Whether you live from one paycheck to the next or have a consistent supply of extra money, creating a household budget is an excellent way to monitor your spending. Below are some steps you can follow to create a comprehensive monthly budget for your family.
1. Take inventory of necessary expenses.
Begin the budgeting process by writing down all of the expenses that you must pay during the month, or if you have a checking account with Belmont Savings Bank, you can take advantage of the free online banking budgeting tool FinanceWorks. Remember to include utilities, mortgage or rent, insurance, gasoline, groceries and any other unavoidable expenses you incur. Look back at previous bank statements and estimate how much you pay toward each of these expenses during an average month.
2. Consider optional costs.
After you have taken inventory of the expenses you must pay, look back at old bank statements and add up the optional expenses you pay each month. Examples of optional expenses include dining out, entertainment costs, cable packages, and nonessential goods purchases. Try to estimate the amount you spend on each of these expenses in a typical month.
3. Look for possible improvements.
Examine each of your expenses for possible improvements. For example, if you typically pay for a large cable package that you don’t use, consider downgrading to a smaller one. If you spend more money than you should on clothing purchases or entertainment, make a plan to cut back. Make sure that you don’t completely eliminate entertainment from your budget. Allowing for some enjoyment each month will help you stick to your budget.
4. Draft the budget.
After you have inventoried expenses, examined them and devised a plan for reducing your monthly output, draft a formal copy of your necessary and unnecessary expenses for future months. You can do this on paper, or you can use a software program or Excel spreadsheet to complete the budget.
5. Make provisions for savings and miscellaneous costs.
Total all of the expenses and subtract them from your monthly income. If you have money left over, consider placing it in a savings account, investing in your retirement or setting it aside for miscellaneous expenses.
Planning for the future is essential, and a household budget is one of the best planning tools at your disposal. By following these steps and practicing self-control, you can develop a budget, stick to it and improve your financial situation over time.