In order to control the spending of the family, one must set up budget. It ensures that your hard earned money is not wasted. It allows you save enough money which can be used on more important things such as your child’s education or can be saved for retirement.
In today’s life where everything is getting expensive day-by-day, setting up budget can be a lifesaver for you. It allows you to keep track on your money. It tells you that where your money is going so that you can stop the unnecessary expenses.
Here is a step-by-step guide on how to set up an effective household budget.
1- First thing you need to do is to collect all your bills of the month which includes power bill, telephone bill, mobile bill, mortgage payment, car payment, utilities and loan etc. You also need to collect pay stub and any other receipts that are related to your income or expense and properly place them in a box.
2- In order to create effective budget, you need to choose an appropriate budget format. A Good budget format can significantly help you control unnecessary expenses. There are various websites on internet where you can download variety of budget formats free of cost.
2- After selecting budget format, you need to calculate your total monthly expenses. It was easy for you as you have already gathered all of your bills. Total the amount of each and every bill of your expenses and you will have the total figure of your monthly expenses which you can note down in Expenses column of your budget format.
3- Once you have figured out the total monthly expenses, now its time to calculate total monthly Income. This can be done by gathering all of your pay stubs and Income receipts from all the contributing members of your family. Write this figure in the Income column of budget format.
4- Your budget format is ready now. You have now the figure of total expenses and total income for the month. What you need to do now is to compare your total income with total expenditure. If your expenditures are more than your total income, you need to assess your expenses and look at the options to reduce your unnecessary expenses.
5- On the other hand, if you have more income than your expense, you can put this extra money into your saving account instead of spending it impulsively.
Setting up Family budget can really help you cut down unnecessary expenses. It sets guidelines about where and when to spend money. It helps you achieve your long term financial goals. So every family must set up a household Budget.