What it takes to make a family budget


AUGUSTA, Ga. (WJBF) –– Budgeting is the process of creating a plan to spend your money.  The spending plan is called a budget.  It is an itemized summary of likely income and expenses for a given period. Since budgeting allows you to create a spending plan for your money, it ensures that you will always have enough money for the things you need and the things that are important to you.  Following a budget or spending plan will also keep you out of debt or help you work your way out of debt if you’re currently in debt.

With every client Fehrman Investment Group works with, whether they have a million dollars or are just getting started, they talk about their budget so it’s an extremely important part of someone’s financial plan regardless of which season of life they are in.

What steps are involved in creating a budget?

Set REALISTIC goals with your income and spending

Identify every one of your sources of income and expenses

Separate Needs and Wants

Design your budget-allocate dollar amounts to each category

Make adjustments as neededWhat does the term reverse budgeting mean?

Reverse budgeting simply figures out how much you need to save and save that much money automatically first before you spend the remaining amount of money with what’s left.  One of the great things about reverse budgeting is that you can’t spend what you don’t have.  It’s almost like a forced savings tool like many retirement plans are through work.  Increasing the amount you save naturally reduces the amount you spend, but it also forces you to prioritize your expenditures.

What steps are involved in creating a reverse budget?

Add up the monthly amount that you need to save to reach your goals

Set up a monthly automatic withdrawal from your checking to savings account

Escalate your automatic savings over time

What is the 50/30/20 Budget?

50% of your income on Essentials/Needs.  This would include your mortgage/rent, food, utilities, transportation, clothing-what you need to get by day to day.  This budget technique says that the amount for all of these things should not exceed 50% of your take home pay.

30% of your income on Personal wants.  This piece of your money should be used for your “lifestyle choices”.  This is the amount you should spend on vacations, entertainment, hobbies, pets, eating out, cell phone plans and cable packages.

20% of your income on Savings.  This amount of money is for your financial priorities-long term savings, retirement, and if you have debt to repay.Do you have general guidelines that you recommend when setting up a budget for someone?

Each person is unique with how they spend their money.  Some have more debt obligations that others.  Some people give to churches and charities more than others.  Some live in higher priced locations than others.  With that being said, below are some general guidelines, but they are certainly not one size fits all.





Debt Repayments-10-15%




Clothing/Grooming-5-10%How do you create a budget when you have fluctuating income?

Budgeting is a little more difficult for self-employed people and for people with commission based jobs due to the uncertain income one may have from month to month.  There are several different ways to tackle this one and it’s fairly difficult since most budgets are based on constants and not variables.  The 3 keys I’d recommend are to:

  1. Ideally, you’ll have an emergency fund of at least 3-6% expenses that will help you smooth out the ups and downs of a fluctuating income.
  2. Know your base-line or your bare bones budget.  That is what is the minimum amount that you need each month to cover all of your expenses.
  3. Pay yourself a salary at the first of the month.  This should be the bare bones amount.  With that, pay all of your expenses, then either save or spend freely what’s left.

What tools are available to viewers to help them with their budgets?

Financial advisors and accountants are two types of people who work with people on their budgets.  For some people, working with someone else on this process is useful and others like to do it themselves.  It’s similar to working out, some people exercise on their own and others like to work with personal trainers.  For those that are the do it yourselfers, there are plenty of free tools online that assist people with budgeting including mint.com, Dave Ramsey’s everydollar.com, and others.

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