How to Create a Household Budget

You can get a handle on your daily expenditures by creating a household budget and sticking to it. Just follow these steps.

Instructions

Difficulty: Moderate

1. Write down every expense for two months. You are not on a budget yet, so spend money as you normally would. This will give you a real indication of where all of the money goes.
2. Break down this two-month expense list into two categories: fixed expenses and variable expenses. Fixed expenses include mortgage, car payment, insurance and recurring bills like phone, cable and Internet. Suggestions for variable expenses include transportation, clothing, groceries, entertainment and childcare.
3. Create a miscellaneous category for expenses that do not fit into a standard fixed or variable field.
4. List all income sources from all members of the household.
5. Allot a monetary spending amount for each category, based on the expense list you collected the last two months. Total the categories.
6. Determine if the expenses are less or greater than the income. If you spend more than you make, then you need to decrease some of your expenses. Look over the categories and see where you can spend less. Eating at home instead of choosing fast food or canceling a service like the house cleaner or monthly video rentals can cut costs.
7. Account for all the income throughout the budget. If you make more money than you spend, then budget the extra into a savings account, investment or local charity.
8. Keep records of all expenses and income sources when you start your budget. This will help you stay on track and warn you if you are getting close to going over your budget.

Tips & Warnings

• Spouses need to create this budget together, and agree to stick to it.
• If you have children, they should be included in the process if they are old enough to have money or make purchases. Let them help create spending limits, allowances and savings accounts. Learning at an early age to live on a budget will greatly help them in the future.
• Do annual reviews of your budget. Check to see if there are areas where you consistently under spend, or over spend, and adjust your budget accordingly.
• There are many software programs available that help you create your budget on the computer.
• Set realistic goals for yourself and your family. If you can't stay in the limits, then the budget will fail.