Whether you are a single college student, an elderly couple living on Social Security, or anyone in between, you absolutely need a household budget. A household budget is simply a roadmap to ensure your bills are paid on time each month and it helps keep you on track with your efforts to save for the future. If you have not taken the time to create a budget yet, then these tips will help you start the task:
Tip: Write Down All of Your Family's Monthly Income
The first step in creating a household budget is to write down all of your income. Write down the "take-home pay" amounts for you and your spouse. Additionally, if either of you has a small business or other sources of income such as child support or alimony payments, then write those down as well.
The total amount of all of your family's income sources is the amount of money you have each month to pay your monthly bills, save for yearly expenses, and save for your future.
Tip: Write Down All of Your Fixed Monthly and Yearly Expenses
Each bill that you pay month after month is referred to as a "fixed" expense. For example, if your mortgage is $1,000 each month, then your fixed mortgage expense is $1,000 per month. Some other examples of fixed expenses are:
- utility bills
- cable or satellite bills
- loan or credit card payments
If you often find yourself struggling to pay yearly or bi-yearly expenses such as property taxes and insurance premiums, this is because you don't yet have a budget outlining how you will save and pay for them. One of the best ways to solve this problem is to write down each of this type of expense, divide it by twelve or six months, and then list that number as a monthly expense.
For example, if your auto insurance is paid every six months and is $600, then your monthly expense would be $100.
Tip: Determine How Much "Flexible" Cash You Have Available Each Month
Finally, once you have written down all of your income and fixed expenses, then subtract the latter from the former. The money you have left after paying each of your fixed bills is what you must use to save for your future and spend on things like groceries and other household expenses. Now that you know for sure how much money that is, you can decide how you would like to allocate it.
For more information, contact establishments like Advisors Financial Planning Group LLC.