When it comes to many households, the budget is one of the most important things to continuously keep track of.
The consumer that stays on budget tends to sleep a little better at night. On the other hand, those that stray off course and spend too much money tend to have their fair share of sleepless nights.
If you’re a person whose household budget is leaving you with questions, it may be time to review that budget and see what’s working—and what’s not working. Overseeing a household budget does not have to be difficult; you just need to know how to budget both your time and money.
In order to budget properly for your home and make the needed changes when time is of the essence, keep the following four tips in mind:
Keep attainable goals – If you are trying to pay down high credit card bills, eliminate wasteful spending, and get your checkbook from the red to the black overnight, you are already setting yourself up for failure. For those that find themselves in a financial predicament, there is a reason they got there in the first place.
Sit down with an old-fashioned notebook, computer spreadsheet, or whatever means works best for you and your family (if applicable). Next, add up how much revenue is coming into your home on a monthly basis. The next step is to review the last six months of expenses and see where your money is going, if the money has been well-spent, and where expenses can be cut. Remember, it takes a number of months to get yourself into financial distress, so do not expect to remove that frustration in a short period of time. If you keep attainable goals and stay within your budget, you will gradually find yourself in a much better financial position.
Determine necessities and desires – Whether it is your rent or mortgage, a car payment or food, there are certain household needs that you are unable to get away with not paying. That being said, there are other expenses that you can quickly and easily remove from your monthly budget. Do you really need that daily latte at Starbucks? Are the 100 or so extra channels on your cable something you cannot do without? Would you be so upset if you did away with the daily newspaper subscription when you can more than likely read the news online at home, work, or your local library? Sit down and review what is and isn’t necessary. You could very well be surprised at the money you are wasting on a monthly basis.
Plan for emergencies – No one with precise accuracy can forecast a medical emergency, a car that needs sudden repairs, or a household matter that will cost substantial money to fix. With that in mind, it is important as part of your budget evaluation to have a contingency fund set aside. While today’s economic conditions have made it difficult for many individuals and families to do just that, it still does not lessen the importance of an emergency fund. Try and put a little away each month for a “rainy day fund” so that you are not turning to credit cards and loans when trouble strikes.
Work as a team (when applicable) – Whether it is the couple just starting out in life or the husband and wife that have been married for decades, budgeting together definitely has its benefits. Let’s face it: Money is typically the number one thing that comes between a couple, especially those who are new to living with someone else. In order to make the household budget work when living with your significant other and/or children, everyone needs to be on the same page, not hide purchases that are costing the family money, and look at the big picture. What is the big picture, you ask? It is simply making sure that money is not an issue to quarrel over for years to come.
For the single person looking to budget, never be afraid to reach out to family and friends for advice on putting a plausible budget together. This is especially important for those just starting out on their own so that they can set the groundwork of positive financial habits for years to come.
With no sign in sight to solid economic growth nationwide, it is as important as ever for households to take a look at where their money is going. If money is going out faster than it is coming in, you could be opening yourself and your loved ones up to a budgetary nightmare.
written by: Dave Thomas