Home Budgeting Isn’t a One-Step Process


Many people avoid home budgeting and spend more than they need to as a result. A person cannot plan for the future unless they know where their money is going today. How can a person create a budget that works and allows them to achieve their financial goals?

Identify All Income Sources

Most men and women will only receive income from their job. Some individuals, however, have money coming in from other sources. All sources of income need to be identified to determine how much money a person has to work with each month.

List All Expenses

Next, list all recurring expenses. Be sure to include items that aren’t paid regularly, such as homeowner’s insurance and car insurance. Be aware that these expenses may change from month to month, and certain expenses aren’t set. Try to estimate those areas, such as groceries, using past bank statements, receipts, and other financial documents.

Track Spending

Purchase a small notebook and carry it everywhere. Write down any money that is spent in the notebook. People who take this step are often surprised to learn where their money is going. It may be used for fast-food restaurants, gift contributions at work, coffee breaks, or numerous other things. However, the money is going out and isn’t being tracked. This can lead to problems in a budget if these expenses aren’t identified.

Create the Budget

Create the budget using the information obtained in the previous two steps. Make certain more money is coming in than is going out. If this isn’t the case, determine where changes can be made to guarantee income exceeds the outlay each month.

Make Adjustments

Don’t become discouraged if the budget isn’t perfect during the first month. It can actually take six months to a year before a person truly has a grasp on their expenses. Stick with the plan, as it will work for those who don’t give up.

Once a household budget has been established, a person finds it easier to prioritize their spending each month, know where their money is going, and pay down debt. In addition, budgeting helps a person set long-term goals and see them through. More importantly, with a budget, a person can build a solid financial future and know they can handle anything that comes their way. The peace of mind that comes with this is priceless.