Every household needs a budget for the simple fact that we all need to know what our financial position is. At the end of the day, a household is just like a business in that there are funds coming in (I hope) and funds going out (unavoidable). The trick to making a budget is balancing those two things and making adjustments where required, and here's how.

Compile your household budget with all members of the household

Makes sense right? Just so everyone is on the same page, and one person doesn't think that they can go out and buy a new entertainment system on credit because the household has the disposable income available to make the repayments, when that's really not the case. Many spouses argue over financial matters, and unfortunately can be the cause of not just stress and heartache, but in a lot of cases the breakdown of the marriage. This can be avoided by transparently getting together and making a household budget as a family, because no one member of it is more responsible for financial matters than the other.

Money (37211)

Include all incoming money

When you make a household budget you should include not just salary, child support, but also any government payments, odd sums of money from little sources such as income derived from online businesses or lawnmowing jobs. You get the picture, any scrap of money coming in must be accounted for so you can have a complete picture of your financial position. Obviously the more the merrier, but I always encourage people to err on the side of caution and underestimate their income to avoid any nasty surprises down the track.

Include all outgoing money

This is often the most painful part of making a household budget – accounting for all expenses. Again, you really must be honest, open and transparent with all expenses. Include everything from child support, food and bill payments to fuel costs and even budget for vehicle costs such as servicing and registration. Any expense that you anticipate you are able to plan and therefore budget for. I know it can be difficult to see the list of expenses, but it's ok, really it is – it's all part of the process. With expenses I always like to overestimate – once again for reasons of caution.

Deduct expenses from income and see where you are

Once you have both columns lined up you are able to place them side by side, and get the calculator out. I hope you've been precise, and haven't been rounding to the nearest dollar – every cent counts! When you have deducted your expense figure from your income you are in a position to judge what your financial position truly is. Even if you don't enjoy the process required to make a household budget, it's an immensely valuable thing to have done for your family as a whole. Hopefully you will have some money left over to breathe – however if you don't, it's ok – cut expenses and increase your income. Whatever you do, Enjoy!