The household budget is the fundamental tool for managing a person's or a family's finances. It is a time-tested method for ensuring that personal money is used properly. The best budget gives a realistic summary of the household's financial situation and alerts the user to spending problems that could become more serious. Budgets that are summarized in checklist form are easy to use and have become popular with many who deal with family finances on a regular basis.
Creating a Household Budget
A household budget does several important things for you. It shows how you are spending money now. It evaluates your spending and tells you if you are meeting your priorities. It provides a convenient way to keep track of your ongoing spending. To enable it to accomplish these things, you will have to assign categories to your expenditures and set goals for improvement. To keep from getting discouraged, go easy on yourself when setting goals.
Starting the Checklist
There are plenty of financial software programs available, with ready-made checklists for family budgeting. They list the standard fixed and variable categories of expenditures and give you the option of entering new categories if you wish. Next to the categories are columns for actual and projected dollar amounts, plus another column to show whether your actual expenditures meet or exceed the projected amounts. The fixed expenditure section should include a place for your investment, retirement and other important funds.
Using the Checklist
Remember to pay yourself first. That is, reserve at least 10 percent of your income for your program of savings and investment. As you assign spending categories to the checklist, be sure not to omit any expenditures. Make sure to assign spending for all necessities, as well as non-essential spending such as entertainment. If you realize you are drawing cash from ATMs more than once a week, you have noticed a danger sign. Start recording every cash expenditure in a small notebook. You may be surprised how small luxuries can add up and cause problems.
If you are living beyond your means and, for example, over-using credit cards, the reality will be evident on the checklist. Use the checklist, over time, to adjust your spending to meet your goals. Take it easy if you can. For best results, adjust your spending patterns slowly. Use the checklist every time you pay the household bills or work on the finances. Let the checklist become a habit and soon you will be in control. Consider using the checklist for planning special events such as weddings and vacations.
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