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Setting a House Hold Budget
To effectively maximize your income, enjoy life, and not stress over financial issues, you must begin with an effective household budget. Planning your money usage, saving money, and correct budgeting does not come easy, nor is it quick. Like all things worthwhile, it takes time, practice, and planning.
The easiest way to start your budget is to realize all your outgoing money can be classified into three sections.
- Bills: These are items that re-occur every month, are typically the same price, and have to be paid to avoid overage charges, late fees, and negative credit types. These include house payment(rent or mortgage), car payment, utilities(this includes electric/natural gas, water) and insurance.
- Expenses: These are the tricky ones, and a place where you have some flexibility and control over the cost. These include groceries, gas, cable, internet, satellite, home improvement, yard work, etc.
- Entertainment. It may seem odd to include an entertainment but budget, but if you don't pay yourself, you will become resentful and will be prone to splurges, reckless spending, and other bad habits.
To begin the process, sit down with a spreed sheet, word processing document, or just a piece of paper and a calculator. Whatever your method of choice is, the important thing is to document it. Note when you get paid, and how much each check per month is. People who get paid once a month have this a bit easier then most, as everything comes out the day they get paid. Weekly hourly employees have the hardest time due to potential schedule changes. Regardless of how much you make, or when you get paid, note it on your sheet. Next, begin with your expenses(bullet #1). Write down their amount and their due date. Now the tricky part, and the part that involves some math and thought. The goal is for each pay period to be paying out no more then 50% of the monthly bills. Try to move things around to maintain as even a balance of output as possible, and try to make sure the check that pays the utilities has the least coming out of it, due to potential utility price fluctuations. Once you get a payment plan that works for you, write it up, print it out, and put it where your will always notice it. Either where you do your bills(if you are organized and use a desk) or hang it on the fridge.
The next step is too look at the remaining balance of each pay period. You should potentially have 50% of each check left. It may vary based on your preferences, but it should be around the same remaining balance. Out of that 50%, take 5% and put it in a savings account, and 10% and put it down as your entertainment fund. This is for eating out, dates, movies, excess chocolate, or whatever you choose to use it for. Only 5% for savings comes out at this point, thats to make sure some money is set aside for emergencies.
The last step involves your monthly expenses. You should, at this point, have 35% of your check left to cover this. Schedule your internet and cable/satellite next, splitting them up across two checks with the most in them, and before the due date of course. Figure up your gas mileage next, and how much you will spend in gas. Calculate travel to and from work, to and from any school functions and church functions. Remove that amount, plus one additional tank from each check. Look at whats left. That is for groceries and other sudden expenses. Depending on your drive, your gas cost you should have 15% or so of each check for food. Not eating out food, just normal food. Be sure and shop as frugally as possible, utilize coupons, sales, loyalty cards, etc. Do your shopping between trips from point A to point B to save on gas as well.
This is not meant to be a budget for everybody, but it works quite well for me. Basic budgeting is all about planning, maximizing your checks, and maximizing your fuel economy.