Although knowing how to create a household budget is a necessary skill, it’s something that a lot of people struggle with. When you don’t have a budget keeping your life in balance, you may spend too much and save too little. At MyFi, we do what we can to help our customers create and stick to budgets. If this is something you usually struggle with, now’s the time to learn more.
Understand what’s coming in
Before you learn how to create a budget, you need to know how much you have to play with. Sit down and take a look at how much money is coming into your house. This could mean just your income, or it could mean the shared contributions from others in your household.
If you have an income that fluctuates, such as from self-employment, try making an average. Or, if you really want to play it safe, you should look at the lowest possible amount that comes in.
Create a basic monthly household budget
Although it’s tempting to make one routine budget and assume you’ll stick to it, it’s also an unrealistic approach. Instead, you should create your basic monthly household budget and then add one-off expenses to it as you go along.
Begin by examining the expenses that never change. For example, your rent or mortgage, your car insurance payments, and any other fixed outgoings. Then, look at those that fluctuate a little and set a strict maximum. This could include groceries, travel expenses, and childcare. By imposing a maximum amount you’ll spend on them, you allow them to remain flexible, but you don’t lazily overspend.
Look at unique monthly spends
Each month brings unique financial challenges. By embracing them before the month begins, you can factor them into your budget and avoid overspending.
For example, if you’ve been invited to a function or a birthday party, decide how much you’re willing to allocate to the occasion. This could include the amount of money you’re willing to spend on gifts, an outfit, drinks, and travel. Budgeting in this way may mean that you need to take a cost-friendly approach to some occasions, but it does mean you’re in control of your spending.
Create savings goals
In addition to knowing how to create a household budget, you need to look at ways to save money. Don’t treat your income as something that you need to spend all at once. Instead, look at ways that you can make it work for you.
If you find that you regularly have spare cash at the end of the month, allocate some of it to paying off debts and building your savings. Paying more than you need to on your credit cards helps you avoid spending too much money on interest. Having savings means you’ll always have something to fall back on when those big one-off expenses hit. By striking the right balance between the two, you can bring yourself to a healthier place financially.
At MyFi, we have budgeting tools that both our standard and premium customers can access. If you’re ready to take control of your finances, check them out.