One of the most important parts of managing a household is keeping the finances in check. Having a household budget helps avoid debt and can make sure you’re prepared for any unexpected expenses. Creating a sustainable household budget doesn’t have to be an overwhelming task, though. Here are some basic tips you can use to create your budget.
Define your end goal
Whether you’re saving to buy a home, trying to make more than the monthly minimum payments to credit accounts or wanting to go on a nice vacation, having an idea of why you’re budgeting is key to creating a successful budget. Once you’ve identified your financial priorities and your end goal, it’ll be easier to stick to your plan.
Prioritize expenses
Now that you know why you’re budgeting, you’ll need to prioritize your most important expenses. Make a list of your monthly recurring bills (rent, insurance, utilities, food, debt accounts etc.). With everything laid out, determine which of those expenses are critical to your everyday survival like those for shelter, food and medication. Then, note which expenses are important for your quality of life such as transportation, cell phone service and childcare. Lastly, note which expenses are ones that you could possibly do without like dining out or shopping for new clothes. By having everything laid out, it will make it easier to identify the expenses that you could eliminate.
Get a realistic estimate of monthly spending
Using bank statements or receipts, go through each expense category and include the expected monthly payment that is required. You may have to estimate for things like gas and groceries but try to get as close as possible. Do consider the time of year when these costs could fluctuate up or down. If it’s still too difficult, you can see how much you spent the previous month and use that amount as a baseline.
Calculate and analyze
Add up all of your estimated monthly expenses and subtract that amount from your expected monthly income. Depending on what the resulting figure is, you will know what you need to do going forward to reach your end goal. If the figure is below or even near $0 and you’re trying to save more, then you should consider maybe cutting some of your expenses or increasing your income.
Creating a household budget is important to reaching financial goals, just make sure that you build a budget that works for you.