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January 17, 2012

How To Make A Household Budget

Setting Up a Budget From Start To Finish
Learning to set up a budget is the first hurdle in taking control of your finances.  Next would be learning how to actually live by your budget but that will come.  Here we are going to look at How To Make A Household Budget for your family’s finances.

How To Create A Budget

1) Make a list of all of your family’s income (spend able income).  This would include regular jobs, child support, social security, and money that comes in on a monthly basis.  Come to a total at the end of your list.

2)  Make a list of all of your expenses that are not variable.  This would include your tithe (giving), mortgage, school loans, car loans, telephone (if it is a fixed amount), internet, insurance (home, auto, life, health), savings, etc.
A good way to compile this list is to go back through your checkbook or credit card to see what expenses are the same every month.

3)  Take your non-variable expense list and find how much you have been spending in these areas.
Go through your checkbook or credit card and write down the amounts you have to pay on these bills every month.

4)  Make a list of all of your expenses that are variable.  This would include groceries, personal/family items (toilet paper, paper towels, etc.), gas, entertainment, gifts, etc.
A good way to compile this list is to go back through your checkbook or credit card to see where you are spending your money and make headings to include all of the areas you are spending money.
In our family I try to make it easy on myself and have a Gas, Grocery, Wal-Mart (or other store where we buy personal items) and Misc. column.

5)  Take your variable expenses and find out how much you have been spending in these areas every month.
Take the headings you have for these expenses and write them across a sheet of paper.  Go back two to three months if you can find your records and start writing what you have spent under the correct heading.  When adding up your totals you can be very accurate and tally it up after each month or you can take an average at the end.
If you are taking an average at the end add, up the individual expense headings and divide it by the number of months you have written down.  Example you have under gas $650 for a two month period, divide 650 by 2, you have spent an average of $325 a month on gas.  Do this for every column/heading.
If you have kept a tally after each month you will still take the average of those totals.  Example you spent in gas 250 the first month, 237 the second month and 267 the third month.  Add these amounts together you have 754, now divide by 3 (because you had three amounts) = 251.33 average per month.

6)  Now that you have amounts for all of your expenses, non-variable and variable, make one list with those amounts next to them.  Leave some space between the non-variable expenses and the variable expenses.

7)  Here is the fun part!  Take your income page total and write it on top of your expense page.  Start with your total income, (subtract your tithe now if you are tithing) subtract all of your non-variable expenses.  Write the total left in the space between your non-variable and variable expenses.

8)   Take the total income you have left after subtracting your non-variable expenses and subtract your variable expenses (these should be the averages that you came up with earlier).

9)  Do you have a Positive number left? Zero? Negative number?
If your number is positive great you are living within your means.  You are not spending more then you make.  You can use the averages that you have been spending every month and keep to those numbers.
If your number is zero or negative the following steps are for you.

10)  Look at the variable averages that you have, where can you cut your spending.  Are you spending more on food then you are realizing, more on entertainment?  You need to change the averages until the ending number becomes a positive.
You need to decide for your family and yourself where you want to spend your money.  In order to not go into debt your expenses can not be more then your income.  Sometimes easier said then done.

You now have the steps on How To Make a Household Budget.  Go do it!  It will take a little effort and time but you will be happy that you are taking control of your finances.

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