Whether you are living alone, with your partner or kids, financial planning and management play an essential role by ensuring your family gets the necessary household supplies. While many may find it a scary thing, approaching your finances wisely helps you stay out of debt. Remember, no one is born with money management skills. However, with a household budget, you’ll always be in a position to track your actual spending habits. Also, a household budget enables you to itemize your expected income and expenses. This helps you determine the money you’ll save and how much you will spend.
Why you need a household budget?
From an economic perspective, having a household budget helps provide financial welfare for your home. The following are some of the reasons for having such budgets.
- The budget ensures that you don’t spend money that you don’t have.
- It helps you save hence preparing for emergencies.
- It helps in alerting you of bad spending habits.
- It helps you focus on your financial goals.
Creating household budget
Without an accurate picture of your monthly expenditure, managing your household budget can be easier said than done. Therefore, in order to effectively manage your budget, here are some useful tips.
List down all your sources of income
Firstly, you need to provide an overview of your monthly income. This should include your wages, salaries, child support, grants, and alimony, among other sources. Also, ensure that the listed sources of income are reliable. Therefore, if at all, you occasionally get cash from outside jobs or from your hobby, you should include it in your income. In other words, ensure your budget is something you can depend on. However, if you are self-employed, or you have a fluctuating income, you can still use the average monthly income or estimate a particular amount with which you can make on a monthly basis.
List down your expenses
After you’ve listed down your total revenue, it’s now time to budget for it. You’ll, therefore, need to note down all the household expenses. First, you need to start with your fixed expenses such as rent, transportation, electricity, medical, water, taxes, and groceries, among others. Also, you can list down the maximum amount you wish to spend on household variable expenses.
Calculate your net income
The net income simply refers to the amount you will remain with after clearing all the household bills. It is calculated by subtracting the total expenses from the total revenue/income. In order to remain financially secure, ensure that your net income is positive. Other than being financially stable, having a positive net income also helps you save, thereby planning for any future uncertainty. If it turns around to be negative, chances of you ending up in debts are high. Just in case it’s negative, there are other options you can take.
Adjust your expenses
If at all your net income turns out to be negative, that’s an indication that you are spending more than you earn. In case of situations, you’ll have to adjust your household expenses; otherwise, you’ll run into trouble. One major area you will look at is the variable expenses. You can, therefore, decide to reduce the amount you spend on hobbies, entertainment, or phone calls, among other nonessential expenses. Look at the basics and give them first priority.
Monitor your spending
The other thing you would want to do is to track your household spending habits against your actual budget. One significance of tracking your expenditure is that it prevents you from overspending. Anytime you are about to get out of the hook, the budget will remind you to stay within your limits. At the same time, if you have an urgency, the budget will enable you to adjust other areas so as to balance the expenses in the long run. For example, you may bump into a chain store and realize they have some great offers for household items. Perhaps you’ve been planning to buy a freezer in the future, and you see the chance too good to be ignored. In such cases, you can use part of your household budget to acquire the freezer then balance it by either forgoing your planned vacation or canceling your gym membership. In summary, monitoring your spending allows you to balance your household budget by cutting down nonessential expenses.
Free Templates & Worksheets
If at all you need an effective, simple, and easy to your tool to keep your household expenses in order, then you shouldn’t worry anymore. Our household budget templates provide you with the solutions you need. The templates help you itemize your income(s), total expenses, and helps you calculate and adjust your budget. Our aim is to help you remain financially stable after catering for all your expenses. Remember, no one is born with money management skills, but with our templates, it will work for your perfectly fine.
One of the key foundations towards achieving financial freedom and security in your home is making a budget. A household budget helps you manage your income and control your spending habits. Besides, it provides you with the opportunity to save for the future. Therefore, whether you live alone, with a partner or you have kids, having a household budget is very necessary.