Family & Parenting

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Household budget building how-to

The majority of families must live on budgets. Heads of households where money is no object may be able to spend at will, but many men and women must develop budgets so their families' everyday needs are fulfilled and so there is a safety net should an unforeseen situation arise and threaten family stability.

Building a budget can be a significant undertaking, but there is a method men and women can employ when developing a family budget to make that process go as smoothly as possible.

• Gather pertinent documents. The first step toward building a household budget is to gather pertinent documents, such as earnings statements, utility bills, mortgage documents, and any other documents that can help you figure out your earnings and expenses.

• Determine what's coming in and what's going out. When building a budget, you must determine how much income your household is generating and how much of that income is already earmarked for necessities like mortgage payments, car payments, etc. Make a list that includes an incoming and outgoing category for expenses, and make a separate category for outgoing expenses that are not necessities, such as the amount of money you spend each month on dining out. Peruse past bank statements to determine those discretionary expenses.

• Determine which discretionary expenses can be trimmed. Certain expenses, such as mortgage and car payments, are likely fixed. Unless you can refinance your mortgage to earn a lower monthly payment or pay off your car loan so you no longer have to make monthly payments, you probably need to examine your discretionary spending to find opportunities to save money. It's best that men and women working together to build a household budget come to a consensus on where to make cutbacks, as you don't want any resentment to build because one person was forced to sacrifice something important while the other was not. Be respectful of each other's concerns and plan on each of you making a sacrifice so resentment does not develop Agree to make initial cutbacks a trial run that you will revisit in the near future to determine how the sacrifices are affecting your quality of life.

• Prioritize paying down debt. One of the best ways to clear up money long-term is to eradicate debt, and consumer debt in particular. It is unrealistic to eradicate certain debts, like a mortgage, in the short-term. But consumer debt, which includes credit cards, tends to come with high interest rates, and carrying substantial consumer debt can negatively affect your credit rating. When attempting to pay off consumer debt, resolve to avoid using credit cards unless it's a genuine emergency and you don't have the cash to cover the associated expenses.

• Periodically revisit your budget. Men and women should periodically revisit their household budgets to determine if their budgets are effective and how those budgets are impacting life at home. Expect to make some minor tweaks whenever revisiting your budget, and don't be averse to making more significant changes if the budget is proving especially difficult on certain members of your household.

Building a household budget is no small task. Men and women willing to work together and revisit their budgets every so often may find that such an approach eventually creates a more financially stable and enjoyable situation at home.    

Maryland Pennysaver