How to Make a Household Budget - Your Step-By-Step Guide

• Author: Monica Jackson
• Posted: 2024-02-14

If you've ever wondered how to create a household budget, then this guide is for you. First, determine your net income, which is the amount of money you earn each month, including what you can spend and what you have to pay. Most budget forms have a field for this information, and if you're a freelancer or run a small business, you should enter your income on the low end. It's better to anticipate a higher income than to have an unpleasant surprise later.

Once you've determined your income and expenses, it's time to break down those expenses by category. Make a list of what you spend each month and divide it into categories: important and non-important. Fixed expenses are things like rent or utilities. Variable expenses include things you buy like groceries, gas, and entertainment. Your bank or credit card statements are an excellent place to start. Online budgeting templates and smartphone apps can also help you keep track of your spending.

Once you've determined the types of expenses you have to pay, start to identify your "trivial wants." These are expenses that don't impact your day-to-day living. For instance, you probably won't go to the movie theater more than once or twice a month. Another example of a trivial want is dining out. You likely don't eat out daily, so don't consider it a must-have.

You can also identify patterns in your spending. You might find that you forget to pack lunch everyday, and this is a pattern that makes you reconsider whether or not you want that new vehicle. Then, you can eliminate that cash you carry to work. These patterns will help you change your lifestyle to fit your needs. And they will help you decide what is important to you. Your budget will make that much clearer.

Once you've determined your net income, you're ready to start tracking your expenses. You'll need to track your income and expenses regularly to ensure you're on track. You may also want to create a budget spreadsheet, which will allow you to record monthly expenses. You'll need a pen and paper to do this, and a budgeting app, spreadsheet, or paper and pen are all tools you can use.

Your monthly spending categories will help you manage your money better. If you're unsure of yourself, try an envelope system. Separate your cash into envelopes, one for each category of spending, and if you're unsure, stop spending in that category. By putting a little planning ahead of time, you'll stay on track and avoid overspending.

You should create a budget with the goal of spending less than your income. Budgeting for more than your income means borrowing money or using savings. Make a budget and you'll find it easier to plan for your expenses. Using a budget will help you become more aware of your spending habits and prioritize your needs. You'll be more aware of your expenditure and will save more money.