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When you are working on creating a household budget, try to remember that it is only as difficult as you make it. The tips here will show you how to start a household budget that you can stick with from month to month.
Keep a Spending Log
A spend log should be the first step in creating a household budget. Start keeping a log of every penny that you spend in a small notebook. Write down the item or service, the place, the date and time and the amount. This will give you a clear picture of where your money is going and what it is going for each month. Do this for anywhere from two weeks to six weeks in order to get a clear and accurate picture of your spending. Here's and easy spending tracking worksheet you can use.
Track Your Income
Create a chart or spreadsheet and list all of your sources of income as well as how much that source provides. List your employment, child support, government payments, disability, second jobs and any other money that comes into your home. This will help you see how much money goes through your household each month.
Determine Your Monthly Bills and Other Expenses.
Use your spend log to look at where your money goes each month. From your log, you should have a fairly clear picture of your food purchases, entertainment as well as the standard monthly expenses. Make a chart and list all of your monthly expenses including food, fuel and clothing. To help you, here's some recommended budget category percentages. Keep in mind that these are only approximate, and yours will vary.
| Housing | 20-30% |
| Utilities | 4-7% |
| Food | 15-20% |
| Transportation | 6-20% |
| Medical | 2-8% |
| Clothing | 2-4% |
| Invest/Savings | 5-10% |
| Debt Payments | 15-20% |
| Misc. | 5-10% |
Account for the Unexpected
Life is not static and your budget should not be static either. Allow your budget some flexibility so that it bends with you instead of remaining rigid. You are bound to be hit with unexpected expenses from time to time and you want your budget to roll with the punches. When creating a household budget, give it some breathing room so that when the unexpected occurs, you can work it into your monthly expenses and it won't hit you so hard.
To do this, allocate some money in your budget to an emergency fund that you can pull from when the unexpected expense hits.
Spend All Your Money
When you subtract your expenses from your monthly income, the money that is left is your disposable income. Don't let that money just float around your household budget with no place to go. Allocate it to some category, whether it is savings, retirement, entertainment or even for investing. Give it a place because then you will not be so tempted to spent frivolously.
This "extra" money has to be spent on paper before month starts or you'll end up wasting it on something you probably don't need.
Keep It Real - Be Flexible
One of the most important things to remember when creating a household budget is to keep it realistic. If you spend $400 a month on food, don't try to under cut that figure just to try to move some money to another category. If you truly need money to allocate to another category, cut something like your cable or that extra phone line. Keep your budget realistic and in sync with your family's spending and you have a much better chance of having a budget that works. You also stand a much better chance of sticking to a budget that is more realistic. Fudging your budget is nothing more than lying to yourself and it serves no purpose than to cause your budget to fail.
Resources:
Mvelopes Personal 3.5
- The
easy software-based budgeting system. Check it out!
Mvelopes Personal is an online budgeting system that makes it easy to create an effective personal budget and track every aspect of your spending as it happens. It will help you 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. Click here to learn more
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Did You Know... |
49% of adults, and 66% of US high school students got F's on a national test on their knowledge of basic economic principles.
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Food for Thought... |
"I'd rather go to bed without supper than rise in debt."
-Ben Franklin.
