Creating a home budget is an important part of managing your household finances. Your budget will help to lay out where and when your money is spent. It can also help to clarify your financial goals and what steps you need to take to reach them. The first step to putting together an effective home budget is breaking down your expenses into manageable pieces. With a clear home budget breakdown, you can begin to restructure your finances to meet your goals.
Make a list of your necessary expenses. This includes rent or mortgage payments, insurance, utilities, food, gas, car maintenance, home repairs, medical expenses, and pet supplies. You will have to make a personal choice regarding whether or not cell phones, Internet access, and cable qualify as necessary expenses as well.
Create a list of extra expenses. This includes things such as new clothing, electronics, books and magazine subscriptions. Entertainment, such as movies, shows, vacations, and eating out, falls into this category as well.
Make three columns on a piece of paper. Catalog your expenses by listing the Category in the far left column, Necessary Expenses in the middle column, and Extra Expenses in the right column. As you work, you may think of other expenses that fall into each category. Sample categories to start with may include home, car, school, business, health care, and pets.
Go over your list of expenses and assign a frequency and dollar amount to each. This clearly lays out how much money is spent on that item as well as how often it occurs. Items such as groceries may be weekly while utilities and mortgage payments are monthly.
List long term and short term financial goals for you and your family. Assign these to the categories created in Step 3.
Create a monthly budget on paper or in a program such as Microsoft Money or Microsoft Excel. Calculate your household income and enter the amounts you came up with in Step 4 at the designated intervals. Calculate your income and expenses for each week to determine where you may need to cut back, save more, or reschedule payments to keep your bank account from going into the red.
Calculate how much extra money you have each week or month and assign this money to various short and long term goals. These may include savings for a retirement fund, money to pay off credit cards and student loans, or some extra cash for a fun vacation. Put aside a set amount of money for each goal every month or simply work on one goal at a time.
- How to Create a Monthly Budget
- Personal Finance For Dummies, 6th Edition; Eric Tyson; 2009
- America’s Cheapest Family Gets You Right on the Money; Steve and Annette Economides; 2007