I have a confession to make. I am a real stickler when it comes to budgeting household expenses. Always on the lookout for ways to save without sacrificing, I think it makes the most sense to come up with a sensible budget you can live with.
- 1: Figure your monthly household income. This is take-home pay, after taxes and withholdings. Don't forget to include interest income and any other sources you might at first overlook.
- 2: Figure your current monthly expenditures. This includes fixed expenses like rent/mortgage, utilities, debt (if you have any), groceries and other items that are likely to stay the same from month to month. It also includes what you spend on extras, like entertainment and shopping.
- 3: Total your income and expenses and see where you stand. If you have a surplus, skip to number 7. If you're coming up short, continue on.
- 4: It makes sense at this time to go back over your expenses and first re-assess the "extras". Are there places where you can reign in the spending? Try setting a goal for the coming month in a category where spending seems excessive. Be realistic, but make it count. (Do you eat out a lot? Try preparing nice meals at home and reduce eating out in the next month to see how it affects your budget.)
- 5: After assessing the "extras" and trimming the excess, where do you stand? Still need to reduce spending? Consider how you can reduce utility bills, save on groceries and other essentials, or even reduce the rent.
- 6: Take your new budget for a test drive. Over the course of the next two months, you'll be able to look again at your income vs. expenses and see how you're doing. Are you saving more? Are the sacrifices you're making do-able? Are there places where you can trim even more? Chances are, you'll feel great "finding" money in one area of your budget and be encouraged to look for other potential savings.
- 7: Determine how to handle your monthly savings. Apportion it according to your needs, wants and goals. Make at least some of your monthly surplus work for you. Investing or reducing debt will snowball your savings and allow you to progressively save/earn more each month. Set aside another portion of each month's savings for that summer vacation, home improvement, or emergency fund. This way, when they hit, those larger expenses can be handled without blowing your new budget!
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