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Establishing a Household Budget

Stack of quarters representing household budget

Living with A Household Budget

For many people, the only way to save for retirement, purchase a home, or send their children to college is to live with a household budget. This article will give you some basic steps to help you understand your expenses and live with a sensible budget.

Get Organized

The first step in understanding your expenses is to get organized and take an inventory. You will need to pull out at least three months worth of pay stubs to determine your average monthly income. Set those pay stubs aside every time you get one. Invest in a file cabinet or store them in a place where you will be able to always find them.

The next step in creating a household budget is to determine your expenses. Gather up three months worth of bills, add them together and divide the total by three. These expenses should include basic necessities like your rent or mortgage, utilities, car payments, insurance, and any student loan payments. Then, add the three months worth of your other monthly expenses. These are expenses that may change from month to month, including groceries, clothing, credit card payments, and medical bills. Divide the total amount of these expenses by three and add the total to your other monthly expenses.

Evaluate Your Numbers

Now that you understand your expenses and your income, the next steps will help you create your household budget.

  • Think creatively. Look for opportunities to economize and cut back on your expenses. Create a plan to cut back your spending in specifically targeted areas. Do you really need that new coat? Can the old one be repaired to last another season? Can you trade in your car for a less expensive one?
  • Consider clipping coupons to use at the grocery store, and remember to stock up on staple goods when they go on sale. Purchasing generic medication and store brand products can also save you significantly over purchasing name brand items.
  • Develop a monthly budget by making changes to your current expenses. Once the budget is in place, stick with it.
  1. Open up a savings account, purchase a certificate of deposit (CD) or individual retirement account (IRA), and deposit each and every time you receive your regular pay. Focused financial planning will help you achieve your financial goals.
  2. Keep track of your income and expenses each month. This will help you evaluate how the household budget is working. Be prepared to make adjustments if something in the budget is not working for you.

Saving At the Grocery Store

  • Don't eat out. Cooking at home is much cheaper.
  • Even if you don't have a backyard, you can grow fruits, vegetables and herbs indoors or in a window box. See gardening advice.
  • Invest in an electronic breadmaker and make your own bread. When you bake a cake, double the recipe and freeze the second cake.
  • Bottle or freeze any excess fruit to use in baking or to top ice cream sundaes, or turn it into jam.
  • When exotic fruits and vegetables are on sale, buy extra, and make sure you eat them promptly or freeze them as soon as you get them home.

Other Household Budget Lifesavers

Not everything you do to save money in your household budget has to be drastic. You would be surprised how much you can set aside simply by taking the change in your pocket at the end of the day and saving it. Another simple task is to check with your cable and/or phone company at least on an annual basis to ensure you are still paying the best rate possible. Often these companies will run package deals, but if you don't inquire about them, you won't save money. Steps like purchasing cable, phone, and internet service from the same company can often mean saving 10 to 30 percent over what you may be paying now.

Books of Household Budgeting

Establishing a Household Budget