The Home Budget – Part I

Do you have a home budget?  If you do, great!  If not, then seriously consider having one. 

I run my household as if it were a business.  All businesses have a goal and my household is no different.  Business goals vary depending on a lot of different things and households can be the same way.  The key is to have a goal.  My household goal (also known as a mission statement) is simple: 

Live extremely well within our means. 

The goal is simple but getting there takes a little work and to do this requires planning and a structured budget.  It also takes some self-discipline. 

A budget is quite simply allocating the maximum available funds to certain expenses.  To do this effectively you must know two things: 

Your Income – all of the money coming into your household 

Expenditures - all of the money going out of your household.

Know Your Income – List all income you consistently bring into your household on a monthly basis.  Sporadic revenue sources (tax refunds, bonuses, irregular child support payments, seasonal work, etc.) should not be included in this amount. 

Establish a Budget – Determine the maximum amount you can easily afford to spend on the various expenditures within your household. 

Home Mortgage or Rent

Child Care

Utilities

Groceries

Non-Food Household Items

Medical

Auto – gas, insurance, maintenance, registration, emission testing, etc.

Transportation – bus passes, transit passes, carpool, etc.

Debt repayment – loans, credit cards, student loans, medical bills, etc.

Savings – retirement, emergency fund, savings account, college fund, vacation fund

Gifts 

Track Your Expenses - I track my expenses, all money heading out, on a spreadsheet.  Tracking your expenses is the only way to know exactly where your money is going.  Guessing never works and for those who have tried it, they are shocked when they discover how far off they are.  Tracking your expenses will ensure that you stay within the budgeted amount you have allocated. 

Structure Bill Payments – Based on your pay dates and the due dates of your bills list which items get paid on certain dates so they are paid on time and you avoid late charges, interest and/or penalties. 

Whether you use budget software, a spreadsheet in Excel or a spiral bound notebook you purchased for 10¢ at the back-to-school sale last fall it doesn’t really matter.  What matters most is that you have a budget in place and you stick to it. 

As time goes on we’ll explore budgeting in more detail.  Do you already have a budget in place?