Tips for Making a Household Budget
Making a household budget can be as simple as projecting your monthly income and expenses using paper and pencil. If you’d like to track your progress or set goals, you can add a few simple formulas to a basic spreadsheet program. Whether you want to create a budget to track your family expenses as they occur, or set spending limits in advance, use basic budgeting techniques to make sure you have an accurate budget.
Collect Your Records
To create an accurate budget, use your previous spending and income numbers to guide you. Collect monthly bank and credit card statements and your checkbook to determine your spending. Use these documents to create a list of your income and expenses. Look for recurring expenses, such as rent or mortgage, groceries, utilities, car payments, student loans, gas and other regular expenditures you make. Write one-time or infrequent purchases in a miscellaneous category so you can create an estimated monthly miscellaneous category in your budget to create an accurate report.
Create Your Budget Document
Decide how you want to create your budget. You can use paper and create your own columns, or use a spreadsheet. Down the left side of the page, list your monthly expenses. Include a row for your total monthly expense number. Skip one or more lines and list your expected income each month. Across the top of your budget create columns for each month, as well as Estimated, Actual and Total columns.
Next to your first column, start a column titled, “Estimated,” and fill in what you think you will spend and earn each month. Next to that column, start a column titled, “Actual,” and enter your actual average monthly spending and income. This will change each month. For example, your Estimated column might show that you will spend $400 per month on groceries. If you spend $450 in January and $470 in February, your “Actual” column will show $460 at the end of February. If you have a fixed car payment of $250 each month, your estimated and actual columns will always read $250.
After your Actual column, list the months of the year, followed by a Total column.
Estimate Your Expenses
Fill in your Estimated column once you have examined your past finances and can estimate what you will spend each month. Fixed expenses will be the same each month, and include items such as loan payments, rent and insurance. Estimate variable expenses, such as groceries and utilities, by adding last year’s total expenditures for those items and dividing by 12.
Track Your Expenses
Keep track of your monthly expenses, especially cash payments, and enter them into your budget at the end of each month. Dining out, gas, movies and other cash expenditures can take a large chunk of your budget without you knowing it if you don’t record them.
Track Credit Card Payments Correctly
If you put $400 worth of groceries on your card one month, then pay $200 off your credit card payment next month, you don’t need to record the $200 credit card payment because you’ve already recorded the $400 grocery purchase the month before. You should record the interest charge in your budget, because it’s new money you owe. If you are using a cash budget only (showing only what you actually spend each month), you won’t need to record interest earned. If you are carrying debt from last year, you may need to record the $200 credit card payment as debt reduction, since it is not going toward paying last month’s $400 worth of groceries. Keep interest as a second, separate line item, because it is an expense.
