Creating a budget for household expenses requires more than totaling your bills and comparing them with your income. You need to create a plan that accounts for life's twists and turns, ranging from an emergency fund for medical expenses to a savings plan for your summer beach vacation. Instead of feeling trapped by your budget, create room to breathe, allowing funds for weekly entertainment, gifts, charitable donations and a spontaneous night out on the town. If you have a savings goal, or wish to pay down debt, dedicate a fixed weekly or monthly amount and adjust as necessary.
Track your income and expenses. When people diet, they often underestimate the number of calories they consume. The same mistake prevails in budgeting, with people forgetting to account for magazines, lattes, cocktails after work, school supplies for the kids and other irregular expenses. Operate on an all-cash system for a month and jot down daily expenditures.
Total your expenses. Consult bills, bank statements and receipts to get an accurate total. Remember to amortize quarterly and yearly expenses such as insurance premiums, property taxes, holiday gifts and seasonal home or apartment repairs.
Enter your expenses for each household category on a spreadsheet. The budgeting worksheet at Kiplinger.com allows you to compare projected versus actual expenses and to record the difference, giving you a more accurate picture of your expenditures.
Record your income on the spreadsheet. Remember irregular sources of income such as tax refunds, interest payments and bonuses from work.
Compare your income and expenses. If you cannot cover monthly expenses, you may need to pare down a category in your bills column, typically from luxury expenses such as vacation savings, gifts or entertainment. You may also opt to work more or earn more to make up the difference.
- Consult your budget every few months to make sure you are on track with your spending, saving and paying down any debt. Adjust your budget after major life changes such as going back to school, having a baby or buying a house.
- Do not punish yourself for overspending. Assess your budget instead to determine if you have allowed enough money for your chosen lifestyle.
Nina Makofsky has been a professional writer for more than 20 years. She specializes in art, pop culture, education, travel and theater. She currently serves as a Mexican correspondent for "Aishti Magazine," covering everything from folk art to urban trends. She holds a Bachelor of Arts in English from Mills College.