How to Determine a Household Budget

Setting a budget can make it feel as if you have found extra money.

You know you worked for it and you know you got paid, but at the end of the month it can be difficult to know where that money went. Budgeting will give you control over your money and help you to see what comes in and what goes out every month. Working out a budget plan and sticking to it can seem daunting, but it's easy, once you get into a routine.

Things You'll Need

• Monthly expense information
• Monthly income information
• Computer

Instructions

1. Find a budget tool that will work for you. Some people prefer a pencil and a pad of paper, while others may want to buy advanced software to facilitate the process. Get something that is quick and easy and that you are likely to use. Don't buy expensive computer software if you don't have easy access to a computer.

2. Determine your current state of spending. Before you write up an ideal budget, start by identifying exactly what you are doing currently. It's far easier to make changes to an existing habit, than it is to start a new habit. Your bank statements should help you identify major expenditure such as mortgage, rent, car payments and utilities. It's the minor spending from cash in your wallet or purse that is often responsible for the disappearance of a lot of your monthly income. That daily $5 coffee, soon adds up, as do fast food lunches. Limit the amount of cash you carry. Keep receipts from daily spending and list everything you spend. The weekly figure for incidental spending can be shocking. Equate it to how many hours you must work to ear that money. That sobering thought can help curtail wasteful spending.

3. Check your percentages against proven numbers. Your monthly expenditure, should according to financial advisor Dave Ramsey, follow percentages of your income. For example, no more than 35 percent of your income should be spent on housing, 10 percent of your income should be invested in savings and no more than 15 per cent should be spent on transportation. Consult a non-profit debt counselor to help, if you are really struggling to make ends meet and getting into debt.

4. Spend every dollar that comes in before the month begins. Spending should allocate money for some form of savings. If you have a plan for your money, you are much more likely to be successful with your money goals. A successful budget doesn't leave a large amount of money unaccounted for, but rather assigns every dollar a purpose. Don't forget to think about incidental categories like emergencies, gifts and social activities, that may not seem immediately obvious.

5. Take time to adjust your budget. You will need several months of working your budget, in order to fine to it to a system that works for you. Make sure that you allow everyone in your family to have a say in how the money is spent. A lot of hard work budgeting can be blown if your spouse spends money without telling you. Communicate about every aspect of the process to avoid conflict later.

Tips & Warnings

• Save up an emergency fund early so that you can avoid the temptation to go into debt when a sudden expense arises.

• Add a little extra to your grocery budget - most people under estimate their grocery budget the first time out.

References

• Green Path: Budget Percentages
• Dave Ramsey: Budget-Lite

Resources

• Kiplinger: Budget Form
• Dave Ramsey: Basic Quickie Budget
• Mint: Online Budget