Building a Household Budget: Where to trim the “fat”

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Building a Household Budget: Where to trim the “fat”

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"A necessary evil" is a quote from one article I read about setting up a household budget.  I agree.  Making a budget is not a fun job, but it really helps control household expenses. 

Building a Household Budget: Where to trim the “fat”Every business has a budget; a household should be treated the same way. 

Making one puts you in better control of your money and also makes it easier for you to find places to save throughout the year.

Some items don't change much (rent or mortgage payment, insurance, taxes), but some line items can vary from month to month. 

My husband and I are working to set up our annual budget and to find places to save more money this year. 

Here are some tips for setting up a household budget and where to save money:

  • Use budgeting tools. First, you need to determine what budget template is the best one for you. You can buy software for your computer, like Quicken or Microsoft Money. These can do some amazing things if you are willing to put the time into it. Another budget tool to consider is using a resource from your bank. Many online banking tools include a budget. You can also find spreadsheets for free that can work for your situation. This is one from Kiplinger: http://www.kiplinger.com/tools/budget/ This is another good one to look at: http://www.betterbudgeting.com/budgetformsfree-basicbudgeting.htm
  • Determine monthly earnings. In order to make an accurate budget you need to determine the amount of money you earn and the amount of money you spend. If you receive a regular paycheck, it is easier to determine the first one. If you are paid on commission or are self-employed, you need to determine your annual salary based on past earnings and then divide by 12 to determine your monthly income. In order to make an accurate budget, determine how much money you have coming in. It is recommended that you don't count any year-end bonuses or tax refunds into your income, as these are not guaranteed. If you do end up with more money than you expected (Boy, that would be nice!) then you can use it the following year, pay down debt, or invest it when you get it.
  • Determine monthly expenses. Some costs are roughly the same each month. For me, the costs that stay the same are things like our car insurance, car payment, cell phone, internet and phone service, electricity and gas, and gasoline charges. While food costs can vary a bit month to month, keep track of your grocery bills to determine how much you are spending each month. Some months my personal expenses are higher, so I need to account for birthday costs, save for the holidays all year long, and clothing expenses which can vary with a new season. Anything that has a bill or receipt makes it easier to track your expenses. Figuring out how much money you spend each month can help you find ways to save throughout the year. For example, I figured out I was spending much more on clothing for my family than was in my budget. I have become much more frugal and careful with clothing purchase since this discovery. Small purchases, even when the clothing is relatively cheap, do add up!
  • Watch the cash expenditures. For me, it is the small cash items that tend to add up. In order to keep track of those smaller expenses, keep an expense journal. If you spend it, write it down! I find that the simple act of doing this makes me spend less. (This works for eating, too!) One way to limit cash expenditures is to take out only a certain amount of cash for each week. If that cash is gone before the week is over, you are out of luck. If you have money left over, save it. One friend saved enough money to redo her bathroom by putting away every $5 bill she had in her wallet at the end of each day. By the end of the year she had enough to redo her bathroom and was frugal enough to not miss the $5 bills she hid in her drawer.
  • Stick to the necessities. Many items Americans consider necessities are really luxuries. By focusing on the true necessities you can come up with a budget that will help you pay down debt. There are many luxuries that are free, so focus on what you can cut out of your budget to get your finances back on track.
  • Include your spouse. If you are married or share finances with a partner, you need to include your spouse in the process. There is no point to going through all of this work to have your spouse spend $500 on a shopping trip to the mall or Home Depot.
  • Revise. After a month or a few months go back and check your budget. Do you need to make adjustments? Has tracking your money helped you save? Are you suddenly aware that you eat out a lot and that is a huge spending item for you? Go back and revise your budget. You may decide you don't need cable TV after all, or decide to find a cheaper cell phone plan.
  • Be honest. A budget will not work if you are not honest. By being honest you can look for ways to cut costs, spend less, and become debt free, which is one of the best feelings in the world. It is worth the work.

My new motto is "More Fun, Less Stuff."  You can have fun without spending a lot of money.  A line item in my budget will include a space for "Fun" and I will decrease the stuff I buy to make room for it.  I would love to hear about how you budget for your family.

Related Links:

 Budget Billing is Right for You

 Using Coupons; How Much Can You Save?

Simplify to Save - Chores, Car Repairs & Shopping

Money Mom's Top New Years Resolutions 

Lori O'DonnellLori O'Donnell

Lori is a contributing writer for the A Straight Talk on Debt blog. Lori is a passionate, married mother of three children, one with special needs. She shares her family's life experiences as she writes about saving money, budgeting, and other timely topics for those living in a one income family. Compensated CareOne Blogger. To read more posts from Lori's Balancing Family blog click here.

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  • Great post!  Budgets are never fun, and most people don't follow one "honestly."  It's definitely a practice that gets better with time and sacrifice.

  • Thanks, Cheryl!  It is hard to follow a budget honestly, and I agree it takes time.  Getting started is the first step and I do find computers and budget programs can help anyone keep better track of their money.  When I don't keep track of my money it disappears a lot faster!  Best wishes for making and keeping an honest budget this year.

  • Track your spending and identify expenses which can be cut. A budget or spending plan should be built to change, as our financial lives are very rarely steady. Set a realistic goal for savings, and work towards it every day.

  • Very nice post on Building Household Budget..

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