If you’re reading this then it’s probably safe to assume you’re looking for a few ideas to help you manage your household budget better. There’s no magic recipe for this stuff, it really just comes down to following a few super simple steps so let’s cover those steps now to get you on the path to better money management.
Have An Actual Budget
Yes, it’s the most basic suggestion but you’d be surprised at just how many households don’t create a budget and stick to it. Sure, life happens and we can’t be expected to never deviate once in a while but that’s what the purpose of a budget is, to be sure you have money available in times of need.
Creating a household budget is not too difficult, you only need to know a few things:
- Monthly expenses
- Monthly net-income (what’s left over after bills & expenses)
- Tracking your spending
- Adjustments in case of negative balances
You simply must figure out how much money you are spending each month on all of your obligatory spending each month. These are things like bills, groceries, memberships and the like. If you happen to spend money on something regularly which doesn’t necessarily fall into any typical category then go ahead and add that to the total as well since you know it’s going to take money out of your bank account on a normal basis. Add all that up and move onto the next step.
Calculate your monthly Net-Income. This is the total you have left over once you subtract your monthly expenses from your monthly income figures. What you get left over is your net income and this is what you have left to do things with such as investing and savings. It’s necessary to be completely honest with yourself when doing the math on these numbers, in the end if you cheat the math you’re only hurting yourself.
Track your spending by keeping tabs on what you’re buying, how much it costs and it’s a good idea to always be on the lookout for a better deal. This is what’s going to give ample opportunity to save a few extra dollars here and there which all adds up over time. There are apps which you can use on your phone, many banks offer some form of online-banking which grant access to their own apps or you could use good old fashioned spreadsheets to do the job.
If you find yourself coming up with a negative figure each month when figuring out a budget then it’s time to take a serious look at what you’re spending money on to see where you can cut corners. Don’t be afraid to downgrade various services you know you can get away with such as internet packages, phone-data plans and the like. Buy groceries in bulk if you’re able to, keep your vehicle’s miles down as much as possible to save on gas and look out for sales and great deals anytime you’re out shopping. It all adds up and you can oftentimes save up to a couple hundred dollars per month if you’re really splurging on luxury expenses prior to budgeting.
Stick To Your New Budget
This goes back to the point that so many households don’t actually stick to a budget even if they figure one out… don’t do that. It can be a pain to adhere to a monthly spending budget in the beginning but once you settle into it things actually become pretty easy because you already have a strong sense of what you can spend and where.
You have options when it comes to finding and using budgeting apps. One highly rated app can be found at Mint.com which offers many excellent features. See bills and money in one place, get alerts about your upcoming bills to help squash late fees and personalize it all to suit your needs.
Alternatively, if you’re interested in using an app which can do all that and get you started in some light investing then have a look at Acorns.com which does just that. You can sync up your personal bank account and let Acorns handle the rest. It will round up your spending to the nearest dollar and use that pocket change to invest into a customized portfolio for you using an intelligent investment algorithm which is built right into the software.
Managing Disposable Income
We all want to have fun and be entertained, eat at nice restaurants and just enjoy life. You’re entitled to the money you earned, of course, but you have to think of it as a tool to help you get the things you want out of life. Figuring out how much money is left over each month (net-income) only to go blow it all on food and movies is such a waste. Instead you should take the opportunity to divide that disposable income into one part ‘fun money’ and the other part savings and investing. There are different schools of thought when it comes to this subject but if you’re able to put away just 10% of your income for savings then you’re probably doing well for yourself.
Save Up, Don’t Borrow
That’s right, you should focus on saving up for those large purchases instead of taking out loans which you’ll only have to pay interest on. Not only does this help to prevent falling behind on payments but it’s also a great way to exercise self restraint and financial responsibility.
You can’t be expected to stick to this suggestion in all cases, sometimes it’s just necessary to get that money now and borrowing it is the only way to do that, fine. Just be sure to shop around for the best deal you can find and be sure to add the payments to your budget so you don’t fall behind. Be on the lookout for consolidation options in the future and don’t forget to take any opportunities afforded to you to pay off your debt early whenever possible.
Limit Credit Card Purchases
Too many of us are far too quick to whip out that little plastic card and rack up another charge. Sure, there’s nothing wrong with it, especially if you’re only using a DEBIT card which draws direct from your bank account. Where it becomes an issue is if you’re using actual credit cards which have interest charges associated with them. Cutting costs is the name of the game and burning money on interests is just not the way to do that.
Keep those credit charges reserved for things which make sense such as medium sized purchases and small emergencies in the event they should arise. If you’re following your budget and sticking to your monthly disposable income then you should have most expenses covered letting you spend safely without the worry of going over budget in the event of surprise costs.
It really is just that simple, you don’t have to make budgeting your money a difficult thing. You only need to actually figure one out and then stick to it and you’ll start to feel the benefits rather quickly.