As we approach a new year, it is a perfect time for you to develop a household budget to help manage your spending. A household budget is an important tool to help you track and control where you are spending your money. In my opinion, I think it is best to establish a monthly budget but keep track of your spending at the same frequency that you get paid to determine if you are staying with your monthly budget limits.
Before you can establish a monthly budget for your household, you have to first determine where you are currently spending your money. The easiest way to do this is to keep a pen and notebook handy and track where every dollar is going in your household for at least one month. In most cases, your bank may have an online tool to help you look at your current spending if tracking manually sounds too cumbersome.
Once you have tracked your household’s monthly spending, you can then develop a household budget by following these steps:
1) Determine what categories you to have in your household budget. Most households will have at least the following basic categories:
- House/Rent payment
- School expenses
- Savings – it is important for you to save and have money for emergencies
2) Determine how much your household needs to spend on each category based upon the information you learned after tracking your monthly spending for a month. As you set each categories monetary limits, make sure you are challenging yourself by asking where you can cut spending to increase your savings. For example, can you eat out less or carpool to cut food and gasoline expenses.
If you are married, it is very important to set these goals together so that everyone is on the same plan.
NOTE: There are many budget resources online to help you develop a budget. Some of my favorite budgeting forms can be found here.
3) If you completed #2, you now have a budget for your household. The final step now is to keep track of your spending going forward to make sure your household is staying within the budget limits. A budget will only work as long as you continue to monitor your spending activities. It might be a good idea to setup a budgeting meeting every week or once a month so that your family is working together on the household budget.
Growing up in a military family, it was essential for my father to keep our family within our budget constraints. It was my father’s willingness to show me the value of every dollar he made and where that money went each month that made me appreciate the importance of a household budget as I got older. I hope that you and your family will be able to meet all your financial goals as we approach this New Year.
Happy holidays from all of us at Bond & Botes.
Mary Pool is a shareholder of the Bond & Botes Law Offices in Montgomery and Opelika, Alabama. She holds a Bachelor of Science from Auburn University at Montgomery, and a Juris Doctorate from Faulkner University’s Jones School of Law. She has represented thousands of clients over her more than 11 years working in the bankruptcy field. Read her full bio here.