Recommended household budget guidelines

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When it comes to managing your money, the more you save, the more you can spend on things that really matter to you. Living without a household budget can lead to impulse spending that depletes your cash and forces you to cut back on important purchases that make life easier and more enjoyable.

Understanding the basics of creating and managing a household budget will help you and your family meet your responsibilities and you’re your lifestyle goals.

Check Your Spending History

The first step in creating a household budget is to learn what your spending needs are, and this requires reviewing your past expenses. Ask your parents for last year’s credit card and bank statements and review them month by month. This will help you start creating a household budget document, letting you plug in more accurate numbers.

List Your Expenses

Create a list of your family’s expenses, dividing them into fixed and variable categories. Fixed expenses are those that don’t change, such as rent, a car payment, cable bill or student loan payment.

Variable expenses change each month, such as groceries, phone bill or utilities. If possible, estimate your monthly average for variable expenses. For example, use your credit card and bank statements to find out how much you spent on groceries last year, divide that number by 12, and plug that number into your budget each month.

You can average quarterly or semi-annual payments, such as car insurance. After people budget for their living expenses, many set aside money for savings goals such as a college fund, retirement, an annual vacation or a house down payment. Record these savings amounts as monthly expenses in your budget.

Review Your Income

Estimate your annual income for the year, including all income sources. If you’re doing a personal budget, this can include not only salary and wages, but also gifts from your folks or grandparents or from the sale of items you might generate during the year. This can include money from the sale of an older computer, from items you hawk on Craigslist or cash you generate from a yard sale.

Tweak Your Budget Numbers

Subtract your monthly average expenses from your monthly average income and see how you do. If you’re short, or very close to your limit, adjust your expenses, looking at your discretionary numbers first. Discretionary items are things you don’t need or can cut back on, such as dining out, clothes, movies or CDs. If you’re still short, you might have to cut back on your savings goals.

Keep your Budget on Track

Once you’ve made your household budget, keep on top of it. Update it with your actual income and expense numbers each week. If you’re not meeting your projections, look for ways to cut back. For example, there are plenty of ways to reduce water, heating and cooling use around the house. If you don’t use coupons or buy generics when you shop, you might be spending hundreds or thousands of extra dollars on food each year.

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