How to Fix a Household Budget
A household budget works if it curbs excess spending, focuses on when and where you spend your household income and prioritizes your expenses for better handling of your money. An effective ratio when fixing a budget is 50/30/20. You want 50 percent of your budget for essential expenses, 30 percent for nonessential expenses and 20 percent to go into your savings account.
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Instructions
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Evaluate your current budget. Review retail receipts, ATM receipts and financial statements going back at least 30 days, but preferably three months, to obtain a clear view of when and where you spend your money.
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Split your expenses into two categories: nonessential and essential. Give a higher priority to essential goods and services, such as housing, transportation, insurance, utilities and groceries. Limit your essential expenses to 50 percent of your household net income.
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Make adjustments where necessary to reduce the cost of essential expenses. For example, bundle home, auto and life insurance plans to cut insurance costs or carpool to reduce transportation costs.
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Restrict nonessential spending, such as magazine subscriptions, cable television and summer vacations, to 30 percent of your budget. Minimize spending where possible. For example, pack your lunch instead of ordering take-out. Bring your own coffee to work instead of purchasing a cup on your way to work.
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Create a savings plan. An effective budget has enough wiggle room for savings. Put aside 20 percent of your income for a savings or emergency fund, according to MSN Money. If you have outstanding debt, pay as high above the minimum payment as you can while putting some money in savings. Pay the higher-interest cards first, and the rest in descending order.
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Tips & Warnings
Your savings should go into an interest-bearing savings account.
References
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