Once you know how to initially set up a family budget, figuring out what kind of budget you need is the next step. A common mistake is thinking there is only one kind, but in reality there are budgets that can help your monthly family spending, help create financial safety or help you and your family achieve your financial goals.
As I’m sure you’ve already read our article on how to set up a family budget, the next step is here- figuring out if you need a comprehensive, problem solving or planning budget.
1. Comprehensive Budget (used for general family budgeting)
i. This family budget can also be referred to as a Master Budget. This budget is for families on a limited income who is trying to limit spending. This budget would include making lists of your spending, with categories and exact numbers broken down by month. This comes in most handy when you need to cut down your family expenses because you have all your information in an organized list in front of you.
ii. This budget can also be used to review your spending over a long period of time, which is referred to as an overall budget.
2. Problem Solving Budget (used for creating financial safety for a family on a budget)
i. This type of family budgeting tool works off the comprehensive budget when you notice you are having problems keeping your spending down in a particular area. You create a more detailed list of the area so as to see exactly where your money is going and what areas you can afford to stop spending on.
ii. This budget is known for finding problem spending areas in a family budget and fixing them.
3. Planning Budget (used for achieving your family’s financial goals)
i. This budget works hand in hand with your family investments. If you are planning your budget specifically around an event or time in your life, this budget can help. It adds an extra category to your initial family budget for your goal.
ii. First, you pay for all other necessary expenses (rent, bills, groceries, etc.). With the leftover money, decide on an amount to set aside in this column for your investment. This is a category that does not show money spent, but money saved.
iii. This plan can be used for family savings as well as investments. This column does not need to be geared toward a specific goal; instead, it can be family savings or money for emergencies. Either way, it is an important category for both family budgeting and investing.