How Do I Set up a Monthly Household Budget?

Setting a household budget means tracking all of your expenses.

Setting a household budget means tracking all of your expenses.

Keeping track of your expenses is a good way stay within a budget and to make sure you have money left over each month to spend on the fun stuff. To stay on budget, constantly update your budget by recording your expenses and bills. Visa's Practical Money Guide: Budget Basics recommends that you spend around 30 percent of your budget on housing, 18 percent on transportation and 16 percent on food. If you are spending more than this, then look at ways to cut spending in those areas.

Write down how much your household earns each month. Your monthly post-tax income will be listed on your pay stubs. If your household income changes each month, average your earnings over the past three or four months, or use your lowest monthly income as a base. Include interest payments, investment income, dividend payments and bonuses in your calculations.

List all of your recurring monthly expenses, such as rent or mortgage payments, insurance (car, housing, health, life), utilities, 401K or other regular retirement contributions, automobile expenses (payments, gas and a set amount toward maintenance) or public transportation costs, regular debt repayments, home maintenance expenses such as garden expenses or housecleaning, child care, pet food and care.

List all your flexible monthly expenses. These are the expenses that change from one month to the next. Calculate this figure by recording your expenses each day for a month or more. Flexible expenses include groceries, clothing, entertainment, hobbies and recreation, gifts and eating out.

Add all of your expenses for the month and subtract this amount from your income. The total is the amount you have left each month to spend or save.

List your spending priorities, such as paying off debts, taking a vacation, setting aside money for your retirement. Decide how much money you will put aside for each of your priorities.

Cut your spending. If you want to have more money left at the end of the month, go back and look at your daily expenses. Determine which expenses you can do without. For example, if you are spending a lot of money eating lunch out each day, start bringing lunch from home.

Track your budget using an online spreadsheet or budget calculator (see Resources). You may keep track of your budget using pencil and paper, but a spreadsheet or online calculator will do calculations for you and let you see how to save more.

Items you will need

  • Bills
  • Record of post-tax monthly income
  • Record of monthly expenses

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About the Author

Since graduating with a degree in biology, Lisa Magloff has worked in many countries. Accordingly, she specializes in writing about science and travel and has written for publications as diverse as the "Snowmass Sun" and "Caterer Middle East." With numerous published books and newspaper and magazine articles to her credit, Magloff has an eclectic knowledge of everything from cooking to nuclear reactor maintenance.

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