For Nesties who are putting together their adult lives after a spell of ramen noodles and student loans, creating a household budget prevents overspending, builds savings accounts, reduces debt and begins the path to financing a vacation, new car, first home or starting a family -- all good things. No matter what your reasons or your age, every household benefits from financial goals and a clear-cut money plan.
Know Your Monetary Situation
Knowing how much money you have available is vital when preparing a household budget. Calculate this figure by adding all wages and expected income for each month, including any bonuses that you know you will receive around the holiday season. Once all of your expected income is estimated for each month of the year, calculate your expected expenses for each month of the year and find the difference. Include gifts and quarterly expenses such as insurance as well.
Make Adjustments When Needed
If your expected monthly income exceeds your expenses, then your household is off to a good start. This allows you to save a portion of your income for retirement, a family vacation or just as cushion in your savings account. If your expected monthly expenses exceed your monthly income, determine which expenses are variable and which are fixed. Adjust the variable expenses based on what you can do without. The fixed expenses are ones that are relatively the same each month and are usually necessities. Once you have made adjustments, you should be closer to, if not below, your monthly income.
Set Up a Budget Percentage
When putting together a household budget, one guideline to go by is to allocate categories and assign a percentage to each. When you know your monetary situation, you know how much money you have to work with. Determine the most important elements of your expenses and decide how much of your income will go towards paying off your debt and paying other bills.
You and your partner are a team. Any financial goals should be shared goals, and each partner must be fully on board with the money plan. Otherwise one of you may overspend, which could put you both in a difficult situation.
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