Family budgeting helps you plan and control the income and expenditures that support your family. A well-managed budget can mean the difference between meeting all your financial obligations each month or coming up short and risking debt. Budgeting helps you understand your current finances, figure out your financial goals, and identify your financial challenges. A typical family budget encompasses more wants and needs than a budget for a single person or a couple, but still accounts for basics like food, shelter and clothing, as well as entertainment and savings.
Components of Family Budgets
The Economic Policy Institute reports that family budgets for a modest standard of living have seven components: housing, food, child care, transportation, health care, other necessities such as clothing and entertainment, and taxes. The EPI notes that expenses rise as family size increases. Housing costs include rent or mortgage, plus tenant-paid utilities such as water, electricity and gas, but exclude telephone, cable or satellite television service, or Internet services. The U.S. Bureau of Labor Statistics’ 2009 consumer unit spending survey results show that families with annual income before taxes of $63,091spend 12.4 percent of their annual income on food, with 7 percent of that for food at home and almost 5.5 percent for eating out. Other 2009 family budget expenditures included 17.6 percent for transportation (for vehicle purchases, gas and maintenance) and almost 6 percent for health care.
The U.S. Department of Labor reports that the average U.S. consumer unit had 2.5 persons with 67 percent homeownership, 1.3 earners, and $49,638 in income in 2009. The department reports that families spend the largest amount of their incomes — 34 percent — on housing in 2009. Three family budget areas that vary the most by geographic region are housing, health care and child care. In 2008, the typical family budget for a four-person family ranged from $42,000 in Oklahoma to $69,000 in New York, according to the EPI. A large part of the difference is due to the wide variation in real estate, income and sales taxes in different areas of the country. The EPI reports that a major factor in falling below a family budget is single-parent families that only have income from one adult.
Manage a Family Budget
In “Family Budgeting,” Kathy Cramer suggests that, in addition to budgeting for fixed monthly expensees, people budget for savings to build a six-month emergency fund to manage unexpected expenses for things like roof or auto repairs or job loss. She recommends using a family budget to know what money comes in and what goes out, and making budgeting easier with tools such as a spreadsheet or accounting software.
Resources for Family Budgeting
Those who have problems planning a family budget and staying within it can get help from various sources. The U.S. government MyMoney website provides information about personal budgeting and financial literacy. Free resources for family budgeting are available at the SimpleWaysToSaveMoney website. Easy-to-understand financial concepts and information are presented in graphics at Visual Economics' website. The Economic Policy Institute provides an online family budget calculator.
- Economic Policy Institute: Basic Family Budgets
- "Family Budgeting: How to Budget your Household Money"; Kathy A. Cramer
- Economic Policy Institute: What We Need to Get By
- Visual Economics: How the Average U.S. Consumer Spends Their Paycheck
Heidi Cardenas specializes in human resources, business and personal finance, small-business advice, home and garden and home improvement. Her professional background includes human resources and business administration, technical writing and corporate communications. She has studied horticulture and business administration, and enjoys guest blogging for publications including Herb Companion Magazine, Natural Home Living Magazine, and Mother Earth Living.