Financial experts agree that making and living on a budget is the best way to take control of your personal finances, get out of debt, and save money for retirement, college, and other large expenses. Home budgets, however, are daunting for many people because they are afraid that they will be too constrained by the limits they set. Yet home budgeting is actually quite liberating, for knowing exactly where your money is going frees you up to spend it on what you wish instead of on miscellaneous bills and other debts incurred when you purchased things on the spur of the moment. A few easy tips is all it takes to creating a home budget you can enjoy.
Track Your Spending
Spend a month tracking every dollar you spend. Record all receipts and create categories like housing, food, clothing, mortgage, car insurance, gas, and so on. Good home budgeting software like Quicken can help you figure out which categories you should list, and it can assist your home budget planning.
Distinguish Mandatory and Discretionary Expenses
Examine your list of expenses after a month and separate it into discretionary expenses and mandatory expenses. Look to see where you can cut discretionary expenses like eating out. Shave some of it off and assign that amount to another category like debt repayment or savings. Discuss all of this with your spouse if you are married, for home finances can be one of the most contentious issues if husbands and wives cannot agree on them.
Try Out Your New Home Budget
Spend a month living within the constraints of the new budget amounts you have come up with for each category. Go back and adjust totals where you feel overly constrained. Home budgeting is an ongoing process and you will probably tinker with your totals every couple of months depending on income and expenses.
Pay Off Debt
Devote as much money as you can toward paying off debt. The fewer debts you have, the more spending money you will have in your pocket.
Donate to Charity
Give some of your income to the church and other charities. I cannot explain it, but it seems that those who tithe and are generous with their money never go long without their needs being met. Home budgeting is successful only when you begin to see how you can spend money on others as well as yourself.
Get Home Budget Help
Consult financial experts for further advice. Dave Ramsey is particularly recommended for those who want to get out of debt and plan for their future.
• Always include an entertainment category for each spouse. Having a little bit of money that can be spend however one desires makes the whole process of home budgeting more enjoyable, and those who spend a little on themselves are less likely to go over budget in other areas.
• Look for ways to save money. Making your lunches, carpooling to work, and other such tips are the best ways to save money in the long run.
• Personal finance books can also help you create a budget you can live with.
• Do not overestimate the amount of income you have to work with. Home budgeting will only succeed if you allocate money you actually have, so be careful not think you can fall back on the credit card and remain in control of your funds.