Most people live paycheck to paycheck, and spend what they want whenver they want. But if you keep up the pattern long enough, you’ll soon discover that the money runs out before you’ve paid all the bills, and there is never any left over for special purchases or holidays. To get control of your household spending and start saving you will need to set up a household budget.
The thought of having to stick to a budget might make you cringe. It does sound restrictive and boring. However, if you really want to create wealth, you will find that a budget can actually give you freedom. You will have control over your finances, know where your money is going and you will have a plan to reach your financial goals. Not spending on a few things that you can do without right now means you will be able to spend on larger, more important purchases in the future.
Here are some easy household budgeting strategies you can use to get started.
Find out how much you earn.
The way you are paid can determine how you budget your money each month. If you are paid weekly, you can calculate your budget based on four paychecks per month. That means that you will have four extra paychecks throughout the year to help with (extra) expenses. If you are paid bi-weekly you can calculate your budget based on two paychecks per month and have two extra checks throughout the year. If you are paid monthly, calculate your budget based on the monthly amount. You won’t have extra paychecks throughout the year, so you’ll need to be careful in budgeting for the extras. For those who are not paid with regular frequency, figure out your annual income and divide it by 12 to determine your monthly income.
Track Your Expenses.
Your fixed expenses will be easy to figure out. These are the items that stay the same from month to month, such as your mortgage, car payment, etc. Your other expenses can be trickier to calculate. To find out how much you really spend in a month, carry a notebook with you and write down everything you spend for the next 30 days. This will tell you what you are spending and where all of your money is going.
Figure out the Difference.
Now, find the difference between what you spend and what you earn each month. If you have extra, a good portion of that should be saved and invested. If you find that you are spending more than you earn each month you have two choices: either lower the amount that you are spending or find a way to increase your monthly income. Doing both is something you might want to consider.
Lower Your Expenses.
Lowering your expenses is the most obvious way to resolve the problem of spending more than you earn. Simple changes made over time, such as renting a movie instead of going out to the movie theater, can add up to big dollars in your bank account. Other changes might be lifestyle choices, such as giving up one car and using public transportation.
Taking control of your personal finances by setting up a household budget is an important first step in creating wealth. As you begin to make wise decisions about where your money is going, over time you will find opportunities to spend less and save and invest more.
Julianne Alvarez-Wish is a military wife, mother, business owner, professional writer, blogger and legislative advocate. She is the Director of Communications for Our Milk Money, the Colorado State Leader for the National Association for Moms in Business and the owner of Buy By Mom and Buy By Mom Blog. She is the Colorado Springs Stay-at-Home Mom Examiner for Examiner.com. She also blogs at A Wishful Thought. Her passion, purpose and goal is to help parents work from home so they can be home with their children.
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