With the cost of everyday living necessities constantly on the rise, the importance of establishing a healthy household budget is an essential aspect of any financial plan. While there are a myriad of tips relating to creating a household budget, the following are essential elements any healthy budget features.
Step 1: Identify Bills and Regular Expenditures
In order to determine what your budget should be, and where it is currently, monitor where your money is going for two weeks. On a notepad, or on your smartphone, write down the exact amount you spend each day along with a detailed description as to what the money went to.
This method allows you to not only identify your major bills, but also small expenditures that over time can add up to a substantial sum of money.
Step 2: Create an Income Spreadsheet
While knowing where your money is going is important, understanding exactly how much money you receive each month is an important aspect of establishing a budget. Without knowing how much income you make it’s essentially impossible to create a sturdy budget. See how to make an income spreadsheet here.
Step 3: Identify How Much You Wish to Save
Having a budget only works if you understand what you’re saving for. While you may wish to simply grow your savings account, set specific saving goals to assist in carving out your daily, weekly and monthly budget according to www.your650score.com. For example, if you wish to have $2,000 in your savings account within the next four months, then you have a tangible number to work with regarding how much you must save per paycheck.
Step 4: Create a Daily Budget
Once you’ve identified all of the aforementioned elements, it’s time to create a daily budget. Once this budget is created, the hard part comes – sticking to this budget. While some may be disciplined enough to never spend more than what’s allotted, most consumers are unable to do this. Therefore, simplify this process by creating seven envelopes (see Frugal Living). On each envelope write the day of the week.
Place the amount of money you can spend for that day within the envelope. Spending with cash is far more effective than spending with debit cards because once the envelope is empty, you can’t spend more. This is among the most effective ways to stick with your budget as you must make a conscious decision to take money from other envelopes. The best part, if you have money left over, you can either put that into your savings account or apply it to another day of the week.