How to make a Family budget and manage the Household accounts with the Cash Manager
Create your family or personal budget to manage your Household accounts and save money, using this simple template suitable for anyone with the Cash Manager.
Get started with this template
Video Family Budget: video tutorial that shows you how to make a family budget using the Cash Manager of Banana Accounting. In this way you will be able to better manage your family or your private accounts, obtaining precious savings to reach your goals more easily.
How to make a family budget
Thanks to Banana software, in addition to learning how to make a family budget, you will learn a method that will be very useful in your life, to be applied in different areas such as the management of a small or medium business, an association or any other activity, to have control over your finances and achieve the desired success. Don't worry, you don't need accounting knowledge to start managing your accounts with Banana, and once you have control over your finances, you will think about the end of the month with more serenity and less stress.
This is how in a few steps you will be able to improve your financial situation:
Only by following all three steps will you learn how to manage your finances in the best possible way and achieve maximum success. It will take a little effort at first, but once you understand the mechanism, you'll be able to go on with it!
Are you ready? Start from here!
Create your file
If you haven't done it yet, download and install the free version of Banana Accounting 9. Once you're in the program, proceed like this:
- Menu File → New
- Select the Universal-English Region
- Verify that there is a check mark in the box Include universal templates
- Select Private Category
- Select the Cash Book Type
- In the list on the right select the Family budget and Household accounts template and click on Create
Once opened, enter your activity data into the File Properties, such as the header, the accounting period and the currency you want.
Adapt accounts and categories tables
Before creating your own budget, you need to quickly adapt your account and categories to your specific needs.
The Accounts table only shows the Liquidity account, or rather, the liquidity in your possession. You can customize it by changing the account number, description and opening balance.
This table contains the income and expense categories, of which you can see the updated balances at any time. There are also the Cost centers, which are used to know in detail the amount of expenses and income for each member of the family.
The categories are divided according to the same structure explained in detail in the Planning paragraph:
- Fixed expenses
- Variable expenses
You can also edit categories and cost centers by adding new items, changing the category number, changing the order and deleting lines that you don't need.
Insert your expected income and expenses
Now it's time for the planning phase, you have to insert the expected expenses and revenues: go to the Budget table. The creation of the budget is really easy, you just have to enter the amounts of income and expenditure that you expect to have during the year, giving it a category of expenditure.
- In the template you already find lines for the various expenses, which you complete with your amount
- Enter the repetitive operations only once, indicating the code Repeat
If you make mistakes you can always correct, so you're sure you can make your own perfect forecast!
To create the budget correctly, follow three simple steps:
- Insert your income
- Insert fixed expenses
- Insert variable or extra expenses
For more technical information, please consult the documentation page of the Budget table.
Start by thinking about all the fixed income you have and the amount of it. Salary is the main income, but there may also be others depending on your work and your assets.
Revenue may include:
- Real estate rents
- Maintenance cheques
- Bank and postal interests
Tip: Only rely on assured income.
Insert fixed expenses
Now it’s time to think about all the fixed costs. This type of expenses includes both annual and monthly expenses and you can estimate them based on those of the previous year. For expenses that vary slightly from period to period you can make an average estimate, rounding up the amount to be more cautious. It’s better to make an inaccurate forecast at the beginning of the year, and then adjust it, than to have surprises of higher expenses.
For example, to insert the monthly rent expense you must enter the start date (usually the beginning of the year), the repetition (how often this expense is repeated), the description, the amount in the expense column and the expense category.
In the template you can already find examples of fixed expenses that you can easily modify and eliminate, according to your needs. You can still insert new items.
Fixed costs may include:
- Rent or mortgage for the house
- Taxes and duties
- Medical expenses (health insurance)
- Television fee
- Electricity, water and gas
- Transport (fuel, season ticket for public transport)
- Personal care costs (personal hygiene, household hygiene)
- Education costs (university fees, school books, newspaper subscription)
Insert variable or extra expenses
Now do the same thing, but thinking about all those expenses not of basic necessity (we can call them extra expenses), which are usually variable during the year.
Variable expenses may include:
- Meals and drinks in restaurants and bars
- Cinema, theatre and shows
- Various gifts
- House breakdowns
- Car repairs
Also in this case you have to make a presumed estimate of all the extra expenses, thinking about how many times you incur each single expense and of course its amount.
- For each extra expense, set a monthly ceiling, which is a maximum amount that you should not exceed monthly. Respecting it will allow you to keep your spending under control.
- Unforeseen expenses, such as car repairs and house breakdowns, estimate them annually, divide them by 12 and report this figure monthly.
View the monthly forecast
An action that is often underestimated is the control of budgeted expenses and income, to determine from the beginning how you are managing your money.
To do this visualization is very easy: just go to Account1 → Enhanced statement with groups, and from the list that appears choose the Monthly Forecast report (is the most important report to consult in this situation). Press OK to view the report. The program shows you for all months and for the year:
- Liquidity status
- Total income and expeses
- The surplus or deficit of the month
In addition to the monthly forecast, you can freely view annual, quarterly and 4-year reports in Account1 → Enhanced statement with groups, or create your own customized report.
Improve your financial situation
Surely the goal you want to achieve is to save as much as possible. Check the Change in cash item (highlighted in red in the image above) and make sure you have a positive value, especially at the end of the year. In this case it means that you are generating savings, and that's good!
On the other hand, if your expenses are greater than your income, it means that you're mismanaging your money or you've made a mistake in your budget. Check if you have overestimated some expenses and change it correctly or choose one or more extra expenses that you will commit to reduce during the year.
- See if you have months with a deficit
- Check to see if there are any months in which your liquidity goes into negative (means you have a problem)
- Check which expenses affect this deficit
- You can make improvements:
- By eliminating expenses that are not essential
- By reducing expenses
- Moving expenses later in time
- Checking if you have a chance to increase revenue
It's time to actually keep your accounts!
With the budget under control, including the "savings goal", you can start register the various real transactions of money and compare them from time to time with the expected values.
Daily transactions must be inserted in the Transactions table. To make a registration you must enter the date, the description, the amount in or out and the respective category, just like you did for the forecast a while ago. Easy, isn't it?
For each expense you can also enter the code of the cost center (family member) in the column CC1, so you can update the amount of expense for each member of the family.
View the transactions with account cards
When you register your transactions, you may want to check how a particular expense category or cash account has evolved over time. To do this, you can check the respective Account Card.
For example, by selecting the Liquidity account card you will have a summary of all its movements. By also clicking on the chart option below, you have an even more immediate view of the account's performance.
Tip: Check your Liquidity account at least once a month to see instantly how it is performing and compare it with the months that are passing.
Check the difference between balance and budget
For more control over your performance, you can go to the Categories table and look at the Budget Diff. column, which shows you, for each category, the difference between the real balances and the values you had budgeted. In this way you have an additional indicator to understand if you are following the budget well and to make better decisions.
3. Controlling and reporting
Compare the forecast with the report and analyze
During the year you can compare at any time your current situation with the budget, to understand if and where you are spending more, in order to adapt your buying habits and save more! At the end of the year you can make the final comparison between the actual report and the budget to see if you have achieved the desired savings.
Create the control report from the menu Account1 → Enhanced statement with groups → Yearly report compared to budget.
Also in this case, if you want to have a more precise and targeted view, you can create reports with the monthly subdivision, which also include the difference between the balance and budget of each month. This gives you an overview of the months in which you had the most financial difficulties and those in which you saved the most.
When you get to the end of the year, you will have to re-plan the next one by creating a new forecast, using exactly the same procedure as before. A new savings goal awaits you!
Try the income/expense method
You're getting on well with the Cash Book system, but do you need to manage more accounts like the bank or postal account? You can then switch to the Income/Expense accounting: it is more complete and works in the same way as the Cash Book!
For the Income/Expense accounting you will have a limit of 70 transactions and 20 lines for the budget, but if you want to exceed this limit and use Banana Accounting without limits, you can buy a license key and explore all types of accounting.