Saving for children's college fund, saving for retirement, and making a large purchase such as buying a home are not attainable unless one sets up an effective family budget. Today, saving money is often difficult as everything is getting more expensive day-by-day. Setting up a budget can be a lifesaver for a family, but only if one follows through with the budget that was set up.
Some of the most common mistakes one makes when setting up a budget are not keeping track of monthly income and expenses, not being consistent with monthly savings, using credit cards excessively, and lack of emergency funds. An effective way to keep track of monthly expenses and income is to prepare a worksheet and keep track of all spending and income. This will help one save a certain amount of money at the end of each month after all necessary expenses have been taken care of.
Consistency is a key to managing an effective budget. When one is not consistent with saving, he or she tends to over-spend, which will effect budget goals. By setting up a budget, one is able to keep track of where his or her money goes, as long as accurate records are kept.
When setting up a budget one must first accurately estimate and record one's income. This includes salaries, bonuses, commissions, family business profit, or other means of income to list in one's budget. The next step is setting up household expenses. This includes recording everything you spend and setting up a schedule to spend them on. This can mean monthly bills, annual expenses, or day to day living expenses. Next one needs to set up his or her budget goals. When setting up a budget, it is important to write down ones short, medium, and longterm goals.