Planning a household budget and sticking to it is the best way to build a solid financial foundation for you and your family. Creating a budget is made far easier if you write down everything you spend money on during a month and subtracting that amount from your income. Too many expenses and not enough income can spell financial disaster for any family. You can protect yourself financial with a solid household budget and then sticking to it.
How To Budget
Creating a family budget is surprisingly simple. First, list all of your monthly sources of income: paychecks, interest income, loans that are being paid back to you and any other sources of income. Add these numbers together for your total monthly income. Next, use your checking account register and any credit card statements to see how you have been spending money. It helps if you group expenses by category: rent or mortgage, utilities, groceries, car expenses, eating out, and so on.
Be sure to plan for bigger, more periodic expenses, such as insurance, vehicle registration, and taxes. Add these expenses together to determine how much money you have spent on each category over the past year. Finally, divide these numbers by 12, for a monthly average for each category. You can use an online budget template to help you record where your money comes from and where it goes. Obviously, your income must be equal to or greater than your expenses. If it isn’t, there are ways to cut costs.
After learning more accurately how you have been spending your money, you can use that information to cut any unnecessary costs that you cannot currently afford. Sodas, eating out, and excessive purchases can be trimmed back to keep you within your budget. The average American family spends $850 each year on sodas alone. Take advantage of sales flyers before heading to the grocery store and put off bigger purchases until special sales occur. Also, buy non-perishables in bulk. Next, look at your car. If it costs more than it is worth to maintain, replace it with something more affordable. You can cut utility costs by being more aware of how you use electricity. It’s good for the environment and your budget!
Sticking With Your Budget
Sticking with your budget takes resolve, but you can make it easier by setting aside money for bills and savings before buying anything else. The general rule of thumb for savings is to put aside 10% of your income. It is always a good idea to have enough money put aside to carry you through 3-6 months of your budget, in case of job loss , illness, or injury. When payday arrives, simply sit down with your checkbook and write out checks for all of your regular expenses for that time period and transfer 10% to your savings account. If you already have your rainy day nest egg built up, you can use the remaining money, if any, for going out to eat, buying that fun new whatever, or taking a trip.
Create Financial Goals
By creating financial goals, you give yourself a better reason to stick to your budget. Your financial goals may include buying a house or a car, retirement savings, or a special trip.
Taking the time to learn how you have spent money in the past and trimming back where it is necessary can help you and your family enjoy financial independence and reach your financial goals.