Plan and set family goals for budget

Did you overspend yet again?

Better sit down and start a family budget before you go broke.

Follow these tips:

Take a free budget class. Circle Feb. 5 on your calendar. That's the next "Money Management & Credit Recovery Class" presented by Housing Opportunities Made Equal. Developing a budget is one part of the seminar.

The program runs from 6:15 p.m. to 8:15 p.m. at 700 E. Franklin St. in Richmond. RSVP by calling (804) 354-0641.

Get every family member involved. Set goals together so everyone has some skin in the game, urged James Bowers, managing director of the Center for Economic and Entrepreneurial Literacy in Washington.

If the family decides together that it will save a certain amount toward a trip six months from now to Walt Disney World, for example, exercising spending restraints in the interim won't seem so bad because everyone gets rewarded.

"One of the biggest advantages to including all members of the family is children will learn from their parents about making a budget, which is a valuable experience," Bowers said. "I think it's very healthy for a family to do a budget together. The kids will feel included and understand how decisions are made."

A bonus: When they start to beg for budget-wrecking purchases, "just say, 'that's not in the budget this month,'" Bowers advised.

Give everyone who spends money a pencil and a small notepad. It should fit into a purse or pocket, he said. Starting Jan. 1, they should track every cent they spend each day for two months. "No expense is too small to write down during that tracking phase."

Tracking the family's expenses will be an eye-opener, he said. A seemingly tiny expense -- say, that $3 fancy coffee every workday -- can tally up to $60 a month.

Next, create categories that include all the family's expenditures. Itemize fixed costs first, such as the mortgage, car or insurance payment -- amounts that stay the same each month.

Then itemize variable costs, such as food expenditures, heating costs, cell phone bills, dining out and clothing. Total the expenditures monthly.

Identify areas where you can cut back. Maybe the family is spending a lot of money on lawn care, clothing, cellular minutes, Internet service, pay television, movies, concerts, bowling nights or weekend trips.

Can you find, say, a less expensive calling or text-messaging plan? Would it be smart to refinance the mortgage if rates are low? Can the family get a better deal on car or homeowners insurance? Does it need all of those cable channels?

"There are a lot of pretty painless ways of saving quite a bit of money," Bowers said.

Set family goals. Every family should set an amount to save, he said. "A basic rule of thumb is to have three to six months' worth of basic expenses in the bank in case there's an unforeseen emergency such as a job loss or medical emergency."

Another goal might be to pay down the family's credit card debt. Decide how much to pay down each month and by when to pay it off.

Teen-friendly goals might include buying school clothes or an iPod.

Now craft a proposed budget. Write in the amounts in each category that the family would like to expend. That way, what it spends or saves is not left to chance.

Stop and examine how the family is doing. Once a week, see how actual spending matches the proposed budget. Maybe the family will need to skip the movies next week or forgo steak dinners and eat barbecue for a while.

The goal is to modify behavior instead of letting day-to-day wants dictate its financial situation, Bowers said.