Creating a Household Budget in Three Early Steps
Whether you’re living on your own for the first time or you’ve been married thirty years taking time to look at your household budget is always a good idea. You should always review your household budget once every six months. Ask yourself the basic questions:
Does your budget need readjustment?
Do you have a little extra to spend on a fun vacation?
Do you need to cut back somewhere?
Do you have enough to save for retirement?
By having a comprehensive understanding of your budget you also will gain insight of your own lifestyle.
Here are three steps for developing a comprehensive household budget.
Some Things Never Change: The Constant
When creating a household budget there are certain aspects you can’t avoid: rent, electric and water bill, groceries, gas, etc. Some of these things occur at the same time every month. Others are less predictable. Overall, you gotta drive, you gotta eat, you gotta stream movies– these are unavoidable, and should be the first step part of budgeting your money. Calculate your monthly income and then piece by piece subtract each of these costs from that number. If you’re running out of money before you can subtract the constants you might be in a bit of trouble. A personal finance consultant may be able to help you organize your spending and keep your head above water.
You Do You Budget: The Variable
Every household is different. You may have three kids or the first on the way. You may only have a dog, you may have a dog, three children, and a spouse consider. You may have none of the above! Luckily, your household budget can be completely personalized, centered on your current needs. After you’ve determined what to set aside for your fixed expenses, you can alter the amount earmarked for variable items. The variable category gives you freedom in how much you decide to spend where, allowing you to prioritize as you see fit. For example, you might decide you can spend less on clothes each month in order to give yourself more money to save toward buying a new car, new car seat, or new car mat for your pet.
The most important thing you can do for yourself when it comes to your household budget is set goals. Short term and long term goals will help you put your financial situation in perspective. Goals also give you incentive for saving more, spending less, and congratulating yourself when you meet one. Whether it’s paying off a credit card or being able to afford a vacation giving yourself something to work toward will help you get a handle on your household budget.