Create A Household Budget To Improve Money Management

Are you often short of funds soon after collecting your pay? Does it feel like you pay and pay but yet you are nowhere near clearing your credit card debt?

Most likely, you do not have a household budget.

Ok, so what is a household budget and how does one make a budget?

To put it simply, a household budget is a money plan for you to organize and achieve your financial goals. If you are constantly out of the money and your household debts are mounting, you need to pen down a budget right away.

As parents, we have the responsibility of allocating the family’s funds and making sure there is enough to go around. If we cannot exhibit financial discipline, then it is almost impossible to impart the right money values to our children.

Below are some steps which you can adopt in formulating a practical household budget.

1. Sit down with your spouse and plan a household budget together. List down what your joint financial goals are…long term and short term.

2. Cut family overhead to the bare minimum. Do you really need the $500 romantic dinner every week and expensive coffee at Starbucks? "Keeping up with the Joneses" is not cool if the quality lifestyle is built on debts.

3. Make reasonable allocations for food, clothing, shelter, utilities and insurance. A household budget is not a financial starvation diet where you deprive yourself of basic needs.

4. Allow yourself some pampering in the household budget. This will be for your entertainment, relaxation, recreation, vacations and gifts.

Working hard all year round and not taking appropriate breaks to re-energize or buying gifts to reward yourself is too taxing. Frankly, not the kind of household family budget which I will adopt and I try hard to preach what I do.

5. If you have spare cash for investments, allocate them according to short term and retirement needs.

If you want to get organized, there are many online budget forms available. Just use any search engine and type in “free budget forms.”

I use a simple Excel spreadsheet and then check monthly how and what I did as compared to my plan. For a more detailed budget, you may want to try MS Money which can even give you your personal financial statement and analysis.

On a final note, remember that any successful household budget will require you to consider savings first before any spending. Remember “Pay now, enjoy later.” Even a small amount saved will edge you closer to your long term financial goals.

There are two major ways to increase savings. One is to actually save and scrimp on available funds, and the other is to increase your income.

Which method do you think is easier to save money?