Home budgeting can seem overwhelming to someone who has not had to plan a household or family budget before. Yet, once someone has completed his or her first home budget, it should be easy to maintain and update in the future. Many people utilize a monthly budgeting system to help them create a yearly overview or other long-range plan. The first step is to decide on a tracking and planning system. Then one can determine how much money comes into and goes out of the home each month. There are several types of home budget tools available, such as budgeting guides and software. These can be used to help a family reach its financial goals, which often include paying off debts and saving for the future.
A common first step in home budgeting is deciding how to track the information and develop a financial plan. One option is a simple spreadsheet, created on paper or as a computer document. Other people use budgeting software programs, such as Quicken®. There are several other options, both free and for purchase, that are available for downloading online.
Next, many people calculate the specific amounts of money coming in and going out weekly, monthly, and yearly. These home budgeting figures are usually categorized as income and expenses. Income is usually easy to measure if one has a steady source of revenue, such as a permanent, full-time job. One should also include any additional income, such as earnings from settlements, investments, or any other miscellaneous payments.
Tracking expenses is typically the next step in home budgeting. Most people find that it helps to start by listing their standing obligations, or fixed expenses. Some examples can include loans and monthly rent or mortgage payments. These are fixed because the same amount is due every payment period. The amounts of other expenses, such as groceries, entertainment, and other bills, may fluctuate. One can then begin to differentiate necessary expenses from non-essential spending.
When attempting to save money, home budgeting often requires an assessment of whether too much money is being spent in some ways. Ideally, one may be able to redistribute some income from one category to another, in order to cover expenses. This may entail reducing or eliminating spending in enjoyable areas, like entertainment or travel. Realistically, though, it may be difficult to curb one’s spending entirely, so many experts advise setting aside a little bit of fun money to spend without guilt.
Many families want to learn how to save more money and pay off debt. Financial experts often recommend trying to do both, if possible. Paying off existing debt can help reduce fees and interest payments. This can free up more money to put into savings or other investments. Financial professionals also usually advise people to set aside a certain amount of money in an emergency fund. If someone suddenly finds himself or herself without a steady source of income, or facing an unanticipated expense, an emergency fund could help him or her deal with such scenarios.