5 Tips to Make Your Household Budget

vintage calculator

The art of balancing the checkbook went out the window for most when banks started offering customer accounts online. With it went an essential life skill: knowing how much cash you have to spare at any given time. Budgeting might not be quite as common as it used to be, but it’s still a necessary skill for anyone and everyone. Even if you live quite comfortably on your current income, it’s still smart to tighten the purse strings in some areas in order to put more money away for later in life. Here are five easy ways to design a basic budget for your household:

  1. Figure out how much you spend now. First things first: ask yourself, how are you doing without a strict budget? There’s an easy way to answer this question quantifiably. Look over old bank statements and add up how much you spend, on average, in the course of a month or a pay period. You can also download a money tracking app on your smartphone (like GoodBudget, for example) and track your dollars as they go. Do this for at least two weeks to get a good snapshot of your typical spending habits.
  2. Set realistic goals. Based on your usual spending, design goals that you can realistically achieve. If you dine out a few times a week, don’t set your dining-out goal so low that you’re going over it every week. On the other hand, you should be trying to accomplish something with your goals. So if you’ve been going out to eat far too often, it might be helpful to set your dining-out budget low, but also commit to only having dinner out two times a week.
  3. Use a spreadsheet. One of the most effective ways to ensure you’ll stick to your budget? Making sure you understand it. So you need to lay out your budget, point by point, in a way that’s easy to understand. You can find many budgeting worksheets online for free. Many of them break down the budget into categories like food (groceries and dining out), utilities, student loans, credit card payments, and so on. This interactive worksheet by Kiplinger actually generates a neat spreadsheet for you in Microsoft Excel after you enter your information.
  4. Factor in any lingering debt. When you start taking a good hard look at your finances, you might suddenly notice that the credit card bill has been creeping up slowly each month. Maybe the interest rate on a student loan has started to climb. If you do have debt, you want to make it a top priority in your budget. At the very least, you should be meeting monthly minimum payments. If you can swing it, throw some extra money at debts to shorten the amount of time you’re paying interest on them.
  5. Be especially aware of fun money. When people live beyond their means, it’s often because they aren’t keeping a careful eye on “fun money.” Fun money is basically anything that goes toward entertainment. Movie tickets, tapas and cocktails, a weekend away—these can all drain your fun money budget in a hurry. That doesn’t mean you can’t splurge every now and then, just make sure you set a specific goal and stick to it. If your monthly fun money is gone, you have to stay disciplined in avoiding spending until you get your next paycheck.

Creating a Budget [Bank of America]
How to Create a Family Budget, Step by Step [Mint]
10 steps to making a financial budget [CNN Money]