Most people avoid talking about household budget let alone creating it. Somehow they don’t want to be bothered by the hassle of planning their household spending when impulsive shopping seems so much more fun and easy. They do not realize that by not having a household budget, they are actually prone to suffer from financial bleeding, until they find that their financial goals and retirement plan are non-existent. It is usually only after the financial panic attacks their lives that they start making a household budget. It is true that it’s better late than never. But if they had started planning their budget earlier, they could have saved so much money lost in their financial bleeding.

A lot of people just do not know how to start a budget. They tend to over complicate the definition of household budgeting and therefore avoid looking into it at all. Sadly only few people realize that creating a household budget is actually very simple.

Your Monthly Income

The first step before starting to do a household budget is start recording your monthly cash flow and look at it. Examine where all your income comes from and where all your money goes.

Be sure to include all your income, commission based or monthly paycheck, earned by you and/ or your spouse. Do not forget to include income sources such as child support, disability income, and so on. All of your expenses should also be in your cash flow spreadsheet, no matter how small it is.

Your Household Expenses

The more unpleasant step to create a budget is to list out everything you spent your money on each month. For every event where you lose money, you must have it listed in your household expenses spreadsheet. Some of your expenses are usually fixed, which means that it is something you always pay for every month. These fixed expenses include rent, mortgage, car payment, phone bill, electricity bill, etc. Besides these fixed expenses, make sure you include all your variable expenses as well. This includes credit card usage, groceries, entertainment, medical expenses, clothing, dry cleaning, personal care, gifts etc.

By having everything listed out like this you will be able to look at your expenses every month and analyze them. Where do you spend your money the most? Keeping track of all your expenses will give you a very good idea about your spending habit. By knowing where you are at in your attitude towards money and your spending habit will help you determine where exactly the leak is that causes the financial bleeding.

To help you analyze your expenses better it is worth the effort to make categories for all the expenses you have listed. Having coffee at Starbucks, lunch in a canteen, snacks from the vending machine can go under the “Eating Out” category. Buying milk for the kids, potatoes etc can go under “Groceries”. The more detailed your list is the better you will understand and handle your finances.

After you have added up your income and household expenses for that month, subtract your expenses from your income and see how much money you have left from that month’s income. Some of you may be surprised to see that you have almost nothing saved from that month’s income. For most people this moment is quite eye-opening as they will see that the many $5 to $10 purchases at a coffee shop or eating out is suddenly something that you could have cut out to save your more money.

Making a household budget will help you take back control over your finances. As you see in detail what expenses you could have cut to save more money, you will have the power to stop your financial bleeding.

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