Personal Finance


Household Budgeting

Household budgets are essential in managing a family’s income and expenses. The budget should be realistic and include use of discretionary funds for entertainment. The budget should also include a savings plan to assist with unforeseen events that may occur in order to reduce credit card usage. A good household budget should start with the use of a checking account to manage deposits and withdrawals. It is easier to track your money this way and avoids the overspending which occurs by carrying cash.
It is important to set goals when setting up a household budget. Everyone has different priorities so you should identify those and consider them when creating and following a budget. Discretionary spend should be tracked and you should establish goals to limit the excess spending which prevents saving.

Budgeting can be tracked using a simple spreadsheet. Spreadsheets allow you to list income and expenses throughout a month or year and track bank account balances on a daily basis based on these items. To set up the spreadsheet you first list sources of income and frequency. Identify the expenses by due date and amount. You can sort the list by date based on the chronological events. Adding a simple calculation to the spreadsheet allows you to see your bank balance as it reflects each change in income or expense. You can also keep your checking account balance recorded in the spreadsheet and report on the amount spent each month by expense type. It is easy to track excessive spending with the spreadsheet and determine the areas to focus on cost reduction.

You should shop around for products and services to ensure you are getting maximum value for the price you are paying. You will benefit from the time investment in price comparison and increase the amount of money available for saving or reducing debt. Comparison shopping also allows you to evaluate your current plans to determine if there are unneeded or unused features. These features can be removed from the service plan and reduce the cost.

Individuals who do not live within a budget are likely to incur credit card debt and are unable to save for large purchases or retirement. These unplanned items remove the amount of discretionary income you have for other items and often lead to accumulating more debt. Once you have identified the daily and monthly account balances you can begin to see opportunities for savings. Saving for retirement should be added to the budget as soon as possible. This is accomplished by reducing discretionary spending but will produce significant benefits as the investment gains interest income in the investment account.