| One of the most frequently asked questions | | | | monthly expenses. Subtract this sum from your |
| about money management is how to develop a | | | | total net income. |
| household budget that works. Far too often, | | | | And now the moment of truth has arrived! If the |
| people wait until they are in financial trouble | | | | remainder is positive (greater than 0), then |
| before they start thinking about budgeting. Either | | | | congratulations! You've done well. You already live |
| they get laid off or they find themselves dealing | | | | within your means and can start kicking your |
| with a large unplanned expense. Either way, a | | | | savings plan into high gear, whether you're saving |
| household budget could have helped. | | | | for retirement, for charity, for your children's |
| Evaluating your cash inflows and outflows on a | | | | college education, for a new home, or for a |
| monthly basis seems to be the best and simplest | | | | vacation. |
| way to get a handle on your finances. | | | | If, however, the number is negative, fear not. It's |
| Your first step is to figure out your monthly | | | | that way for most of us. At least now you know |
| income after taxes. This is the "net" amount | | | | where all that money has been going. All you do |
| deposited into your bank account. If your income | | | | now to bring that remainder back into positive |
| varies, calculate the average of your net income | | | | territory is adjust the numbers on your variable |
| over the last 3 months. And don't forget to add | | | | expenses. Hopefully that will do it. Then you just |
| savings account interest here too - every penny | | | | have to stick to those newly realized budgetary |
| counts. | | | | constraints (or make adequate adjustments to |
| Then make a list of your fixed monthly expenses | | | | compensate). |
| - meaning you pay the same amount towards | | | | If that doesn't do it, you may have to take a |
| them each month. That may include: housing | | | | more drastic look at either your lifestyle or your |
| (mortgage or rent), car payments, credit card and | | | | income sources or both. |
| school loan payments, phone, cell phone, cable TV, | | | | But before you hang your head and resort to |
| satellite radio, child care - all of it. Don't forget to | | | | taking on that second (or third) job, bring your |
| list the bills that come quarterly, annually, or | | | | family into the conversation. Discuss how you all |
| semiannually. | | | | can better prioritize your expenses. Choose |
| Now you should have two columns: one for net | | | | certain categories with tallies you'd like to bring |
| income and one for fixed monthly expenses. But | | | | down and set targets monthly to try and reduce |
| you're not ready to compare the two against | | | | those costs. Play around with the numbers until |
| each other just yet. There's still more calculating | | | | something works. |
| to do. | | | | Other options include comparison-shopping for |
| For now it's time to account for all the variable | | | | cheaper prices and lower rates on certain |
| expenses you have each month: dry cleaning, | | | | expenses. Trim non-essential allowances, for |
| personal care, groceries, medical costs, pet care, | | | | example: go to the salon every three weeks |
| entertainment, gifts, and anything else you spend | | | | instead of every two. Or trade in that gas-guzzler |
| money on. This is where budgeting starts getting | | | | for a more fuel-efficient vehicle. |
| a bit more creative. | | | | If at all possible, it's also highly advisable (to say |
| Estimate other weekly and monthly expenses. | | | | the least) to take 10% of your income off the |
| The more precise you can be, and the more of | | | | top and "pay yourself" - start building up a |
| your variable expenses that you can think to | | | | savings. |
| include, the more accurate and effective your | | | | Creating and sticking to a budget then maintaining |
| budget will be. For example, when you calculate | | | | its relevance and effectiveness by adjusting it |
| food costs, that might include groceries, work and | | | | regularly is essential in successfully managing your |
| school lunches, and occasional dining out. Specifics | | | | finances. Now you can start to make decisions |
| matter, even when you're making estimates. | | | | based on facts and not guesswork. You're better |
| Before considering this step completed, and just | | | | able to plan for so-called "unexpected" future |
| for good measure, review your checkbook ledger | | | | expenses and, even better, the things you want. |
| and credit card statements for the last few | | | | And for an even easier and more effective way |
| months to see if there's anything you left out. | | | | to create and manage your household budget, |
| Add all these variable expenses to the column | | | | use a simple budgeting software like Budget |
| containing your fixed expenses and add the two | | | | Forecaster from Strativia Software. It'll set you |
| together. You now have an idea of your total | | | | on the path to financial security. |