Few topics can cause as much stress and strain on a marriage as developing a monthly household budget. Yet in order to keep long-term goals in sight (college, retirement, your dream vacation) and short-term priorities in line (groceries, bills, mortgage), a budget is necessary. Households that don't adopt a budget face the possibility of being buried under a landslide of debt. You can create a manageable budget with relative ease. But staying on track involves a partnership, planning and self-control.
Tracking Household Spending
Keeping track of your household spending is the first step toward creating that monthly budget. It's also the most tedious step. Before even beginning to develop a budget, track your expenses for three months. With online banking options and money management software readily available, you should have the means in place to create a chart you can monitor, analyze and update without too much hassle. A simple Excel spreadsheet works well. You'll want to count everything, right down to the M&Ms you pull from the vending machine every day at work. By tracking all expenses you'll have a much better idea of where your money is going every month.
Evaluating Your Spending
Here comes the painful part, the part that can bring tension, conflict and grief. If you discover that you are spending more than you are earning, you're going to have to make some difficult decisions. Before the household war begins, you'll want to compartmentalize your spending. First, determine your fixed costs. Your mortgage would be foremost of these costs but there will be others, such as car payments, student loans, medical bills such as payment for braces or a second mortgage. Next, determine your regular bills, such as utilities, phone, cable, credit cards, department store cards, insurance and other bills that may not be fixed but always show up. Finally, tackle the expenses that leak money out of your account like a busted faucet. Look at groceries, gas, fast food, meals out and other frequent expenses. After all have been categorized, you'll need to determine what is necessary and what is considered a luxury. Rethink your life. Consider your long-term goals and how to get there, and then be ready to make the tough choices any household budget requires.
Sticking to the Plan
Think of your household budget as one of those pie charts. In fact, you can make a pie chart easily in Excel. The largest slice of the pie should be for necessities--real necessities, such as food, gas, utilities, mortgage and medical bills. Discuss what is truly a necessity in your household. Evaluate whether you need that $100 monthly gym membership or that data plan for three of your mobile devices. If you are truly strapped for cash, you'll need to make those hard choices to keep your balance sheet from dipping into the red. Evaluate your current mortgage and determine if refinancing is an option. Keep the credit cards that have the lowest interest rates or give the best rebates and keep the others in a drawer. Scour your statements for hidden fees. If you can't cut enough, look at raising your household income through part-time jobs, services or opportunities. Don't assume windfalls such as bonuses or tax refunds will automatically happen. Once you have developed a budget that works, make sure everyone in the family has bought into the plan, and track your expenses. If your family strays from the plan, someone has to be the enforcer. Set long-term and short-term goals and, when they are achieved, build into your budget an opportunity for a household reward.
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