Managing Your Family Finances

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It is that time of the year when people focus on their incomes and paying taxes. Unfortunately, most people live paycheck to paycheck. They spend what they want whenever they want. Many people do that and discover they are broke, and they don't know where the money went. Many times they "run out of money before the month" as the saying goes. Also it is important to have extra money saved for those unexpected emergencies. To get control of household spending and start saving we need to set up a household budget.

There I said it. The "B" word. Even the word "budget" can make people cringe. I know it sounds boring and something only "nerds" do. But if you are serious about better managing your finances, a budget can actually give you freedom. You will have more control over your money, know where your money is going, and have a plan to reach your financial goals.

Here are some easy household budgeting strategies you can use to get started.

Earnings
Write down how much you and your spouse (if married) earn each month. If you get paid weekly, then multiply that amount X 4. If you get paid every other week, the mutliply that X2. It is more difficult if your income varies month to month. You need to calculate your annual earnings and divide it by 12 to get your average monthly income.

Expenses
Your fixed expenses are the items that stay the same from month to month, such as a mortgage payment, car payment, telephone bill, etc. Some expenses vary from month to month such as your electric / gas bill. You need to budget for the approximate amount of the bill. In the middle of a cold winter, you will likely need to plan on paying more for heating. Many companies offer a "budget billing" option where they spread the payments evenly over 12 months. The the 12th month the balance is corrected, and you will owe more or less that month.

Some other expenses can be more difficult to calculate. Some people recommend that you carry a notebook and write down everything you spend for 30 days. That will tell you how much money you spent and where it went. You might realize you were doing something like speding $500 in a month to eat out!

The Difference Between the Two
Find the difference between what you spend and what you earn each month. A portion of any surplus should be budgeted for investments or savings. If there is a shortage, then you have two choices. Either you lower your expenses or increase your income or both.

Setting up a household budget is important to manage your family finances. Then hopefully you can pay your bills and save for your future.

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