Household Budgeting - Getting Control of Your Household Finances

Household budgeting is about creating a spending plan that helps you keep track of all your household expenses so that at the end of each month you can see what money is coming in and where all your money is being spent.  

Why is this important?  Because you don't want to know after your money is gone that you don't have enough left over for rent, car payment or groceries or other important expenditures. 

You need to know at all times what your income is, how much money you will need to spend, and how much money will be left over. 

Don't do what a lot of people do and that is to rely on your check register's balance, it can't help you with how much money you need until your next pay day.  If your checking account balance says you have $500 but you haven't yet paid all your monthly expenditures you could be in trouble if you decide to buy those new pair of shoes you've been eyeing.

Get in the habit of relying on a household budget.  Know exactly how much money comes in each month, how much money must go for bills and how much money is left over. Only then will you know what expenses need to be curtailed, or eliminated?

Here are some practical tips and information on how to create a household budget for managing your money on a daily basis:

1. List on a piece of paper all your monthly expenses.
The best place to start is by creating a budgeting spreadsheet or budget worksheet  This is an easy way to be sure you include all your monthly expenses.  Start by referencing your checkbook. Go back for one year and write down all the checks you wrote. This will take some time but this is how you get an accurate view of your spending so you can create effective household budget planning.

You generally have two types of expenses, regular and non-regular. Regular expenses are things like car payments, rent or mortgage, insurance, gas & electric, etc. Non-regular expenses are things such as clothing, pet care, donations, etc. Be sure you include them all.

For non-regular expenses, add them all up for a year and divide them by 12. For example, if you spend $100 year on donations then add $8.33 ($100 / 12) to your monthly expenses for donations. You probably already know what you spend on regular things like car payments. rent or mortgage, but this exercise helps you also find out what you spend on irregular things such as credit cards, donations, pet care, dining out, clothing, movies, etc.

2. Total your monthly expenses and subtract them from your monthly income.
Surprisingly enough, as you make your household budget you may find that you are living within your means and you are able to make your expenses. So why are you broke and in debt? The problem is cash expenditures. This is where having a household budget makes all the difference. Most people don't keep track of the cash they spend. If you can make a conscious effort to track every penny that slips through your fingers each day for things like coffee, candy bars, lunch with friends, etc. you may be very surprised at how easily your money slips through your fingers. So be sure to be thorough about ALL your monthly expenses.

3. Track Your Spending
Next, be sure to accurately track your spending.  Use a small notebook, calculator or financial software to track all of your expenditures. I like to use a small notebook or palm pilot, or use personal budget worksheets, but the choice is yours. My biggest problem area was groceries, but when I actually looked at what I was spending and my lack of organization (I was at the grocery story almost every day) I realized I was spending about $20 a week more than I needed to. That's a savings of about $80 a month. 

4. Be sure your expenses are properly allocated
If you find that you are spending too much money, let's say, on lunches at the office, make your lunch and bring it to work. If you're spending too much money at the movies, rent movies instead or cut back on snacks such as candy and popcorn, which can be very costly at the movies. If your long distance phone bill is too high, make better use of email or look into more economical phone plans.

Here's a general guide on how much money should allocate to specific expenses:

• Housing 31% 
• Food 10-15% 
• Transportation 17-20% 
• Insurance 5% 
• Health Care 5-8% 
• Clothing 5% 
• Savings & investing 10-15% 
• Entertainment 5%. 

If you're truly serious about how to make a household or personal budget that will help you become debt free and find peace of mind, take a long hard look at improving your spending habits, understand where you're losing control, make clear goals and cut waste. It's unrealistic to think you can get out of debt without tracking, you can't cut waste if you don't know where it is.

Creating your Household budget will not work IF...

- You don't have the determination to stick with your budgeting plan.

- You don't come up with a budget you can live with. This means you have to be realistic, don't cut ever thing all at once, work up to it.

- You don't fully understand the difference between a need and a want.  Be realistic about what you really need versus what you want. Really examine that question when you make out of the ordinary or even ordinary purchases.

Practical Household Budgeting Help

If you're thinking that it's not going to be easy to create a financial budget on your own, get some budgeting help. A good budgeting software is an ideal place to start for helping you with budget spreadsheets and developing a budget planner.  It gives you everything you need for creating a household budget and keeping accurate track every aspect of your spending -- as it happens.

With home budget software you'll notice that at the end of each month, you will always know exactly how much you have left to spend, instantly know the impact of every spending decision, effectively manage credit card spending, and quickly create an easy to use household budgeting plan.