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Creating a household budget is a must for every family. Whether you are a single individual, a couple, or a family with children you need to understand where your income is going. This helps you to know where to make changes as needed.
Tips for Creating a Household Budget
Evaluate your income
The basics of your budget come from income and expenses. Many families just take that income each pay period and see how far it will go toward their needs. This method doesn’t work and is often the reason that debt becomes an issue.
To begin, you really need to fully evaluate how much income you have coming in, and how it compares to your expenses. Sit down and create a spreadsheet or simply use a notebook and list all income you regularly receive. If your income varies week to week, this may fluctuate, but you’ll have an average to put on paper. Take the last 4 pay periods, use their average for your budget to get a basic idea of what to expect.
List every expense
To truly create a budget that is functional, you’ll want to look at all of your expenses. This isn’t just about the main bills you have like rent and insurance. This should include things like subscriptions, fees, groceries, and even those little splurges. Don’t forget to add all of the little things to this list. It’s time to really get honest about where your money is going.
Families struggle most often with their finances when they aren’t fully honest. Sometimes, we forget about those little $2-$3 expenses and don’t realize how easily they add up. By truly listing every expense, you can see what changes need to be made to make sure your mandatory bills are paid in full.
Make changes as needed
Once you understand how much money you are bringing in, and how that compares to what you are spending. That’s when you will be looking at what you truly need to change. The most important things are, of course, your mandatory bills for a roof over your head, transportation, and food. Along with those, things like insurances, telephone, Internet, and similar are equally important. Luxury items like extra television channels, eating out often, or even a newer car may need to be cut back to make room to pay the necessities.
Make plans for paying off debt
Most people have some kind of debt. Typically, it will be a home mortgage or vehicle payment. However, you may also have credit cards or loans that need to be paid off to become debt free. One of the biggest parts of creating a household budget is figuring out how you can pay off your debt.
While there are many tips out there for making it easy to manage your budget and pay off your debt, we are huge fans of the Dave Ramsey Total Money Makeover. The book is a great investment and really can help you to learn how to manage your money and make changes to pay off debt.
If you are here trying to figure out how to manage your finances better this year, this is a great beginner step. You’ll want to work hard to focus on making goals and sticking to a solid financial plan.