Budgeting A Household

No one likes budgeting. The very word, budget, gives people the feeling of restriction and financial stress. While creating a budget and sticking to it can leave you a bit restricted, it's not really meant to leave you feeling that way. The biggest reason to budget is to make sure you don't end up spending above your means. It's also meant to help you save as much as you can in case of an emergency, so that you don't go into debt trying to pay off medical bills or car and home repair bills.

Whether you make thousands of dollars a month or just enough to get by, a household budget can come in handy. So let's get started.

How Much Do You Have?

If you're working on a budget so that you can save up to move out or look for a new place you shouldn't look at what rent and mortgage payments are. First you should look at how much money you have in any given month. Average it out and round down to the nearest 100th. If you're simply looking to straighten up your household finances, the same instructions apply.

That means if you make somewhere between 1.5k and 2k a month you should average it out to 1.75k and then go to the lowest 100th, which would be 1.7k. If 2k is rare and 1.5k is more typical for you, stick with that as your average monthly income.

Keep that number in your head and remember it well. That's the money that will be available to you as long as you're working. That's how much money you can count on.

What Are Your Needs?

Your needs are pretty simple. These are the bills and expenses that recur every month. They include utility bills, insurance bills, grocery bills and transportation costs (ie: gas money, bus or subway money). The internet bill may be included in your utilities or you may be able to live without it. Same goes for your phone; some people need one and some people don't. Once you've figured out the cost of all your necessities, add them together and round them up to the nearest 100th.

Let's say all utility bills add up to 225, insurance bills are 200, grocery bills come to 350 and your transportation costs are 75. That all adds up to 850 and rounds up to 900.

Take 900 from your average of 1.7k and you have 800 left over.

If you have rent or a mortgage payment you would also subtract that from your average. I'll go with average rent in areas where people make around our averaged 1.7k a month. That would be 500 for a two bedroom apartment or small house.

That's going to be taken from our 800 and we'll have 300 left.

What Are Your Savings?

Savings are very important. A small cushion can take off a lot of stress. A big cushion can be great for retirement. I have an article on how to save 10% of your income and outline the steps to help you reach that goal. Saving 10% of your monthly income is a nice number to aim for. Over time it'll build up and can cover unexpected medical bills, repair bills or even help buy a house.

Taking 10% from our average of 1.7k we'll get 170 in savings each month. That is subtracted from our 300 and leaves us with 130.

What Are Your Wants?

Okay, wants are luxury items that you don't need. You just really want to treat yourself. It's okay to want things. In fact, aside from providing for their families, wants are the biggest reason people work so hard. Your wants include that quick cup of coffee you grab on the way to work, or that fast food meal you cheated with last week. Wants also include impulse buys.

It's important to learn to limit your wants. Set aside a little extra spending money every month for your wants, but draw a hard line not to go over that amount.

Should You Round Down Or Up?

I've been rounding down and up a lot. Let me explain why I choose to do one or the other in a given situation.

Bills and income tend to fluctuate. Some months your bills will be lower and you won't have to pay out as much. Some months your pay will be lower and you'll have to tighten your belt. These are facts of life.

The rounding down of your income helps plan for the lower paying months while rounding up on bills helps plan for the more expensive months. This way you and your budget won't suffer too much through the tight times.

It's just like the old saying, "Hope for the best and plan for the worst."

Final Thoughts

I wish someone had sat me down and told this to me when I was younger. And I know that some people think they can do it better. Maybe they can. Their budgeting plan may work out perfectly for them, but it may not work for everyone.

This is just a basic, beginner's budgeting plan. I wish you the best of luck!