The word budget seems like a dirty word to some people. The thought of writing down every expense and categorizing household bills sounds as fun as a root canal. Thankfully, with today’s technology you can keep a simple household budget without spending your entire day recording each expense. A simple budget is one that allows you to reach your goals without having to track every dime every day.
Discuss your goals. Everyone in the family should be on the same page for your budget to be successful. Often, budgeting problems aren’t the result of tracking but are a problem of communication; one member of the family knows how much money the family has and everyone else is living as if money isn’t an issue. By having family discussions often about the budget, you’ll find that everyone spends more frugally.
Write out how you spend money now. The Federal Deposit Insurance Corporation offers a great worksheet to help you keep track of your expenses for a sample week. If you prefer an online version, the National Foundation for Credit Counseling has a good monthly budget worksheet. Don’t worry about how much you should be spending yet. Just write down your expenses so you can see in writing where your cash goes.
Calculate how much your goals will cost. An effective budget is driven by your true long term goals. It’s easier to avoid the extra coffee or lunch at a restaurant if you know why you have a budget. Assign costs to each goal. To help with longer term expensive goals such as retirement or education costs, use online calculators found at financial websites such as Yahoo! Finance or MSN Money.
Find money in your budget to save toward your goals. Review your expenses and pare down those that you’ll need to cut in order to reach your goals. This is easier than cutting expenses arbitrarily because you can easily see what should be cut to reach your goals. Often, people are able to save money through utility bills by signing up for budget plans or insurance costs by getting competitive insurance quotes.
Use direct deposit to fund your goals. For education, direct deposit into children’s savings, such as a 529 plan or Coverdell IRA. For retirement, have funds automatically withdrawn into your retirement plan, such as a 401k, SEP or 403b plan. If you don’t have these plans, ask human resources if they’re available; if not, set up an IRA at a local brokerage house or bank. If you don’t have direct deposit, use automatic arrangements to have funds move directly from your checking account to investment goal accounts. This will fund your goals automatically, keeping your budget simple.
Find online sites to maintain your budget. Many banks now offer financial tools that will remind you when your account is low or help you categorize and chart your spending habits. If not, look toward free web services, such as Mint.com or Geezeo, or Wesabe. These will automatically track your spending habits and may point out ways to reduce spending or save money more efficiently. Although these charts are nice, schedule time in your family budget meeting to review your expenses to control waste and keep your budgeting simple.