household budget

In this age of credit cards and checking accounts many times people can find themselves in a financial “rut”. Considering that everywhere you go plastic or checks are accepted, you could find yourself becoming overrun with bills, finding yourself drowning under a mountain of bills. Getting used to making and most importantly, living by a budget can be difficult. The main thing to learn is self-discipline.

A budget affects everyone in the household. As you prepare your family budget make sure not to “spend” every dime. There will always be emergencies or sudden and unexpected expenses.

You will need to have paper, pencils and a calculator. Never do a budget in ink, as there will be occasions that changes need to be made. In order to avoid becoming overwhelmed only do a budget covering two weeks at a time at first.

Later you can do one that covers anywhere from one month to six months, enabling you to plan for vacations or other large expenses. You will need some quiet time to concentrate. On one piece of paper make lists of your expenses along with the dates each payment is due. Make as many columns as needed. Some common columns would be:

Household Expenses:

Rent
Utilities
Phone
Insurance
Internet

Car Expenses:

Gas
Maintenance
Insurance

Credit Cards:
Visa
MasterCard

Medical Expenses:
Insurance
Prescriptions

Personal Expenses:
Clothing
Schooling
Vacation
Entertainment

Next, write the amounts of the bills as well as the date the payment is due next to each entry. If you don’t know the exact amount, then jot in an estimate, however, always overestimate. This is where the need for doing it in pencil applies. When you receive the bill with the due date, you can change it. It should now look something like this:

Household Expenses:
Rent Amount Due date
Utilities Amount Due date
Phone Amount Due date
Insurance Amount Due date
Internet Amount Due date

Car Expenses:
Gas Amount
Maintenance Amount Due date
Insurance Amount Due date

Credit Cards:
Visa Amount Due date
MasterCard Amount Due date

Medical Expenses:
Insurance Amount Due date
Prescriptions Amount Due date

Personal Expenses:
Clothing Amount
Schooling Amount Due date
Vacation Amount Due date
Entertainment Amount Due date
Total =

After you have done this, add the amounts and fill in the total at the bottom. This shows your expenses.

On another sheet of paper make the same type of columns for your credits or earnings. This would include paychecks; cash in the bank, expected bonuses etc. Anything that can be considered as a regular income or is cash you already have on hand. Total these and place the amount at the bottom of your Assets page.

By subtracting your expenses from your income you will, if not now, eventually be left with a positive number. This is called being in the “black”. It means your expenses are lower than your earnings. There are times you might find you are in the “red”, or your expenses are higher than your earnings.

When that happens you need to be able to adjust, i.e. move your entertainment to another week or make arrangements to pay a bill on a different due date. It’s a good idea to try to avoid moving bill due dates. Putting it off doesn’t mean you won’t have to pay it and sometimes there might be a hefty late fee.

Occasionally, you might find that on the weeks you are in the “black”, you can pay a bill before its due date. This is beneficial for several reasons:

  • It frees up funds for the next week
  • It earns a good rating with creditors
  • It saves money on finance charges and late fees

Making and maintaining a budget need not be frightening, intimidating or difficult. It can end many sleepless nights of worrying. It’s not an overnight fix and will take time and effort to adjust to. It also takes a few weeks to see results, however, in the long run it will bring peace of mind. Isn’t it worth it?

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