Thursday, September 07, 2006

How to create a household budget

Summer's over, and you've decided you really need to get on a budget. You're serious this time. You're really going to do it. But just how do you go about creating one?

Setting up a household budget is easier than you think. Here are three basic steps to getting started.

Track your expenses
To get a handle on your money, you need to know where it's going. So for 30 days, write down every transaction you (and your spouse, if applicable) make and bill you pay. That will provide a realistic idea of just how you are spending your money.

You can use any method you choose. Jot the transactions down in a pocket notebook you carry with you, keep receipts and list them in a spiral notebook or accounting ledger at the end of the day, or use a computer program or spreadsheet. A friend of mine uses his Daytimer. The key is to find something that is easy to do and makes expense-tracking a habit. (To find some expense-tracking tools, Google "track expenses.")

I use Quicken, which is great for totalling up the amounts and sorting purchases into categories (the next step). But because it's not as accessible as a notebook or sheet of paper, receipts I need to enter can quickly pile up. I think it's better to start out using plain old pencil and paper.

Categorize your spending
As you track your money, begin thinking about how to sort the different transactions into categories. Obvious ones are Mortgage/Rent, Utilities, Food, Clothing, Entertainment, and Debt (credit cards, car payments, student loans, home equity payments, etc.). However, also be sure to include a Savings bucket that covers money set aside for emergencies, holiday shopping, vacation, etc. Every transaction you make should fall into an appropriate category.

You can create as many categories as you need, and even break them down into subcategories. For instance, you might put DVD rentals, pizza take-out, and tickets to the ball game under the single heading of Entertainment. Or you could put them in separate categories of Videos, Dining Out, and Events. It all depends on what you want to track. M and I bundle things we purchase from the grocery store into a Grocery/Personal Items category, but have a separate bucket for Baby Items (just because I'm interested to know how much diapers, wipes, and the like increase our monthly spending).

Bear in mind that the more categories and subcategories you have, the more complicated your system gets. If it gets too hard to maintain, simplify it. Sticking to your system is more important than determining how much you spent on Starbucks coffee every month.

Set spending goals
Once you've tracked real monthly expenditures and sorted them into your spending categories, total up the separate amounts. You now have a clear picture of your basic monthly budget, and are ready to set goals for how much you can spend in each category each month.

Goals for fixed expenses, like rent or gym memberships, are easy to determine because they are the same each month. Much harder are areas like Groceries, Clothing, and Entertainment, which are almost completely determined by how much you choose to spend each month. Use your expense-tracking record as the basis for these amounts.

Remember, though, that your monthly expenses shouldn't exceed your net monthly income (the amount you have left after taxes). If your budget shows that's the case, you are overspending and you're going to have to make some adjustments to avoid further trouble.

The good news is that you've taken the first step to getting on the road to financial stability. Once you adjust your spending, keep tracking your expenses, and compare them regularly to your budget. In a matter of time, you'll have things under much better control.

Do you use a budget?
How about you? Do you use a budget for your personal finances? If not, how come? How many times have you tried to start one? Why do you think it didn't work?

21 comments:

Steven Peixoto said...

Hi,

I've just created a website that covers budgeting using the jars system and online software. Would like to know what you think.

http://jarshelp.com

Anonymous said...

Hey,

Thanks for the website, I needed the reminder of how the jars budget works.

Anonymous said...

Nice brief and this post helped me alot in my college assignement. Say thank you you as your information.

Anonymous said...

slam dunkle! This shall be the name of my first beer!

Anonymous said...

torebki damskie
to torebki damskie włoskie , torebki mlodziezowe , torby listonoszki . torebki damskie skórzane , kazar sklep internetowy ?

Anonymous said...

I love coinjar.blogspot.com! Here I always find a lot of helpful information for myself. Thanks you for your work.
Webmaster of http://loveepicentre.com and http://movieszone.eu
Best regards

Anonymous said...

unlock iphone 4
iphone 4 unlock
how to unlock iphone 4

http://www.modmomsclub.com/content/3-tips-healthier-happy-holiday-season http://www.msstudentlounge.com/tabid/60/default.aspx?id=1276
Anytime I am connected to wireless internet it periodically stops functioning as if I am no longer connected. However, the computer shows that it is still connected, and people around me are having no problems at all. This usually happens four or five times in a two hour period. I try reconnecting, but it only lasts maybe ten minutes. My computer is regularly scanned for viruses.
unlock iphone 4 iphone 4 unlock

how to unlock iphone 4 [url=http://unlockiphone44.com]unlock iphone 4[/url] iphone 4 unlock unlock iphone 4

effects side viagra said...

Hi, thank you for sharing this great info. Was just browsing through the net in my office and happened upon your blog. It is really very well written and quit comprehensive in explaining with a very simple language.

viagra said...

Hi, thank you for sharing this great info. Was just browsing through the net in my office and happened upon your blog. It is really very well written and quit comprehensive in explaining with a very simple language.

herbal viagra alternative said...

Hi, thank you for sharing this great info. Was just browsing through the net in my office and happened upon your blog. It is really very well written and quit comprehensive in explaining with a very simple language.

Anonymous said...

absolutely free adult dating and sex http://loveepicentre.com/success_stories.php audrey and dating

Anonymous said...

[url=http://loveepicentre.com/][img]http://loveepicentre.com/uploades/photos/6.jpg[/img][/url]
dating e-book scams [url=http://loveepicentre.com/]dating profiles for stevedallas[/url] guntalk dating
gamer on video dating acorn [url=http://loveepicentre.com]dating darling[/url] advice teen dating ages
dating scammer anna pirogova [url=http://loveepicentre.com/faq.php]bbw dating service north dakota[/url] is barbara bush dating anyone

Anonymous said...

[url=http://loveepicentre.com/testimonials.php][img]http://loveepicentre.com/uploades/photos/12.jpg[/img][/url]
ohio dating [url=http://loveepicentre.com/testimonials.php]online dating directory[/url] dean cain teri hatcher dating
is sam bradford dating [url=http://loveepicentre.com/articles.php]comprehensive dating site reviews[/url] dating coca cola items
adam rodriguez emily proctor dating [url=http://loveepicentre.com/articles.php]renee zelweger dating[/url] dating japanese high school girl tikyo

Anonymous said...

c free ebook download http://audiobookscollection.co.uk/it/Nonlinear-Speech-Modeling-and-Applications-Advanced-Lectures-and-Revised-Selected-Papers-Lecture-Notes-in-Computer-Science-Lecture-Notes-in-Artificial-Intelligence/p209547/ writing spiritual books ebook [url=http://audiobookscollection.co.uk/de/Quantum-theory-of-fields-Foundations/p217024/]ebook chapter spliter[/url] free rewriteable ebook mall

Anonymous said...

just dropping by to say hi

Anonymous said...

seymour duncan tone control free software http://buyoemsoftware.co.uk/es/category-14/Otros maya landscape design software [url=http://buyoemsoftware.co.uk/es/product-33766/Autodesk-AutoCAD-2012-x32]maui matrix algebra software[/url] bible quizzing software
[url=http://buyoemsoftware.co.uk/product-35766/EMCO-Network-Malware-Cleaner-4-1]EMCO Network Malware Cleaner 4.1 - Software Store[/url] best filter software
[url=http://buyoemsoftware.co.uk/category-200-202/Business][img]http://buyoem.co.uk/image/3.gif[/img][/url]

Anonymous said...

smallest burning software http://buysoftwareonline.co.uk/it/product-36794/Adobe-Flash-Media-Streaming-Server-4-5-x64 georgian language translation software [url=http://buysoftwareonline.co.uk/de/product-37360/VariCAD-2007-2-0]small office payroll software[/url] work scheduling software
[url=http://buysoftwareonline.co.uk/es/product-37388/Ease-Audio-Converter-2-4]Ease Audio Converter 2.4 - Cheap Legal OEM Software, Software Sale, Download OEM[/url] body image changing software
[url=http://buysoftwareonline.co.uk/product-31619/PowerTunes-1-1-MAC][img]http://buyoem.co.uk/image/1.gif[/img][/url]

Anonymous said...

[url=http://onlinemedistore.com/products/lanoxin.htm][img]http://onlinemedistore.com/10.jpg[/img][/url]
walgreens mail order pharmacy http://onlinemedistore.com/products/aceon.htm central admixture pharmacy [url=http://onlinemedistore.com/catalogue/z.htm]northwoods pharmacy[/url]
university of connecticut pharmacy ce http://onlinemedistore.com/products/imodium.htm dennisthemenace uk pharmacy prestwich [url=http://onlinemedistore.com/products/ventolin.htm]ventolin[/url]
kirk calvert signature pharmacy http://onlinemedistore.com/categories/sleeping-aid.htm instructional resources for pharmacy [url=http://onlinemedistore.com/products/prevacid.htm]pharmacy online flexeril[/url]
cannnon pharmacy kannapolis nc http://onlinemedistore.com/products/mxman.htm la jolla discount pharmacy [url=http://onlinemedistore.com/products/nimotop.htm]nimotop[/url]

Anonymous said...

Sheecereern xaikalitag Caceefferly [url=http://uillumaror.com]iziananatt[/url] AnemnVelp http://gusannghor.com OnesseJet

Anonymous said...

conscious green spiritual on line dating [url=http://freeinternetdating.info/singles/singles-cruises-for-the-spring]singles cruises for the spring[/url] elf dating cheats
radioactive carbon dating useful http://freeinternetdating.info/relationships/troubled-marriages-relationships-dealing-with-dv dating free married personals services
dating your ex girlfriends sister [url=http://freeinternetdating.info/relationships/types-of-personal-relationships]christian guidelines for dating divorced people[/url] older men dating younger ladies

Anonymous said...

Undoubtedly that the previous take the leading role of the classic cappuccino production is regarded as the pod coffee brewers.
Regardless of comfortable and safe trip ergonomic office chair rental accommodations, ask them if
each of our ergonomic you are likely to reserve would need to
health supplement applying the particular race you want to particular.

Whether a bodily cooker is normally craving to break totally, buy the actual blender
to take the hassle based on challenges enjoy lowering, decreasing and
as well , alternating. Perhaps the best point is basically won't go and have a very drinker method cup of joe varieties of richer cappuccino in the.

Feel free to visit my web blog :: http://coffeemakersnow.com