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A Simple Household Budget

Simplifying the way you manage your finances can make sticking to a budget much easier. If you have a more simple and straight forward budget that is easier to understand, you are much more likely to actually follow it.  With the right technique it should only take you 20-30 minutes a week to stay on track.

The most time-consuming part of the process is the actual setting up of the budget.  So don’t try to do this with a house full of kids and other relatives over the holidays.  Allocate the time and place, and stick to it. If necessary put a “Do not disturb” sign on your door, turn off your phone, and disconnect from the internet (eliminate distractions!).

While there is a plethora of software to ‘simplify’ the preparation of a budget, a simple spreadsheet is all you need.  Don’t complicate the process by having to learn a new program.

A good first step is to gather up all of your bills and receipts that you can find around the house. A credit card statement is perfect if you charge most of your purchases.To start off, list your monthly incoming and outgoing cash flow. Estimate, in round numbers, what you spend on each expense every month. You don’t need to be precise, but err on the side of more rather than less with expenses.

Be sure to include:

* Mortgage/rent payments
* Utilities costs (electricity, gas, phone, water etc)
* Groceries
* Food
* Transport
* Car expenses
* Clothing
* Education expenses
* Entertainment
* Gifts

A Simple Budget

One of the simplest types of budget is called the “60 Percent Solution”.  In essence, this budget aims for you to fit your monthly expenses within 60% of your gross income.

This will allow you flexibility for long and short term savings, spending money and retirement planning. These can be what often break a budget, because people fail to budget for them.

While the percentages will vary depending on your circumstances, consider these guidelines:

60%  - Monthly expenses
Housing, clothing, food, transportation, utilities, insurance, communication.

10% - Retirement
In some countries this forms part of a compulsory superannuation plan, but if it doesn’t for you, you should have this deducted automatically from your paycheck.

10% - Debt reduction or long term savings
This is your long term savings or “emergency fund”. You can speak to a financial advisor for recommendations on how to invest this money.

10% - Short term savings
These are the funds set aside for those ‘every now and then expenses’:  birthday and Christmas gifts, car maintenance or repairs,  uninsured medical expenses, appliances, home maintenance.

10% - Pleasure
This will include recreation, eating out, movies— whatever you want, without the worry of breaking your budge.

Having a household budget with fewer categories will make it much more manageable and help you to realise your financial goals.

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Written on 13 February 2010 by editor under Get out of debt with No Comments
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Finance Overhaul: Control Your Spending With a Household Budget

If you are looking to get your finances in order or reduce your debts then you have to get back to basics and the best place to start is with a household budget. The purpose of a household budget is to figure out how much money you have coming in and where it is going out on expenses. Now you are armed with all the information it’s time to make some changes to achieve your goals.

Let’s take a look at the steps involved in creating a household budget.

1: Calculate Your Incomings: This should be a straight forward task. You need to calculate your average incomings per month such as pay checks (after tax), bonuses and dividends from any investments. Don’t just think about your pay for the last month, you should bear in mind occasional payments such as bonuses or dividends from investments and then work out the average value of these per month (over the course of a year).

2: Calculate Your Outgoings: Calculating your outgoings is a little bit more complicated as you spend money in far more ways than you earn it. Go over your statements for your bank account and credit cards for the past few months and figure out how much you have in outgoings each month and where it is going. Credit card and debit card transactions may be easier to keep tabs on but it’s hard to see where cash withdrawn from ATM’s has ended up. It may be a good idea to keep a spending diary with you for a couple of weeks to take note of all your cash spending. Hopefully you will find your typical outgoings are lower than your incomings but often this is not the case. If you find your outgoings are higher than your incomings then you are pushing yourself into debt each month and need to take action to reverse this trend.

3. Classify Your Outgoings: Once you have worked out all your outgoings it makes sense to classify them together into categories such as groceries, utilities, clothes, entertainment, loan repayments, travel and so on. Doing this will let you see where most of your money is going.

4: Sort out the essentials, the nice to haves and the not required: Now you can see where your money is going then you need to decide what can be changed. You may find some of the expenses are fixed and cannot easily be changed such as rent or mortgage repayments, car registration and so on. If you need to make large cutbacks then perhaps even these items could be reduced by downsizing your home. If you don’t want or need to go to such lengths as moving home then you need to seek other areas for cutbacks. You can reduce your monthly bills in lots of ways such as becoming more energy efficient around the home, switching utility companies, using VOIP for calls via broadband or cutting out pay-TV packages. Common areas for cutbacks are reducing your entertainment and shopping expenses for items such as dining out, buying music, clothes and so on.

5: Make Goals: You should now have figured out what you are spending and where you can make cut backs. You shouldn’t be aiming to create a budget just to survice on; you should be looking to have spare money to increase your net worth each month. A couple of methods of raising your net worth is by lowering your debts or by raising your savings. If you are in debt then the goal should be to get out of debt as soon as possible. Set goals for how much you want to pay off per month and build this into your budget. Once you have paid off debts then the focus can become on saving money each month via a high rate online savings account. High interest savings account products have high interest rates and accumulate quickly when you make regular monthly deposits. You should make it a goal to increase your net worth each month by either reducing your debts or boost your savings so you have money saved for unexpected expenses or to purchase large items debt free. There are many other options for extra money in your budget such as investments in property and so on.

6: Keep Yourself in Check: Make sure you keep reviewing your budget and looking for areas where you can make further trimmings and savings. A budget is not a survival plan, it should help form your long term financial roadmap to improve your long term net worth.

This article is written by Richard Greenwood of www.compareyourbank.com.au which compares bank products and savings products to help consumers find the best credit card. Products can be compared side by side looking at comparable features before making an application online.

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Written on 02 August 2009 by editor under Get out of debt with No Comments
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How To Budget Your Household Money

Even when both partners in a family work, money can still be tight. It costs a lot to afford all the essentials in life including a place to live, food and car expenses. Add to that a bit of spending money and some unexpected purchases and there can be little to no money left at the end of the month. Budgeting Money is a great idea regardless if there’s a little or a lot of money to work with.

Salaries are really the foundation of any financial plan. If the person works at a job where they are paid a certain amount week after week it can be a bit easier to plan a monthly household budget. People who don’t receive regular salaries, such as people paid on a commission basis, will find it harder to set out a financial plan, but it can be achieved using average earnings.

If you’ve never created one of these before it can be a bit daunting. The easiest approach is to list all the money coming into the home and all the money going out. To do this effectively a person should really document all the expenses they make in a one month time frame. This includes every stop at the convenience store they make, as well as every penny they spend in vending machines.

It can be difficult to itemize every dollar but it’s really important. Doing this helps the person preparing the monthly household budget by showing them where excess money is going. It’s very surprising how quickly trips to the mall or sporting events add up.

Working the old-fashioned way with a pencil, a calculator and a piece of paper can be time consuming and obviously can lead to some mistakes being made. For anyone with a home or office computer, using financial budgeting software is really the best approach. All that is required is that you key in all the relevant numbers and the program will offer suggestions regarding where money can be saved or where it can be redirected.

Debt can be very worrying and for someone struggling to make ends meet it can be very stressful. Setting a monthly budget that focuese on paying off debt as fast as possible makes huge sense.

A good way to do this is to think about where money can be saved and then using that to pay a credit card. When a person sees just how much cash they are spending on the non essential items, it becomes a lot easier to save money.

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Written on 27 July 2009 by editor under Get out of debt with No Comments
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