Preparing a Household Budget

A household budget saves money.
i money image by Horticulture from <a href=''></a>

To some people, budgeting comes naturally. But others, who have never considered a budget, may be surprised to find out how much money is going out the window. That money could have gone toward a new car, a special vacation or a savings account. If you're ready to prepare a household budget, there are certain things to be considered.

Determine your Goals

Whether your goal is to purchase a new home, a new car, or a much-needed vacation, knowing your goal ahead of time makes it easier to stick with the budget. If you don't have a specific goal in mind, it's easy to forget your budget. Creating a plan to pay your bills on time helps you stay on track.

Gather your Statements

Before you begin writing down any expenses, make sure that you have all your statements in front of you. This includes all of your bills, bank statements, and even receipts. Three months of bills should give you enough information for a pretty accurate budget sheet. The receipts show where your money is going -- whether it is towards bills, fuel for your vehicle, or the shopping spree that you went on when you needed some retail therapy.

Categorize your List

Create categories for your expenses. This makes it easier to keep track of how much money you spend in each area. You should have four categories of expenses: home, personal, work and living. Home expenses include items such as your mortgage or rent, property tax, home insurance, cable, internet, telephone and utilities. Personal expenses include items such as recreational activities, entertainment, gifts, education and any donations that you make. Work expenses include day care, transportation, business wardrobe, parking and lunch. Living expenses include groceries, medical bills, pet-related expenses and clothing.

Make Adjustments

Review your list and compare it to your total income. If you're making more than you spend, you're doing well; if you're spending more than you have coming in, you need to make adjustments. The first items you need to reduce or eliminate are the items you can do without. You don't need to go out to eat every weekend; you can start bringing your lunch to work, go to the movies once a month instead of every week, and choose another cable package with fewer channels.

the nest