A household budget is an effective way to keep track of your finances, avoid debt and overspending, and help you save money. The following are tips to develop your household budget:
1. Determine Essential Bill Expenses
When people think of household expenses, the first item that usually arises is paying the bills. Making sure the mortgage/rent, electric, phone, gas, and water bills are paid is essential, along with any monthly car payments. Gather all of your bills to work out how much you spend in one week or one month, and put aside enough money to cover them.
Credit card bills are also important expenses that need to be paid, because every time you miss a payment, you are charged interest and late fees, and your debt rises more. Do not forget to account for bills you pay quarterly or annually, such as insurance and taxes.
2. Calculate Food Expenses
The next most important expense is your food bill. Whether you live alone or have a large family, food expenses can add up quickly. Figuring out weekly food expenses may be easier than figuring monthly. Devising a set menu you can stick to can also help you plan how much you are going to spend on food.
Alternatively, if finances are exceptionally tight, you can see if you are eligible for food stamps by visiting the U.S. Department of Agriculture, Food and Nutrition Service’s Supplemental Nutrition Assistance Program (SNAP) at www.fns.usda.gov/fsp or by visiting your local food banks, which are usually housed in churches.
3. Organize a Budget Spreadsheet
Organizing a spreadsheet can be an easy way to keep track of all your finances and help you budget more easily. Set up different columns for your food, bills, clothing, entertainment, and any other expenses you might have. Have one column for your projected expenses and one for actual costs. By setting up a spreadsheet, you can see at the end of the week where you are overspending and where you could cut back and save money.
4. Merge Your Income Effectively or Handle Your Own Finances
If you are married or living with a partner, decide whether or not you will combine your incomes. If you decide to do so, add your weekly or monthly incomes together, and begin your budgeting with the total amount available. If you decide to keep the incomes separate, then you should both budget individually and remain responsible for your own expenses and saving.
5. Eliminate Unnecessary Expenses
Especially if you are having financial struggles, try to note and add up all your discretionary daily expenses, such as morning coffee, magazines or newspapers, and gas money. If you add up these expenses over a week, month, or year, you will be surprised how much money you are spending on these items that you could otherwise be saving.
6. Set Aside Savings
Don’t forget to include saving money as a part of your regular budgeting; set aside a certain amount of money each week or month to go into your savings account. If savings are treated as a regular, fixed expense, the account will probably grow more quickly than it would have otherwise.
7. Prepare for Emergencies
An emergency fund is a must for most households. Unexpected events can happen at any time, so it’s important to always have some cash on hand in the event of an emergency. This amount does not have to be a large amount, but add to every time you budget; even $10 per week is a start.
8. Keep Track of Your Credit Report
An important part of budgeting is to know your credit score and have records of your credit report. When you complete your household budget, having your credit report at hand will also help you to project your expenses. You can visit www.annualcreditreport.com/cra/index.jsp to obtain a free copy of your annual report from each of the three major credit bureaus.
9. Budget for Vacations
Most people like to take a vacation each year, even if it only means a weekend at the beach. Accounting for your vacation fund is an important part of your budget, so that you will be able to save enough money to cover hotel, food, and entertainment expenses while you are away. If you class this item as part of your savings category, you can split your savings budget into different parts, such as vacation fund, emergency fund, school, and retirement.
10. Budget for a New Home
You can determine whether you can afford to buy a new home, and how much of a home you can afford to buy, by considering the dollars already accounted for in your current household budget. Online mortgage calculators such as the one at www.MortgageCalculator.com can help you figure out your monthly payments.
The post 10 Tips for Developing a Household Budget appeared first on AllBusiness.com.
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