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Creating a Budget for Your Household
There’s no question, a budget is the best way to gain control over your household finances and live a life free of financial stress. Here are a few simple steps for planning a budget for yourself or your family:
Step 1: Collect your financial information together. This will include every credit card statement, bank statement and your receipts. Anything that documents your expenses for the last three months needs to be collected. What are you going to do with this information? You’re going to use it to categorize your expenses. What do you spend on your home? What do you spend on your car? Your food? Your health? Entertainment? You’re not tracking your expenses right now, you’re simply coming up with expense categories and sub-categories for your budget. If it makes it easier, begin by drafting the categories and sub-categories you think your expenses will fall into. As you go through your expenses you can verify your category decisions.
Step 2: Gather your income statements or profit and loss sheets and determine how much money you really have to budget with. You can use either your net or gross income as your number, just be consistent. Also, if you choose to use your gross income, make sure to account for your taxes on your list of expenses.
Step 3: Using the same documents you used to create your budget expense categories and sub-categories, now examine how much you spend each month on each. I highly recommend that you write this number down. It may be an eye-opening exercise, but it will also help you predict how much you will spend in the future. You want your budget to be a realistic reflection of your spending habits, not a financial diet.
Step 4: Find a method of recording your budget. This could be a simple spreadsheet where your columns are a list of your categories, your weekly or monthly available spending amount, how much you actually spend and the difference between the two numbers. Your rows will be the income and expense categories you’ve already established.
Step 5: Create a budget, keeping in mind that you will want a budget category devoted to savings goals too. Once your budget is created, spend a month or two following it. Keep your budget close at hand so you can track your finances closely. Assess your spending on a weekly or monthly basis. Re-evaluate your budget if you need to. Your budget is not set in stone and some of your expenses are variable, meaning you control how much you spend on them. For example, entertainment is variable and your mortgage is fixed.
A budget is nothing more than a spending plan. It isn’t a financial diet. It is a tool to control your money and be knowledgeable and smart about where it goes. It’s your money after all, and isn’t it great to have the upper hand?
by Sam Carrara
Making a budget is a wonderful way to plan for the future. Make sure to see which areas are out of balance or need to be cut completely- 10 cups of coffee per day.
Also work to get buy-in with your spouse and regularly look to see how you are doing. Sometimes they see gaps that you may have missed (two heads are better than one).
Thanks for the tips.
by Sherry
I’ve been working on our budget for this year. I think it is very important to have one.
by Andrew Reynolds
BUDGET is very important especially if you have family. It’s important that you know where your money goes and you can make sure that you spent it to important things.
by titan
Yap. We need to control our budget. Its needed and i believe many people ignore this important thing right?
by John
Once you consider the fixed costs, its a lot easier to manage the rest of the income, I think. I like to consider those off-limits so I don’t even think of the money as being there if its already for something else. While the entertainment budget can be reduced, I’ve also found it needs to exist
Even a small amount of money spent on having fun can be extremely good for productivity and mood.
by bhutan webhosting
If you cannot control where the money is going. If you cannot keep track of money, you will lose track of everything in life.
Budget and finance is important in life, controlling and knowing about them is even more important.
by Tina Anderson
Thank you for posting these critical steps to improving one’s finances. I know I need it and there are millions more who needed this information as well.
by Cully P
One point I didn’t see made was that budgets are great when it’s your budget–and no one else’s budget. Meaning, if you’re in a relationship and money is shared in accounts, both parties in the relationship need to follow the budget. It’s one thing to follow a budget yourself–but if someone else has access to the same money, your budget may go down the drain by no fault of you own.
by Megan
This website gave us many good ideas for desired info saving that no other blog makes the thead really desired.
by George Lindemann Jr
My wife is the one doing the house budgetting and I can’t thank her enough. Budgetting is such a tough job for someone to take on. Yeah, my wife is tough. (grin)
by credit card
Yes! budget plays a vital role in every ones life, if you commit a mistake in your manipulates it will effect your finance very seriously. Most of us can hardly imagine a life any more without credit cards. More and more purchases are made over the internet, which require a credit card. For more relevant information regarding creddit card just visit the above site.
by C4G
I’ve had to really learn how to budget since I’ve been running my own home business after I retired from the corporate world. Most of the budgeting is for business related expenses because I when I started, I paid off my mortgage and credit cards with my savings and I only have several bills related to home finance.
However, when I was carrying a mortgage and car payments, it was thoroughly important to budget wisely so I could save that money I used to pay off my mortgage in the end.
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by pdf filer
Thanks for sharing the idea. I prefer to save at least 10% from my earning first than create a budget planning, monthly, from the rest. I agree with buthan.. that’s the way how we should be aware of.
by mortgage quote
All steps are very important and I would add a step and this is to learn and analyze your budget so that you can minimize your wants and make more use of your money.