There are many different ideas and techniques to make a household budget. A good first step is to make a list of your fixed expenses like your rent, car payment, and utilities. Then start making other categories by looking at your bank account online. What do you spend per month for food at the grocery store? What do you spend on entertainment? Additionally, don’t forget about expenses that come up infrequently such as property taxes, vacations, etc. The best way to deal with infrequent expenses is to take what you will pay one time a year and divide the expense by 12. That way you are putting money away each month for that one time annual expense.
After you have the list of expenses and categories, now it is time to take a look at your income. Determine what your household income is by looking at your paychecks. Be sure to use your monthly income even if you get paid in another manner, so you can compare and contrast your monthly income with your list of monthly expenses.
Once you have both your monthly income and your monthly expenses, you can now start analyzing where you might be spending too much. Generally, your housing cost should only be about 30% of your income. Additionally, an expensive car can really bust a household budget. If money is tight, you can always look into downsizing to a vehicle that is dependable and affordable. Another category that can bust budgets is eating out too much. When my wife and I started using quicken to do our budget, we were amazed at how much money per month we spent on going out to eat. If you are spending too much try eating dinner at home together and bring your lunch to work.
It is also important to make sure you are budgeting a certain amount for saving. A good rule of thumb is to have a total of 3 months of your expenses in savings. That way, if someone loses their job or your car’s transmission goes out, you will have the money to pay for these expenses instead of going into debt. In addition to saving for retirement, you should put aside 10-15 percent of your take home pay into savings until you build up 3 months of your expenses.
There are many different systems out there to ensure you follow your budget. My wife and I use Quicken to track our budget and spending. If you have Excel, that is also a great way to make a budget. Taking advantage of online banking is also a good way to track your spending to create your budget. There is also the Dave Ramsey envelope system. At the beginning of the month you put a certain amount of cash in an envelope that is marked by a certain spending category. It forces you to budget because once the envelope for eating out is empty that means no more eating out until next month. Just try to find something that works best for you!