How to Plan a Home Budget

Planning a home budget is not a difficult task, but it does require persistence and dedication. It's important to have a home budget in place whether you're trying to save money or you want to stop overspending on non-essential items. Take the necessary steps to put your financial life in order by creating a home budget for your family. The task may seem daunting, but it's really just a matter of comparing your income and expenses to see where you stand.

Calculate your expected monthly income for each month of the year. It's important to figure out each month separately as this allows room for expected bonuses or seasonal employment. If your company always gives an annual bonus during December, for example, add this to your December income.

Calculate your expected expenses for each month. Include quarterly and annual expenses such as insurance payments and property taxes. Don't forget to include the cost of gifts during the holidays or for birthdays. If you plan on purchasing your Christmas gifts in December, make sure to list your budget for each person as well. If you're expecting a bonus from your employer, this will offset the additional expenses. If you don't receive a bonus, use money that you've saved throughout the year.

Divide your expenses into categories to determine if each item is a fixed or variable cost. Fixed expenses include items such as car and mortgage payments and other necessary costs that remain the same each month. Variable expenses include groceries, entertainment and other costs that can fluctuate from month to month. For variable expenses, calculate your average cost by examining the most recent three months.

Determine if your expenses exceed your expected income or vice versa. If your expected income exceeds your expenses, allocate an amount to set aside for your savings account each month. Treat this as if it were a bill paid to yourself. Don't touch the savings unless there is an emergency, or if you reach your savings goal. If your expenses exceed your income, make adjustments, beginning with the variables first. Take away or reduce non-essential spending until your income exceeds your expenses. If you can't reduce your expenses far enough, you'll need to increase your income by getting a second job or taking on more hours at work.

Save money whenever possible for unexpected events and planned trips. It's always important to have savings set aside for medical emergencies, car repairs or other unexpected expenses. Even if you and your family are planning a trip, having savings set aside helps you plan more efficiently. Budgeting for your trip makes paying for it much easier and keeps it from becoming a burden. The alternative is to spend your most recent paycheck on the trip, making that money unavailable for paying bills. It's much less disruptive to plan ahead and set aside some money specifically for the trip.