How to Write Up a Household Budget

by Annabella Gualdoni, Demand Media
    Use a simple computer spreadsheet to write up a household budget.

    Use a simple computer spreadsheet to write up a household budget.

    Writing up a household budget helps you reduce expenses and avoid spending more than you earn. It also helps you plan for emergencies and meet your future goals. Creating a budget doesn't have to be a difficult task, and you don't need to buy any expensive programs or hire a professional. You just need to take a little time and commit to tackle your budget.

    Look at Your Current Spending

    The best way to create a new budget is to look at your current spending. Gather up your credit card statements, check logs and monthly bills for the past year. If you buy a lot of things with cash, save receipts or write down expenses for a few months. You don't need to buy a fancy software program. Plug everything into a basic spreadsheet, and you'll have a reasonable guideline. Do sweat the small stuff. When you track even the tiniest costs you'll see how quickly they add up.

    Factor in Your Income

    Factor in your income. You may hope for, or even expect, a promotion or raise, bonus or even a cost of living increase. It is better, however, to work with a budget based on what you are currently making, since no increase is salary is a sure thing.

    Cut Down on Unnecessary Costs

    The process of creating a budget is the best time to analyze your current spending. Maybe you don't need so many cable channels or a fancy cocktail every time you go out. Your gym may be top-of-the-line, but if you only go a couple of times a month, you should reconsider it. You might amaze yourself with how much money you're wasting and find some painless ways you can trim excess.

    Budget for Non-Controllable Expenses

    Some expenses are essentially beyond your control, like the cost of gasoline, home heating or car repairs. Look at expenses for the prior year and then budget for a 5 percent increase. Take an average for the entire prior year; for example, your electric bill may significantly higher in August when the air conditioning is running than in March, so using a single month is not accurate.

    Set Up Emergency and Reserve Funds

    You also cannot control the unexpected, like unforeseeable home repairs. Put a line item in your budget each year for a reserve account. This is distinct from establishing an “emergency fund,” which most financial experts recommend. The emergency fund contains money for approximately six months worth of expenses, as determined by your household budget, for use if you are unable to work.

    Plan for Savings

    Meeting your monthly expenses is your first priority. Don't forget, though, to budget for your future. If you're planning to buy your first home or upgrade your existing one, you'll need to start saving for that. A baby, new car, kitchen remodel or even small vacations are all events to plan for by adding a line in your budget for them. Most important of all, don't forget to budget for retirement. That day may be decades away, but you need to plan now and start saving.

    About the Author

    Annabella Gualdoni has written newsletters and reports for corporations and nonprofits since 1994. She is a real estate professional and also teaches subjects including international cooking and travel, dating/relationships and personal finance. Gualdoni has a Bachelor of Arts in international development from University of California, Berkeley, a Master of Arts in international relations from Boston University, and a Juris Doctor from Boston College Law School.

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