How to Do a Household Budget
A Full Month's Budget
Why Have a Budget?
- Are you ending upside down or breaking even every single month? Do you know why? Without a budget you won't be able to know beyond a shadow of a doubt what you are doing wrong. It could be that you just need to cut out eating lunch out every day and take something from home, or that you need more income, or even that your spouse is doing something behind your back (I sincerely hope not).
- Making new purchases: If you do not have a budget, then you will not be able to accurately determine whether or not you can make the purchase. If you had hoped to get a loan for it and are not approved, then you need to know whether or not you can purchase it outright or not. If you do get approved, then you need to know that you can make the monthly payment without going broke.
- Going on vacation: Can you afford to take a vacation? Will it be something small like go stay with distant family and tour the sights or can you do something more elaborate like going to Disney World? Can you still pay all of your bills while you away? Having a budget will answer these questions.
- Paying off debt: Do you have several credit cards, a loan and/or a mortgage? Would you like to get out from under the strain of monthly payments that go mostly towards the interest? Do a budget and make a plan to pay your debts off. You'll have all those monthly payments back in the bank account ready to pay for something else or to save it.
- Saving for retirement: As with all the others, having a budget is the answer. You'll be able to determine how much of your income you can place into a savings account, IRA, retirement account or 401K if you have a budget.
Let's Get Started
In order to start making your budget you will need a spreadsheet in which to do it in or a notebook to write it in. Either way is perfectly acceptable. I used a notebook before using a spreadsheet. For neatness purposes, I will demonstrate with a spreadsheet.
You will need to gather all your income sources and your outgoing bills/activities together. Make sure you're not only getting your paycheck stubs, but your spouses as well. You may also receive reimbursement money from relatives that pay something for you. This is considered income. You'll list your bill just like all the others. Your bills are helpful, because they show you the total balance you owe, the minimum payment required and the date it is due.
I personally use OpenOffice, because it is free to download. The spreadsheet is called, "OpenDocument Spreadsheet".
My headings across the top from left to right are:
- Bill Name - Mortgage, Water, Loan, Credit Card, etc.
- Total Amount Due - This is not a monthly payment, but the entire balance.
- Minimum Amount Due - This is the monthly payment due.
- Date Due - It will be plainly stated on the bill.
- Amount Paid - The actual amount you paid to the creditor.
- Date Paid - The date on the check, autodraft, billpay, etc.
- Confirmation/Check Number - The number on the check, confirmation from web, etc.
Now it's time to fill it in. I always start with my "household expenses" first. Then, my "transportation expenses". Then, "revolving debt". Lastly, I move on to my "entertainment".
I also want to make it easier to read, so I use "Borders" to make a square around the information and then then I use "Background Color" to highlight portions of the table.
Being highlighted, for me, means that it is not set up to be paid. In other words, I haven't written the check and put it in the mail or used bill pay through my bank to set it up. Once I have done that, I remove the highlight and fill in the payment portions. It being highlighted makes me focus on it rather than the non highlighted portions.
Please keep in mind that your budget will look similar, but different. You may have tithe, daycare, alimony, homeowner's association dues, etc that I do not have listed in my examples. Just make sure you list every single income stream and every single item you pay for. That's the only way you'll get an accurate view of your budget.
Income vs. Out-Go
To compute how much income you have you need to first figure out where it's coming from. To name a few:
- Salary 1
- Salary 2
- Child Support
- Social Security
Everything I do is per month totals. Some months have four weeks and some have five. I do not want to get into the habit of spending more money than I should on five week months.
As you can see through the example, there's not much money leftover. I would recommend having a buffer in your savings account of at least $1,000.00 just in case something comes up like car repairs or if you go over budget on groceries.
One Step Further
I like to have everything in one place. It's more convenient that way. Normally, you would use a checkbook to keep up with your day-to-day balances. As you can see above, I use the spreadsheet. I look at this spreadsheet every single day and balance the "checkbook" portion. While I am there, I make sure that the expenses that need to be paid are getting paid on time. It's like double, triple and quadruple checking every day.
I get paid on the last day of the month (I count it as the first) and the fifteenth. Whatever is due from the first to the fourteenth, I put under the last day of the month paycheck before anything else. Whatever is due from the fifteenth to the last day of the month, I put under the fifteenth paycheck before anything else. This way I know that my bills will get paid first and foremost.
Having this preliminary monthly budget will give you the foresight to plan when you want to do your entertainment activities or how much you can comfortably put into savings/retirement.
One per MonthClick thumbnail to view full-size
At the very bottom of the spreadsheet shows, "Sheet1", "Sheet2", and "Sheet3". You can right click on the sheet and then rename it. I rename the sheets for the month the budget is for.
You can also add sheets before or after the sheet your clicked on. Personally, I go ahead and do a full years worth of these. By doing that, I can go in and see where I can put money away for vacations or other big purchases I may want to do that year.