How To Evaluate Your Spending

Evaluate Your SpendingFor most of us, we’re living on a fixed income where we know what to expect with each paycheck each month, and if that’s the case with you, you’ll find it much easier to strategically develop a budget plan for your family.

If you are an entrepreneur or working in a job where your income fluctuates, you can still develop a budget but you’ll need to make sure it accommodates any possible decrease in income each month.  

1. Write Everything Down

The first step in developing a budget is to take stock of your fiscal situation. Assess exactly where you are in your financial life, taking inventory of all expenses on a month-to-month basis.  

The more you create a detailed overview of your spending and overall costs, the easier it will be to identify areas where you can cut spending and save more money.

Writing your expenditures down often sheds a lot of light on areas in your financial life that could be ‘tweaked’, and that extra bit of money each month will go a long way.

Take Action

Write down all of your bills. Go line by line through your bank statements and credit card accounts for the past 12 months.  

2. Categorize Your Expenses

After writing down all of your expenses, you can now sort them into categories.

For example, your spreadsheet could include “Housing” such as your mortgage or rent payment, as well as “Food” and “Utilities”.

Then, include “Personal” including gifts and of course, “Education” that may include daycare, summer camp, and school supplies.  

After I found out I was pregnant with my oldest child, I created a budget plan for my family based on Dave Ramsay’s Monthly Cash Flow Plan. I still use an updated version of that spreadsheet today.

For my readers, I have created a Sample Family Budget Plan that you can use to start your budget plan. Go to “File”, click “Make a copy…” and you have your own editable spreadsheet.

Take Action

After assigning all of your expenses to a category, compare your spending to Dave’s recommended percentages. Are there any categories that are significantly higher than the recommendations? That category might be the first place to look for reductions.

3. Include The Family

A budget helps your entire family focus on common goals. If you have one, be sure to talk with your spouse or significant other about their goals, concerns, and stressors.

Depending on their ages and maturity levels, it can also be helpful to include your kids.

One of the easiest ways to get younger kids (roughly ages 4-10) involved is by giving them their own small amount of pocket money each week. Anytime my kids ask for something that isn’t in my budget, I ask if they have any of their pocket money.

Not only will this help them learn how to budget, but you’ll teach them a very valuable lesson about responsibility. They understand what I mean when it is the end of the month and I don’t have enough cash to eat out anymore until next month.

If you have older children (10+), they can get allowances for their own clothes and other expenses that they need to start learning to manage.

Take Action

Share your budget with you spouse and kids so that you are all on the same page as a family. Adjusting to a new budget can be a tough habit to learn.

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