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Creating a Household Budget

Here is a free comprehensive budgeting worksheet that you may download and then save to your computer. 

Download the form

Make sure to read the budgeting basics article to get ideas on how to manage and control your budget and while not accruing debt.

Living on a budget is the single most important thing you can do to keep your finances inline and work to pay down debt.  A budget is a tool that helps you plan your spending, shows you where you can reduce spending, and tracks your spending.  Think of it as the most important guide to manage your finances. Without a household budget you probably won't know where your money is being spent. And if you don't know where your money is being spent, your income will never be great enough to keep you out of debt.

You can avoid this difficult position. Just follow the simple steps below to set up a household budget you can live with:

• Make your budget a family topic
• Calculate your monthly take home pay.
• Understanding your Expenses and Bills
• Keeping Track of Your Expenses
• Build up your savings
• Pay yourself an Allowance
• Don't Spend More Than You Earn
• Set individual and family goals
• Review and Adjust
  
  

Budget Basics

The first step to gain control of your finances is to learn the basics to budgeting. The first rule of thumb for a financially sound budget is simply:  Income must be greater than Expenses

If you break this rule, you accrue debt. 

Sounds simple, right? In a recent study, the average American household now holds a $9200 balance on at least one credit card.  Although this is a simple rule, anytime your expenses are greater than your income, you accrue debt.  When you borrow money in the short term on credit cards, it all too often leads to a major problem later as the debt builds up.

The simplest way to keep from accruing debt on credit cards is to not carry them with you.  If you do not have the card, you cannot use it.

Make your budget a family topic

You have family expenses so why would you not hold everyone accountable for their spending?  In too many families, only one member keeps the budget and pays the bills.  This causes many dysfunctional budgets because not everyone understands what is going on with family expenses.  Make sure to communicate to every family member what the budget is and how everyone is accountable.  An easy way is to post the budget in the family room.  Make sure to include a family goal, such as a vacation.  When everyone is working towards the same goal, the budget will be a normal part of the family.

What is your monthly take home pay?

This is typically the easiest part of the budget to calculate unless your income fluxuates on a month to month basis.  Once you have determined your take home pay, then you know how much you can spend each month.

If you find out that you are spending more than you take home, you have some lifestyle changes that will be required.  You basically have 3 choices: 1) get another job or work extra hours to add to your income, work on additional training or find a higher paying job, or adjust your spending to match your take home pay.

Understanding your Expenses and Bills

First, separate your fixed monthly bills such as rent/mortgage payment, auto loan payments, utility bills, insurance and list those on the budget worksheet.  Next you need to account for daily expenses that come up throughout the month.  This would be lunches, groceries, anything that changes weekly.  These type of expenses can be hard to account for but you can track them thru receipts or your bank statements.

Be sure to track quarterly, semi-annual (every six months), and yearly expenses. Prorate these expenses by dividing the quarterly expense by 3, the semi-annual expense amounts by 6, and the yearly expenses by 12 before adding them to your monthly budget.

Keeping Track of Your Expenses

The comprehensive budget worksheet that is available to download from this page is an excellent tool. If you are not comfortable using an excel spreadsheet, there are many other budget worksheets you can purchase online or in stores that sell computer software.

This worksheet already has the most common categories that encompass daily spending.  If you need to add additional columns, add as many as you need.  The importance of this budget is to start tracking your expenses.

As you begin to accurately track your expenses, you will begin to see ways to make adjustments to your spending habits.  As you make these adjustments and cut out frivolous spending, you will have more money left over.  Tracking your expenses is very important as you begin your path to financial freedom.

Build up your savings

Savings is the single most important part of a budget because it allows you to account for unexpected expenses in the future.  Although this may be difficult, you should pay your savings account before you pay any other bill.  You should first set a savings minimum and then a savings goal.  At a minimum, you are going to deposit 5% into your savings account before you pay your bills.  Then your goal will come second and towards the end of the month.  If you are able to pay all of your bills and have money left over, do not go out and blow it; rather deposit the remaining money into your savings.

After a few months of this lifestyle, you will become very proud of how much you saved and this will become a major part of your lifestyle.  An important goal for your savings account should be to hold enough savings to equal 3 to 6 months of your income.

Pay yourself an Allowance

Paying yourself an allowance may be difficult at first because you are not free to spend whenever and on whatever you want.  An effective way to follow this step is to first calculate all of your fixed expenses like rent, utilities, ect...  Make sure to account for savings!  Then divide your left over income by the number of weeks in the month.  Allow yourself $100 a week to cover the expenses you have not already allocated money to.  If you have money left over, save it.  If you need more money, then look at why and try to adjust.

Don't Spend More Than You Earn

Say it with me, "I won't spend more than I earn." This sounds easy, but it is quite difficult with the ease of acquiring credit.  You must be committed to your family and yourself not to fall into the credit trap.  It takes discipline to live by a family budget and continually save for a rainy day.  Financial planning is not an option if you are serious about controlling debt and building financial stability.

As previously stated before make everyone accountable for their own expenditures.

Set individual and family goals

Goal setting is important in budgeting because it gives you something to work towards.  Changing your lifestyle and living on a budget will be hard work.  You need to reward yourself as often as possible.  Plan vacations or large purchases.  Sticking to the budget will allow you to dream again and live out those dreams.

Always make yourself accountable and think twice about a purchase before you buy. Check different prices around the area and even the internet can save you tons on goods that you are accustom to getting on a daily basis.

Review and Adjust

Constantly review your budget and share it with the family.  This should be at least a weekly topic of conversation.  Make adjustments as necessary and now you are on the track for a secure future!