How to create a family budget
1. Total your net income
- Paychecks and tips
- Freelance or side business income
- Social Security benefits
- Child support or alimony
- Other income sources
2. List your monthly expenses
- Fixed expenses: These expenses occur every month for the same amount, such as rent or mortgage, insurance premiums, daycare, and child support or alimony. If you have any expenses that occur quarterly, annually, or on a schedule other than monthly, simply divide the total by the number of months in each billing cycle. For example, say you pay your car insurance bill of $500 every six months. The monthly average would be $500 divided by 6, which is $83 each month.
- Variable expenses: These are expenses that fluctuate month to month, such as your electricity or cell phone bill. Look at what you’ve spent for each over the past 12 months, and then average the total of each to give a benchmark for your budget each month.
- Healthcare: While your insurance premium is a fixed expense, your out-of-pocket expenses will vary from month to month and year to year. One way to account for this is to take the annual out-of-pocket maximum on your health insurance plan and divide it by 12. For example, if your family's out-of-pocket maximum is $6,000 a year, a good idea is to set aside $500 per month ($6,000 divided by 12) for unexpected health care costs. If you don't end up using it all over the course of the year, then you'll have some money left over at the end of the year.
- Debt payments: Focus on paying down debts quickly — maybe even applying extra payments when your budget allows — so you can contribute more to your other goals, such as savings.
- Discretionary spending: Here's where to budget for extras — things like concert tickets, meals out, happy hours, or whatever else you like to spend your "fun" money on. Generally, discretionary spending should account for no more than 30% of your total income.
3. Set aside money for savings
You should dedicate about 20% of your income to savings, with about 13% set aside specifically for retirement savings. The other 7% should go to other types of savings, such as an emergency savings fund, vacation fund, or college savings for your child.
Learn more about budgeting and download our customizable worksheet at www.synovus.com/familybudget.
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