Many of us start the New Year with resolutions—to carefully select the food we eat, perhaps, or to control our household spending. In the same way that writing down and tracking what we eat can help us gain control of our nutrition goals, tracking what we spend can help us gain control of our household budget.
To create a monthly household budget, one doesn't need to be an expert. Here are three easy tips:
- Keep a list of all of your income, including all sources of the income.
- Determine your fixed and variable monthly expenses. For example, rent or mortgage payments are a fixed expense, remaining the same each month. Electricity and entertainment are variable expenses, changing each month. For budgeting purposes, you'll need to determine a monthly average of your variable expenses.
For example, concerning electricity: Total the amount of your past six months' of electricity bills, then divide by six. That's the amount you should budget each month for electricity. (If you prefer, total the bills for the past 12 months, then divide by 12).
- Total your fixed and variable monthly expenses, then subtract the combined total expenses from your total monthly income.
If your income is greater than your expenses, apply the excess toward your financial goals. For example, use some of the excess to pay off your credit card balance each month, or to put aside money toward college expenses for your children or toward retirement.
If your expenses are larger than your income, decide which expenses can be reduced or eliminated. For example, review such variable expenses as entertainment. Is there something you could do less frequently, or less expensively, or by switching the day?
To stay on track, review your budget every few months or, better yet, every month.
Budget Planning Made Easy
Need some extra help? A number of budget planners are available free. For example:
- Microsoft's family monthly budget planner template works with Microsoft Excel 97 or later. The template helps you keep track of monthly income as well as expenses (housing, transportation, insurance, food, children, pets, personal care, entertainment, loans, taxes, savings or investments, and gifts and donations):
- Personal finance expert Suze Orman offers such aides as: