Making a home together is a big commitment, and it isn't cheap. Drawing up a budget helps you control your household costs and makes it easier to understand how close your expenses are to your income. To begin, gather your recent bills and credit-card statements to learn what you've been spending. Keeping a budget isn't much fun, but it will help you figure out how much fun you can afford.
Whether you use pencil and paper or a computer, make a list of your fixed expenses, the money you must spend every month. Your monthly rent or mortgage payment is a big part of that, along with other home expenses such as utilities and renters or homeowners insurance. Fixed expenses also include debt payments, such as credit-card bills, student loans and auto loans. Next, write down the cost of household essentials such as food, transportation and medicine. For variable costs, such as food or utilities, go over several months' bills and determine the average.
Discretionary spending is everything you want but don't require for survival -- new shoes, the latest smartphone, vacation cruises and 500 cable channels. If you haven't been tracking these expenses, start now. Keep a record of how much you spend and exactly what you spend it on. Credit-card bills and bank statements help, but you'll need to track cash payments, too. Write them down when you make them or hang on to your receipts for later.
What you spend today is important, but good budgeting means thinking about the future, too. Saving for emergencies pays for unexpected plumbing disasters or auto repairs. If you want big-ticket items -- an Australian honeymoon, new furniture or an electric car -- setting aside money now makes it easier to buy later. Consumer Reports recommends you budget for two saving funds -- one for up to six months of income for emergencies, and a second fund for big-ticket purchases.
Putting it Together
Figure out your total take-home monthly income and compare it to your expenses. If you're running in the red, or not saving anything for the future, start cutting your discretionary spending -- no new shoes for a while, or fewer dinners out. Also, check if your fixed costs are as fixed as you think. Trading in your car for one with better mileage, increasing the deductible on your insurance and refinancing a mortgage can cut your monthly expenses. Once you get your income and expenses in balance, continue tracking them to avoid sliding back into old habits.
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