Have your expenses under control – how to create a home budget
What is a home budget? How to plan it step by step? How to limit expenses and thus increase savings? More on that below.
Why is it a good idea to plan ahead the expenses in your budget?
Creating a home budget and updating it regularly allows to optimize the expenses, find sources of savings and investment funds.
When we know how much exactly we spend and on what, we are able to quit Financially unfavorable habits and save up money we need for a bigger purchase, or to adequately manage an extra cash injection.
Spend money on paper
Once you determine all spending categories and organize them by their hierarchy of importance, it’s time to… spend money! Of course we’re talking about spending them on paper. Take a look at every category you Wrote down and determine the amount of money to spend on it. When you’re writing down your expenses, it’s a good idea to see how much you spent on individual categories in previous months. It is especially helpful if you have completely no idea how much you spend on food or transportation monthly. Historical data makes invaluable help in such moments and it will really help you define the appropriate amount.
Plan your expenses ahead
Write down all of your Fixed expenses like: rent, fees, subscriptions etc. Also write down all of your fluctuating monthly expenses like: gas, utilities etc. If you don’t know the exact amounts, write down the amount you are expecting to pay or calculate the average of the earlier payments.
It’s a good idea to plan the home budget one month in advance. After that time you always have to review – what were the objectives and what was the actual execution like. Such procedure will give you a detailed insight into your financial leaks. Which means you will have it all in black and white – where exactly you waste most money. It is essential here to write down the expenses on an ongoing basis, so that you can indeed get the most reliable knowledge.
Once you get a clear picture of the situation, take a close look on these expenses. Ask yourself, what would you be willing to give up? Which expenses can you reduce? This is usually where most people look for extra money, by saving money on things that don’t matter much.
Plan your irregular expenses ahead
When planning your expenses, you can’t forget about planning expenses that are predictable but irregular. That’s why you should determine your major annual irregular expenses, like vacation, insurances etc.
Then open an account for irregular expenses. Of course it may just be a representation of an account in your budget or an actual separate savings account. What matters is to divide bigger amounts by the number of months and regularly save for a specific purpose. Smaller, well-planned amounts don’t have such huge impact on the budget as one-time large expenses.
Simple tricks to improve the condition of your home budget
There are several simple rules to follow if you want to improve the condition of home budget quickly and easily:
- Pay bills first and don’t put it away for later, as you’ll get overdue fees if you don’t pay on time.
- When possible, change your service provider to pay lower bills.
- Analyze your bills. There might be some discounts or cheaper plans that will allow you to save money.
- When choosing a bank, check the offer and compare it with others. Choose the one that offers the lowest fees.
- If you choose to take out a loan, make sure that all the information on costs and conditions of use are clear and easy to understand.
- Set limits – how much you can spend in a month on leisure and entertainment.