How to Establish a Household Budget

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Establish a Household Budget
Establish a Household Budget

How to Establish a Household Budget. Living paycheck to paycheck is challenging and frustrating when you want to put some of your hard earned cash into savings. One of the best ways to save, invest and make more out of your money is to make and keep a household budget. Grab your bills, a calculator and some smelling salts and get to work creating your financial future.

Bring out the bills, receipts, pay stubs and bank statements. Categorize your income and expenses. Use categories like utilities, credit cards, car expenses, food, entertainment, education and any others that make sense to you.

Calculate your expenses and income over the past two months. This tells you how much you are spending and where the money is going. Have the smelling salts handy.

Keep a financial journal for at least a month. Write down any and everything that goes into or out of your accounts. This seems tedious because it is, but knowing your spending habits is crucial to making a realistic household budget.

Begin to budget. Write your categories out in a column on the left side of a piece of paper. Draw 13 columns across the rest of the page. Label the first empty column "Estimated" and label the rest with the remaining months in the year.

Estimate your future expenses. Use your financial journal along with your categorized expenses to decide about how much you spend each month for each category. Write those estimates in the appropriate boxes in the "Estimated" column. Add all of your estimated expenses and total them at the bottom of the page.

Write your estimated monthly income next to your estimated expenses. Subtract your expenses from your income. If your expenses top your income, you either need to get a second job or cut back on non-essential purchases. This is often a painful process, but it is the key to a successful budget.

Keep your spending in check. Once you have set goals for your household budget, stay strong and keep to your budget. It's easy to fall back into old patterns and begin to live outside your means. Resist the temptations. Focus on the future and the financial goals your family has set.

Tips & Warnings

  • Leave room in your budget for annual expenses like taxes, registering your car, vacations and gifts.
  • If you have kids, involve them in the budgeting process. It puts the family on the same financial page while teaching the kids the basics to financial stability.
  • One option for creating a household budget is to use financial software like Quicken. The program includes tools for budgeting, tracking expenses, investing and bill paying.

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