Imagine this scenario: You struggle to make your ends meet every month with the monthly compensation you bring home. You make a list of things you want to do and buy but invariably find yourself not doing anything or buying anything at the end of the month. You do not know where all the money went. You wanted to save some money so that you could invest the money in an investment scheme but you discover that you have spent the money somewhere and you have no clue where. Household budgeting, hence, is critical.
Each time you bring in your monthly compensation, you must be sure of how to utilize the funds the best. In other words, do household budgeting to have a household budget. The essential components of your plan must be: know where you are going to save your money or your monthly expenses; find out whether you can meet the expenses and still have some savings; and lastly, what do you do with the savings? The following tips will enable you to set up a budget and follow the budget.
Tip one: Know your expenses: First, to have household budgets, divide your expenses into the essential and the desirable expenses category. The essential expenses are the expenses that you must incur during a month. (For example, monthly ration, electricity bill, laundry, and conveyance) The desirable expenses are those that come after you have met the bare essentials during the month. (For example, dining out, buying a washing machine, and buying a new shirt).
Tip two: allocate money into each expense head: Create a spreadsheet and create the following columns: Expense type or category, Expense Head, and Budgeted Allocation. Under the Expense Type column, indicate whether it is essential or desirable. Then, depending on the type of expenses, indicate all the expenses head under the Head column, indicate the amount you intend to spend for each expense head under the corresponding row of the Budgeted Allocation column.
After you are done, add up the entire amount and you have the total expenses for the month. Deduct the amount from your monthly income and see whether you are able to meet the expenses.
Tip three: track the budget: Maintain a notebook and try to keep a note of the expenses you are incurring everyday under the different heads. This enables you to understand whether you are able to stick to the budget and if you are not, where are you spending more than what is allocated.
Tip four: Prioritize: Prioritize the items or the expenses that must take place if you are short of money.
Tip five: Identify patterns of household budgeting: Identify tendencies or habits that make you spend unnecessarily on non essential items.
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