A household budget works in such a way that it helps you to keep control of your household expenses. Without a proper budget, it is likely that the household savings and expenditure will go over the board. No matter your income level, maintaining a household budget is a sure way of keeping track of your expenditure and monthly savings. Creating a household budget simply means that you understand what your expenses are, matching them to your income and ensuring you are not in any way living above your means. The household budget is a practical way to manage scarce resources for the household to ensure that there are no wastages and to make sure that the most important things are being taken care of.
The basic format of a household budget is quite straightforward. A typical household budget template is expected to contain the sources of income and projected household expenses. A household budget template will always involve an expense report which gives a better idea of how money in being spent in the household. Every basic household budget should determine your income which should include salary, dividends, commission, child support and other sources of income. It should be able to estimate the required expenses like rent, insurance, car maintenance, medical expenses, groceries etc. In some cases, it should also estimate discretionary expenses like entertainment, new furniture etc.
Creating a household budget can help you make a spending and savings plan that puts aside a certain amount of money each month for some unexpected expenses. It will also help you keep good record of your monthly expenses based on each month’s expenditure. Creating a household budget for the first time could look quite difficult and discouraging. However, in reality, it is quite easy. The major input is to document your current earnings and spending. The following steps will help you create a quality and effective household budget without stress.
Step1
Decide on how you intend to document your household spending. You can create a spreadsheet for that purpose or find some sample budget worksheets.
Step2
You can format the columns of your worksheet by creating titles such as income, expenditure, date and payment method.
Step3
Categorize your expenses. For example, create categories for Rent, Utilities, Household Operations, Groceries, and Transport etc.
Step4
Start documenting your spending by putting your biggest regular expenses into your template. Put in placeholder as estimate until the actual bill is known. For example, put in an estimate for your recurring bills using the previous year figures.
Step5
You are expected to calculate your regular essentials and determine how much you spend on them
Step6
Put in your discretionary expenses also. Note that it is better to have each discretionary expense in a separate row
Step7
Insert an expense row for savings. It should be a goal in your household budget template and should be done if possible. The target should be 10% of paycheck.
Step8
Add up your expenditure each month. Use it to determine how you spend on each category. Record all your earnings and add them together.
Step9
Put the total of your expenses and your income side by side. Check if your expenses are greater than your income and adjust them appropriately. That means you have to target a category to reduce.
Step10
Estimate and put in expenses for contingency into your household budget. However, your target should not be to dip into it except when unavoidable.
Step11
Preview your Household Budget Template and save it.
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For people who are creating a household budget for the first time, it is important to keep it simple by using a notebook and pen to record your monthly income and expenses and have a good idea of how much money you have to spend each month.
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The second tip to keep in mind is motivation. It is important to note that most household budgets get dropped by the side after some unsuccessful attempt at the process. You may not be able to do it perfectly at the first, second and third time. However, you will surely get better at it as you progress.
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You can use a pre designed household budget template available on the internet if creating from scratch seems difficult. However, ensure it is a perfect match for your situation.
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