Creating and maintaining a household budget ensures that money goes where it’s meant to. Just as importantly, when households adhere to a budget and incorporate a savings goal into their financial plans, they are far more likely to achieve their aspirations faster.
There are no one-size-fits-all rules when it comes to managing household budgets. Every family and a householder have different needs and financial expectations. But it’s important to make sure these objectives are aligned.
The fine line of balancing the books while maintaining a healthy lifestyle and accounting for occasional budgetary blowouts can be a challenge. But help is at hand.
Official sources firstly suggest recording your income, in terms of ‘how much’; ‘where from’; and ‘how frequently’ payments are received.
Categorise and add up your expenses. For example, ‘fixed expenses’ include rent or mortgage payments; electricity, gas and phone bills; council rates, household expenses, such as food and groceries; medical costs and insurance; transport costs, like car registration or public transport; family costs, including baby products, child-care, school fees and sporting activities.
Debt expenses, for example, include but are not limited to: personal loan repayments; credit card payments; and mortgage repayments.
Always account for unexpected expenses. Some of these could be car repairs and services; medical bills; extra school costs; and pet costs.
Set your spending limit
The money you have left after expenses are your spending and saving money.
Your spending money is for ‘wants’, such as entertainment, eating out and hobbies.
Plan for what you want to do with your spending money. This will help you to see where it goes and keep within your spending limit.
If you have a savings goal, you can use your budget to work towards it.
Once you know how much money you have for ‘wants’, you can work out how much of it you’d like to save.
Having some savings can create a safety net for unexpected expenses. Even a small amount set aside regularly will make a difference.
Adjust your budget
Your budget needs to work for you and your lifestyle, so it’s important to adjust your budget as things change.
For example, if your expenses start to increase, you may need to reduce your spending or change your savings goal. Or you might be able to save more if you get a pay rise or you pay off some debt.
Remember that saving rather than splurging when excess accrues is crucial to keeping your finances in order. Seek financial guidance if you’re having difficulty managing the books.
A great way to prepare for buying a home is to set your budget now as though you already were paying the monthly mortgage. Try adding in the monthly repayment to your current budget to see how you go, in the short term before buying you can use this dummy repayment to boost your savings.
My Lending Specialist have a great online calculator to help you get an idea of your borrowing capacity and likely monthly repayment. The best possible advice is to be prepared early.