Money in the Bank-How to Create a Household Budget That Works

Household Budget

If you don’t have a grip on your monthly income and your regular expenses, it’s nearly impossible to stick to a realistic budget. Though budgeting may seem too simple to some, it takes a lot of dedication and self-control so that you don’t spend more than you have. Follow these simple steps to create and stick to a household budget.

1. Calculate Your Income and Your Payments

Household Budget 300x225 Money in the Bank How to Create a Household Budget That Works

Image via FlickrImages_of_Money

First, figure out you monthly income and earnings after taxes. Be sure to calculate taxes into your income so you don’t overestimate. Then, determine the cost of your monthly or yearly bills like rent or mortgage, utilities, insurance, car payments, and 401(k). Write your monthly income and expense totals down next to each other.

2. Calculate for Everyday Essentials

The next step in creating your household budget is to calculate your everyday essential payments. Ask yourself how much per week you spend on gas, what you usually spend on groceries, and how many times a week you go out instead of cooking at home. Also, calculate how much you spend on extras like entertainment and shopping. To do this, gather up your receipts at the end of the day, or write down every time you get your wallet out to buy something. Add up your spending at the end of each day.

Then, separate your spending into general categories like tithes and giving, debt payoff, home (rent or mortgage, insurance, property taxes, home repairs, and furnishings), utilities (monthly bills for water, electricity, gas, phone, internet, and cable), car (car payments, gas, insurance, repairs, registration, inspection, and tires), healthcare, food, personal (wants, entertainment, and toiletries), one-time or big expenses, and grace (a buffer for mistakes).

3. Cut Excessive Spending

Next, assess your spending and the extras. Can you cut down any areas of your spending? Try to set a goal for the coming month in a category where you spend a lot like entertainment, or eating out. You could try to limit your shopping budget as well.

If you find you need to reduce your spending even more, consider ways to save money on energy or water. Maybe start bringing coupons with you when you go to the grocery store, or think about ways to reduce your rent or mortgage. You could take on a roommate, or move homes if you find yourself with more space than you need.

After finding areas to cut your spending, assign an amount to each of your spending categories, and stick to that payment plan. No matter how disciplined your budget is, it’s always a good idea to talk with a consultant like Steve Spinner to know where your finances are at, and what you should do with your savings.

4. Test Your Budget

Once you have a budget, for the next two months look at your income versus expenses, and see how you’re doing. Are you sticking to your budget? Could you cut categories of your budget even more?

Maybe you’re even finding that you’re starting to have a lot of money leftover at the end of the month. Set-up your savings for either a vacation, a big purchase, or savings for later in life.

Don’t beat yourself up if you end up going over your budget, just make sure you don’t make the same mistake the following month. If you’re finding it hard to stick to a budget in one category, see if you can cut spending from another category so you’ll have enough money for  the one you’re having trouble with.

Which tip seems the most helpful to you?

Be first to comment