Creating a Family Budget

The Family Budget
Our family has never spent more than our income in the past. However, we also have never had a specific budget in place to track our monthly finances. We recently purchased and moved into a new home which triggered the necessity to create a monthly budget to follow and track our monthly income and expenses.

Goals
There are several goals that I have for creating our monthly budget. The first and most important goal is to track where our funds are going. The second goal is to analyze where to cut costs and become leaner in our spending habits. Finally, decreasing our monthly expenses will allow me to invest the additional money in assets that will accumulate additional monthly income like high yielding stocks or CDs.

Monthly Income
The table below shows our monthly “take home” income which currently only consists of my day to day job. I have not yet included any additional passive or extra income but will adjust the family budget accordingly moving forward in the future.

Monthly Expenses
The table below shows our monthly budgeted expenses.

Notes on the Budget

• Monthly Income - This is the take home pay after taxes and deductions. I currently contribute 10% of my pre-tax earnings into my company’s 401k plan.
• Principal & Interest - We took out a 30 year fixed loan @ 5.625%.
• Car #2 - This debt was paid off last October, but I still like to include it as a line item in our expenses.
• Car Insurance - Covers both of our vehicles.
• Gas - The budgeted amount may need to increase in the future based on gas prices. Unfortunately, the extra funds will need to come from one of the other line items.
• Car Maintenance - This is an estimated monthly value based on last year’s expenses for car maintenance.
• Car Registration, Plates, and Taxes - This is also an estimated monthly value based on the previous year’s expenses.
• Phone, Cable, and Internet - We signed up for a bundled package, which gives us our local phone service, high speed internet, and satellite coverage.
• Electric & Gas Bills - I purposely budgeted high on these two line items. We are in a new house that is twice the size of our first home. We also moved from the Midwest to the Southeast so it was difficult for me to identify a targeted amount. We expect higher electric bills (air conditioning) and lower gas bills (heat) as a result of living in a different part of the country. I will be looking at these two line items as an opportunity to cut our costs or change the budget as they are variable costs.
• Water/Sewer – Again, I will be looking at this line item as an opportunity to cut our monthly expenses.
• 529 Plan – Child #1 & Child #2 – We invest $3,000 in each of our children’s 529 plan / year. This adds up to $6,000 per year, which eats away at our monthly budget. Fortunately, we were able to use our federal tax refund for 2007 to help supplement this $6,000 expense. The result is a combined $100 monthly expense from our bottom line per month.
• Medical Expenses – This is a variable expense depending on the month. I have attempted to average out the monthly expenses to what I think we will spend on our co-pays, prescriptions, etc. for our medical expenses.
• Groceries & Entertainment – This is the most difficult line item to keep in balance and may need to be increased out of necessity with having two young children.
• Investments & Savings – This line item includes $100 per month that I am having automatically transferred into my Prosper lending account each month. The remaining will be used to purchase stocks that pay high dividend yields.
• Prosper Loan – I have taken out a business loan from Prosper in which I have used the funds to purchase a high yielding stock. You may ask why I lend money in Prosper and also have taken out a loan from Prosper? I will follow up later with an article on this strategy.

Final Thoughts
I will provide the results for our family budget at the beginning of each month for the prior months activities. I will also give any updates and adjustments that are made to the budget when they are made.

How do you track your personal/family finances for the month?

Sincerely,
passivefamilyincome

Tagged as: family budget