Wednesday, March 26, 2008

Basic Household Budget Planning

The first step on the Frugal Journey is to create a Household Budget.

Relax - it won't hurt, I promise.

It will, however, show you where your money should be allocated and places where you can cut spending, a simple way to be frugal.

In order to effectively create a budget, you need to know where your money is spent. That information should be at your fingertips if you keep close tabs on your checkbook or your online banking. If, as you read through the expenses listed below, you find yourself unsure of what you're actually spending in each category, you'll need to track your spending for two to four weeks. Record every purchase and bill, saving statements and receipts. Then, with information in hand, sit down and run the numbers

A household budget will only work if both you and your spouse are in agreement of its necessity and aware of how your money will be spent. If only one of you is carrying the weight of bill-paying and day-to-day consumer decisions, you'll find that no amount of budgeting will help. Good communication is imperative, as is an agreed-to focus on sticking to the plan.

I would like to note that while money is a tool, one which helps you acheive your goals, it is an emotionally charged tool. The subject of money within families can evoke a wide range of differing emotional responses, especially when it comes time to discuss how money is spent. If you find that budget planning is difficult or impossible because of emotional clashes between you and your spouse on how your shared income(s) are spent, you should seriously consider the help of a professional third-party: a financial advisor; a therapist; or a religious pastor.

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Basic Household Budget Planning



Net Monthly Income from ALL Sources: $_______

Housing (including Rent, Mortgage, Equity Loan, Escrow Funds): $_______

Electricity: $_______

Natural Gas: $_______

Water: $_______

Phone: $_______

Internet and/or Cable or Satellite: $_______

Cell Phone(s): Plan and Phones: $_______
Trash, Condo or Apartment or Homeowner's Association Fees: $_______

Car Payment(s): $_______

Auto Insurance: $_______

Groceries and Drug Store Items: $_______

Gas and Oil Changes: $_______

Savings, both Emergency and Investment: $_______

Life Insurance: Self; Spouse; Children: $_______

Health Insurance and Health Care Costs: $_______

Child Care, Education, Tuition: $_______

Credit Card Payments: $_______

Student Loan and/or Debt Consolidation Loan Payments: $_______

Charitable Giving: $_______

Clothing, Entertainment, and all MISC. Expenses: $_______

Total Monthly Expenses: $_______

Subtract the amount in RED from the amount in GREEN: $________

If your final dollar amount is zero or positive and you have no debt, great job!

If your dollar amount is zero or positive and you have some debt, you're on track; debt reduction and elimination will hopefully be your next focus.

If your dollar amount is negative, or your dollar amount is negative and you have some debt, it's time to tighten the belt to get your budget back to zero.


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Items below are not covered on this budget worksheet but may apply to you (which is exactly why a detailed, personal budget is a must-do for each family); lump these in the Misc. Expenses category.

Pets: feeding, grooming, veterinary bills.

Home Improvement Fund: repairs, maintenance, landscaping, furniture and decor.

Restuarants: nights out with adults, and those quickie drive-thru meals, too.

Auto: license fees, annual registration fees, annual emissions testing fees, state taxes on vehicles.

Personal Care: dry cleaning, haircuts, salon visits, gym memberships

School Children Expenses: school supplies, field trips, lunch money, extracurricular activities such as sports, music lessons, dance classes, enrichment activities.

Alimony or Child Support.

Subscriptions to newspapers or magazines.

Memberships to professional organizations, unions, or social clubs.

Gift Fund for birthdays or Christmas/Hannukah/Seasonal Giving.

Vacation Savings Fund.

ATM Withdrawals and Fees and/or Cash in your pocket.

Lump any other monthly expenses not listed here under Misc. Expenses. Better yet, take the time to create your own budget worksheet that's tailored to your family's needs!

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Using this, or any, budget worksheet should give you a better idea of where your money needs to go as opposed to where it actually is going.

Several of the items that fall under Misc. Expenses should bear close scrutiny for cutting or eliminating if you find yourself coming up short on your bottom line. Other areas you can look at first for decreasing are Groceries (are you buying whatever strikes your fancy or are you planning a list with coupons and sales?), Cell Phones (do you carry a basic plan or do you carry several lines with the latest cell phone gizmos and gadgets?), Cable and Internet (are you paying for premium channels or basic cable? Did you shop for the best bundled internet/cable/phone package deal from the providers in your area?), and Entertainment, Clothing, and Restuarants.

Remember, your Frugal Journey is yours alone; your budget will look different than everyone else's in reflection of that basic fact. And the expenses you decrease or eliminate will also reflect that difference. Tightening the budget belt is challenging, yes, but remember that the first principle of the frugal life is embracing the idea that less really can be more - more happiness, more contentment, more time, and ultimately, more money in your pocket.