Making a Household Budget

In order to manage money effectively, control spending and meet your personal financial goals, it's essential to make a household budget. A budget isn't set in stone; it will inevitably change over time as you have adjustments in income, take on new debts or pay off bills. There are many helpful budgeting software programs that allow you to easily enter your expenses, change your financial data and even use the information in your budget to complete certain aspects of your taxes.

Calculating Income and Expenses

Developing an accurate budget requires some preparation to lay the groundwork. Calculate all of your sources of income, including your salary, your spouse or partner's salary, income from part time jobs or seasonal work, rewards from credit cards and interest from retirement accounts or investments. Once you've added up all of your sources of income and have accounted for taxes, you'll know how much money you have to work with in your budget.

Estimating your expenses may be more complicated and time consuming than calculating your income. Many consumers aren't aware of exactly where there money goes each month. To create an accurate and realistic budget, dedicate one month to adding up all of your expenses. Save every receipt in a box or folder and add up all of your costs at the end of the month. You may be surprised at how much you spend on items like coffee, snacks, lunches or dinners at restaurants or new DVDs.

A household budget should include all of your priority expenses, like your rent or mortgage, groceries and restaurant meals, telephone and internet, utilities, transportation, clothing, personal care, pet care, home maintenance, home and car insurance, health and life insurance. You must also include monthly credit card bills, personal loans and other unsecured debts. Accounting for all of these necessary expenses is the first step in creating your budget.

Annual expenses, like yearly insurance premiums, holidays, taxes or family vacations, are often overlooked when making a budget. Divide these expenses into 12 segments and include them in your budget for each month. By setting aside a certain percentage of your income every month for these large expenses, you can avoid turning to credit cards for birthdays or annual bills.

Once you've taken all of these priorities into consideration, you'll know how much disposable income you have left over each month. A certain percentage of your disposable income should be dedicated to a household savings account. Building a savings account will help you stay on track in other areas of your budget. An emergency savings account will also keep you from relying on high interest credit cards when you have an emergency car repair or an unplanned medical bill.

Trimming Your Budget

After you've finished making a household budget, you can identify areas where you can cut back. Consider canceling fitness center memberships or DVD subscriptions if you aren't using these services. If you're eating lunch out several times a week, think about packing lunch at home to save money. If you order a latte from a local coffee bar every morning, consider cutting back on this potentially expensive habit.

Making a household budget is a necessary first step in managing your family's finances. Many households slowly accumulate credit card debt or take out new loans at the expense of their future goals, when following a budget would prevent the use of credit. Develop a budget that allows you and your loved ones to meet important family objectives, like taking a special vacation, replacing an old car, sending your kids to college or securing a comfortable retirement.

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