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Household budget: Spending the same income on more

Household budget: Spending the same income on more

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Where does your monthly salary go? Do you keep a certain amount of your salary to be spent on the house, or is it a case of buying things just as you need?

Did you know that great savings can be obtained from a household budget?

What is household budget management?

Managing a budget for your household is more than just keeping track of all the expenses for the month. It is a thorough chart of how much income there is, how much will be spent, and what can be saved. The idea of the budget is to broadly plan for living within your means. A housefhold budget ensures that bills are paid on time, household debts are cleared, savings goals are set and achieved and a lot more.

A simple way to do this is by labeling different envelopes with the heads of all the recurring expenses of the month (such as rent, electricity, car EMI, etc.). By doing this, you know exactly what is to go where, and if there is a leftover, it can either be carried forward to the next month, or kept aside as saving.

Where do you start?

  • Make a plan: Create an inventory of your needs vs. wants - from the biggest to the smallest. Learn to differentiate between needs and wants. Think basic. Those things which are essential to living out the month are your needs whereas those which would make your month 'better' are your wants. Put all these items into two categories- non-negotiables (such as food, rent, clothing, education, transportation, and insurance) and everything else.
  • Select an appropriate budget format: A few examples of household budgets are available on the internet and you can download them for free, just in case creating your own format doesn't appeal much to you. You need to ensure your spreadsheet works on a monthly cost basis, so all your income and expenses should be multiplied or divided to fit this calculation. A weekly expense should be multiplied by 52 (weeks in the year) then divided by 12 (months of the year) to get a monthly equivalent figure. A quarterly bill should be divided by 3 to get a monthly amount and so on.
  • Track your expenditure: You can track your expenditure for a month to establish your spending pattern. This will allow you to prune out the things that can be classified clearly as 'frills'.
  • Become a conscious spender: Now that you have an idea of where your money goes, you can actually keep that in your mind while you spend. This way, never will you have to wait for another month for something really desired.
  • Go local: A supermarket may contain everything under one roof, but if you spend a little time comparing prices, you may just come across local shops that carry items of the same or better quality at fairly lower prices. This way, you may even find better product on your hunt to save a few bucks.
  • Prepare for the unexpected: Car repairs, medical costs, weddings and birthdays, appliance maintenance, emergency travel- all qualify as additional expenditure, which you can actually plan for with the help of your spreadsheet, now that your finances are clearly laid out before you.

Reassess the budget after one month, making necessary adjustments; and then again after three months.

Tips for making, maintaining good household budget:

  • One family, one agenda: It's very important that all the members in a family know and understand how income is distributed over a month, and what it is your budget is aiming at. One can even ask the young in a family, to contribute to the budget. You may even be surprised to know various innovative suggestions you might receive.
  • Set clear targets: Save money on a monthly basis to achieve your target- whether it's a high-end mobile phone, or a holiday. Don't succumb to instant credit cards or the option of EMI payment on smaller stuff. In fact, put away your cards as much as you can and stick to cash. Remember- a budget is to help you with your income not credit!
  • Think out of the box: Emergencies are natural, and you will find yourself in need for quick cash at times. The trick is not to panic, but figure out a way in which you can spend less, save more, and yet continue to live in a manner you are accustomed to.
  • Be flexible: A budget is not meant to tie you down, it rather gives you defined economic freedom.

A good household budget allows you to have full control over your money. It helps you enjoy rather than worry over it. It makes spending more purposeful, and protects you from financial problems.

Disclaimer: BankBazaar.com is an online loan marketplace. All information in this article has been provided by BankBazaar.com and NDTV Profit is not responsible for the accuracy and completeness of the same.

Story first published on: April 13, 2013 20:11 (IST)

Tags: Household budget, Income management, Bankbazaar


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