A household budget ensures that you are not spending beyond your means – it is a way to look at opportunities to save money and set aside more for a rainy day. You should even involve your children so that they can start early in managing their own finances.
The first step is to put together how much each family member earns or contributes to the household. Have an open discussion with your spouse and other members about how much they earn and agree on the amount each should contribute to the household.
The key to successful budgeting is to keep track of what you spend on. Apart from big ticket items such as housing instalments or car loans, note down other expenses such as groceries, utilities, school fees, dining and other entertainment expenses. Keep tabs on other smaller expenses so that you have a clearer idea on how much is being spent monthly. You can even classify your expenses into categories such as ‘loan repayments’, ‘food’ , ‘transport’, ‘education’, ‘entertainment’ etc.
The budget should also take into consideration your long-term financial goals. Set a goal for your retirement savings so that you can determine how much funds to allocate for savings and investments in order to build your retirement nest. Determine the portion of savings to set aside for big ticket items such as a family holiday or even getting a car. Setting goals allows you to visualise the impact of your financial discipline and keeps you focused on your efforts to achieve long-term rewards.
With all these considerations in mind, develop a budget to meet those goals. It could be as simple as eating at home rather than dining outside, using the fan instead of turning on the air-conditioner. Reducing a few dollars daily from the grocery or utility bill goes a long way towards freeing up more cash for other more important areas in your budget. Find out those areas that you are overspending and devise ways to either keep to that budget or determine if you need to reallocate resources from other areas to maintain a realistic budget.
To help you get started, you can implement a way to track your daily spending. You could use a simple notebook, an Excel spreadsheet, or even an expense tracking app. Some apps you can try include Wally, which lets you take a picture of your receipt for your own tracking purposes or GoodBudget, which uses a budgeting system that helps you categorise your expenses and monitor your spending.