How to Prepare a Simple Conservative Family Budget

by Percival J. Meris on December 12, 2010

Preparing a Family Budget

Family Budget Photo Courtesy of Microsoft Office

THERE ARE PEOPLE WHO DO NOT KNOW HOW TO PREPARE A SIMPLE FAMILY BUDGET. Preparing a family budget is a simple thing to do. This article is for these people who need tips on family budget preparation.

Here are the principles I follow in preparing my family budget. Get ideas from them to create your own family budget, according to your own particular situations.

Why Prepare a Family Budget

A well-prepared family budget is your guide to judicious spending. The scarcer your money is, the more you should rely on one. Here are why:

  1. It limits your expenses only to what you can afford.
  2. It assures you there is fund available for each expense item.
  3. It serves as guide to financial self-discipline.
  4. It gives you an idea how much more to earn to make both ends meet.
  5. It lets money now to last until the next income cycle.
  6. It maximizes the purchasing value of money.

How to Prepare a Conservative Family Budget

A conservative family budget leaves allowances for increase in expenses due to unexpected needs and escalating market prices. Here is how to prepare it:

  1. Determine your income frequency, and set your budget for that period of time.
  2. If you receive income fortnightly, prepare a budget for that period. Prepare another, if the scenario changes in the second fortnight, such as if you have to pay for bills due during that period.

  3. Determine your minimum income and their sources.
  4. Sort the sources list according to income certainty. For example, a regular fixed income source goes ahead of the less certain overtime pay source. Rely less on the less certain. The fixed income source gives you the minimum amount of the total income without the commissions or overtime pays.

  5. Determine the maximum expense amount of priority items.
  6. Make a list of family expenses for a period of time, and sort according to importance. If an item cost varies, such as power or water consumption, choose the maximum amount spent for a given period of time, say the past six months. If the income cannot accommodate all the expenses in the list, take away those in the low priority levels.

How to Determine Expense Priorities in the Family Budget

These expense items should be listed according to the following priorities:

  1. Yourself
  2. Pay yourself (or the family) first. Set aside a certain percentage of your income, say 10%, for savings. The amount you save today may find its usefulness in future contingencies.

  3. Your Creditors
  4. Pay your financial obligations next. These are bills, loans, and mortgages. Take these away from the total amount, and make do with what remain. If you cannot repay without adversely affecting your family’s comfort, do not incur debts.

  5. Family Expenses
  6. List down family expenses according to importance. Do not scrimp the more important items in favor of the less. In their order of priority, food, clothing, shelter, health care, and your children’s education should come first in the list. The expenses for those that follow may be lessened, minimized, or eliminated, if necessary.

    Under this item, provide also for a contingency fund for unexpected expenses for unbudgeted items.

How to Manage the Family Budget

Now that you have prepared a family budget in written form, it is time to implement it. The following suggestions are based on the scenario that you are paid a monthly salary, half of which you receive fortnightly (every 15 days). Do the following with your 15-day take-home pay:

  1. Separate the amounts according to the total expenses to be incurred in each week.
  2. This week’s expenses exclude those for next week. If you fall short of funds, withdraw from contingency, but do not spend next week’s.

  3. Divide your money according to expenses, and store them in separate labeled envelopes.
  4. You compartmentalize funds, and provide them their own expense channels. This way, you do not touch other funds, and confine each expense to its budget item.

  5. Keep a record of expenses for each item.
  6. Record your expenses, preferably with dates, on the face of the envelope, while maintaining a running total. If you don’t do this, you forget and later wonder how the money disappeared.

  7. Provide funds for a fifth week in the budget.
  8. For budgeting purposes, consider a weekend as the end of a week and the beginning of another. The beginning of each week marks the start of a new budget period.

    Since you are budgeting your monthly income fortnightly and spending them weekly, you usually find most months with four weekends. However, there are months that have five.

    During those four-weekend months, provide a portion of the budget for your fifth week expenses.

  9. Decide on what to do with your savings.
  10. Keep them as savings, add them to the fifth week budget, purchase items needed but not included in the budget, or reward your family with a fine dining treat.

How to Succeed in Implementing Your Family Budget

Budgeting is not so much money management as it is self-management. You need self-discipline to abide by your plan.

If you are tempted to spend for items without budget provision, choose to respect your plan. Unless implemented, a useless financial plan your family budget is.


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