Making a Budget for your Home Costs

February 1, 2013

household budgetBudgeting for your household can be a difficult skill to master and today’s reality of available credit and careless spending can make it even harder. Household debts have reached new highs, and can impede on long term goals. It is important to take household budgeting very seriously, even if it seems like a daunting task. The basic principal of a successful budget is simple: household income must be greater than household expenses. To create an effective budget, the following are simple steps to take:

  • Print out or download a budget template. The template will help shed some light on exactly how much money you have, where it is coming from, and where it is going.
  • Pay yourself first. Pick a number that you’re comfortable setting aside for both an emergency fund and savings. The general rule of thumb is three months of your income amount is a healthy emergency fund.
  • Write down your mandatory expenses and discretionary expenses. Mandatory expenses are ones that are unavoidable such as your mortgage, loans, utilities, and groceries. Discretionary expenses include entertainment, eating out, and unnecessary shopping. After you’ve added both types of expenses, deduct your income from your expenses, and this will be your monthly savings. Your goal is to try to reduce as much of your discretionary expenses as possible to increase your savings amount.
  • Lastly, continue to evaluate your budget on a consistent basis to see where you can spend less and save more.

Be sure to check mortgage rates frequently as well; as rates may have changed since you locked in a mortgage. It may be worthwhile to break your current mortgage and obtain a new rate with the amount of savings that you may receive.