Dude, I don’t know about you, but at the end of the day, about all I have energy for is watching Parks and Recreation for about the 100th time. (Or any of the Marvel movies. They’re like a balm to my tired soul.) We work hard to earn a living. That’s why we should make sure we spend the money we bring home wisely. That’s where a household budget comes in.
Do you have a household budget? I’m very lucky that I have a husband who is all about that biz. We use Quicken and we go over our budget at the end of every year. It used to be super painful for me. But several years ago, I started getting the hang of not only coming up with a smart budget, but also sticking to the budget, which is kind of the important part.
Our household budget is a good tool to see at a glance what we have coming in, what’s going out (and exactly where it’s going) and if there’s anything left at the end of the month to put into savings.
Before we dive into exactly what a household budget can do for the average adult, let’s consider for a minute what would happen if we weren’t tracking our income and expenses. We may end up spending more than we’re making in a given month (or two, or three); over time that can put us into some pretty hot water financially. We may also spend a lot more than we’d like to believe on things like eating out (so, so guilty), going to the movies or (ahem) buying new clothes. Having a household budget gives us more control over where we want to really spend our hard-earned cash. Maybe that’s dinner and a movie, but maybe it isn’t. Wouldn’t it be nice to have control over that choice?
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Why You Need To Keep A Household Budget
It Tracks Where Your Money Is Going
A household budget simply tracks your money. You record where the money comes from each month (your income) and then record everything you spend it on (your expenses). Start with your regular monthly bills, like mortgage or rent, car payments, utility bills, etc. What’s left after all the bills are paid is your discretionary income, the money that you can spend or save however you want.
Helps You Identify Things You Waste Money On
Having all of your expenses in front of you in black and white helps you identify where you’re wasting your money. Looking at a budget report makes you reconsider if you really want to spend well over $200 a month on cable TV (we cut the cord several months ago and it’s glorious) or $150 on your large cell phone plan. Or how about that yearly magazine subscription to something you no longer read? Go through your expenses and reevaluate if this is REALLY how you want to spend your paycheck.
Allows You To Be Proactive About Savings
Saving money without a budget is hard. We go in with the best of intentions at the beginning of the month, but somehow there isn’t anything left at the end of the month.
A household budget gives you a chance to be a bit more proactive. Set aside some money for savings at the beginning of the month, even if it’s just $20. Put it in the budget as a regular expense, just like you do with your other urgent bills. Then, you’re already ahead of yourself, saving money before you can spend it. If you need to, open a separate savings account so you’re not tempted to spend it.
Another way to save money without thinking about it too much is to sign up for Acorns. Acorns is an app that rounds up all over your purchases, then deposits the difference in an account for you. You’d be surprised how quickly those cents add up. By saving money this way, it’s not as painful and it happens without you lifting a finger (except for signing up). Download Acorns for iPhone or download Acorns for Android.
Ensures You’re Not Spending More Than You’re Making
Most importantly, your budget will keep you on track and help you make sure that you’re not spending more than you’re making. (That’s called debt.) And I don’t have to tell you that that’s pretty important for your financial well being. Spending more than you’re making usually means you end up with a lot of credit card debt, which is the worst kind because of the high interest rates. Following your household budget will help curtail credit card debt.
How to Keep a Household Budget
Okay, so now you’re thinking a household budget is sounding like a good idea. But how do you figure out a budget, track your income and expenses, and then stick to a budget? Good question. There are a lot of answers to all of those questions and most of it depends on your lifestyle, how tech savvy you are, and your financial goals.
For myself and my husband, we look at last year’s total expenses. Then we look at how much we have saved and how much more we want to add to that savings. We look at our income from the previous year. By subtracting the expenses from the income, we can see what money we saved, if any, and compare it to our goal.
If we’re not saving enough, we start looking at where we can cut back on expenses and set a limit on those. (Our dining out budget is generally the one area we have the worst time sticking to. Everyone is so busy! Plus, we travel a lot and have a lot of guests, which leads to taking everyone out to eat.) If we’re saving enough, we just use the same budget. If we’re saving a lot and feel like we have wiggle room, then we’ll ease up on a few areas. (That doesn’t really happen when you’re raising kids.)
You can set up a spreadsheet in Excel or Google Sheets and enter your income and expenses by hand. Or you can use these apps and programs to let them do most of the work for you.
What do you do to track your income and spending? Tell us in the comments!