Household Budget
A household Budget is a necessary evil – without a budget you will find yourself living from one pay day to the next and out of control. Planning ahead is the answer. You should be able to identify where your money is going and when. An overall look at yearly expenses should give you the control, the ability to plan ahead and ensure that the money that you are earning is being used the way that you want it to be used.
Creating a household budget takes 3 steps.
1. Identify how you are spending your money now. 2. Evaluate your current spending. 3. Track your spending to make sure it stays within those guidelines.
So now for Step 1 - Identify how you are spending your money now. Gather together your household bills for the past year. Utilising this historical data and knowledge of your current income and anticipated household expenses for the year, insert your income and expenses into either the ‘Household Budget’ from the enclosed CD or the paper copy in the month when the expense / income occurs. In order to ensure that you adequately budget for your utility expenses using last years bills, add on 5% to the total bill to allow for any increases in costs. Now that you have completed inserting all your income and expenses into the ‘Household Budget’ it is time for some simple adding up if you are using
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the paper version. Of course if you using the copy from the CD, the adding up will be done for you automatically! Add up each of the columns for your monthly income and expenses. Add up each of the rows to show how much you spend in a year on each expense category and your income sources. Now deduct your total expenses (B) from your total income (A) for each month to show if your have a surplus of cash each month after expenses or a cash shortage. Now it is time to take your ‘Household Budget’ one stage further and break the figures down to a weekly picture. If you are using the Excel Budget, this will be done for you automatically. If not, please divide your annual totals by 52 for a weekly picture of your finances. After doing this you are ready for Step 2.
Step 2 - Evaluate your current spending
By completing your Household budget, you can see exactly how much money you spend each week on each of the expense categories in addition to how much your household income is on a weekly basis. This information will enable you to better plan and control the spending of your money. LOOK at where your money has been spent. ASK yourself why some areas are high and if they can be reduced. SEEK financial assistance if necessary. If your cash flow is a bit dire each month, take out a piece of paper and draw a line down the middle. Label one side ‘wants’ and the other side ‘needs’.
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Looking at your monthly household and leisure expenses, allocate which expenses fall into the category of needs and which are wants. Now see which of the wants can be cut back on, such as your Pay TV subscription, weekly hairdresser appointments, buying your lunch every day at work or having takeaway 4 times a week. (Also refer to out Top ways to save money)
Step 3 - Track your spending to make sure it stays within those guidelines.
Re-visit the ‘Household Budget’ at least once a year to reassess your spending and every few months to check that your current spending is staying on track.
Don’t drive yourself crazy monitoring ever item of spending.
You can become over zealous when tracking your spending to the point that it can become to stressful and aggravating to family members. Once you determine which area of spending can be reduced, concentrate on those areas and worry less about other aspects of your spending. Congratulations - the budget that you have put into place will help you navigate your way through some potential money minefields and should speed you on your way to financial growth and independence.
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