A Family BudgetOn September 21, 2017 by Natalie Carroll
Improving your financial management skills involves understanding all your spending habits and taking action to make necessary changes. For most people, investigating their expenditures can be intimidating but you need to understand all aspects of your finances if you are going to take total control.
When starting out, I was quite reluctant to dive into the scary task of reviewing my monthly expenses. Later, I realized that it is among the most rewarding decisions I’ve made about money. Serious budgeting started when I talked with my wife and we decided that it was time to break out of debt. With the new resolve, we had to consider each angle of our finances and change most spending habits.
Compile all the necessary items
Before you sit down to create a budget, you’ll need to gather the following items.
- Pay stubs
- Bank statements
- Credit card statements
- Monthly receipts
- Monthly utility statements
- Active loans information
Calculate your income
Here, you are going to start by studying your pay stubs and compile the total income. If your payment is weekly, you’ll need to add the earnings to arrive at your monthly income. But if your salary is commission based, you should take at least four months income and divide to come up with the average income. The same applies for hourly payments.
Determine your fixed expenses
There are some payments that must be made each month like utility bills and insurance premiums. If the payments vary from month to month, you’ll need to look at your last four months bills and determine the average. Here it’s wise to base your calculations on the months that show the highest expenditure.
Categorize the items on your budget
After you’ve compiled the figures, it’s time to record them on the appropriate categories in your budget. You can have different categories including income, fixed expenses, and discretionary expenses. To know if you are living beyond your means, simply subtract your expenses from the income. If the answer is a negative number, you are expenses are higher than earnings.
Make the necessary adjustments to your budget
Take a look at your expenses and find where you can make changes. For instance, you may want to consider the amount you are paying for cable TV. If it’s too high, you can downgrade to a cheaper subscription. Today, there are myriad options to help you save on cable and you can also decide to use the streaming services if it can fulfill your requirements.
Under the discretionary expenses category, check if you are overspending on certain items. It’s likely you’ll discover that your budget is burdened by your habit of dining out too often.
Now that you already have a budget, it’s important to stick to the laid boundaries. Although it’s not easy, your efforts will pay off in a short while and you’ll be able to achieve important financial goals. Because times change, you need to constantly review your budget to ensure that it is a reflection of your current financial situation. In addition, make an effort to involve your partner throughout the journey.