What is a household budget?
A household budget is a document that collects all income and expenses in a certain period, in a systematic way and ordinate.
It is a detailed description of your family economy and the most effective way of making the most of your money. You usually do monthly or annual budgets.
Why is useful
Thanks to the household budget will have a valuable information on your actual habits of consumer spending, will be able to analyse them in an objective way and to take responsible decisions in the planning of your financial future.
Where to start?
Before preparing your household budget, you need to ask yourself some questions:
- How much money enters and how much spends your family every month
- If is achieved to arrive with comfort at the end of the month
- If is achieved to save and if it exists a emergency fund
Why is necessary?
There are many reasons to draw up a budget and each family can have its own, but it is especially useful for:
- Knowing what you spend your money on.
- Conform to those which expenses that you can allow you.
- Prioritise those expenses that are really necessary.
- Reduce or eliminate debts.
- Save a certain amount of money every month.
- Have an emergency fund, or to increase the actual.
- Live without economic ups and downs and make plans for the future.
- Detect anomalous gaps or expenditure.
- Control debts.
- Reduce family conflicts.
- Transmit financial education to your children.
How is done?
It is important to write down all income and expenses of the family unit, specifying which are accurate amounts and the both and and so much recurring income and expenses as the occasional ones.
- Revenues: It is significant to include all entrances of money, the most significant one will be the work wage or income, but also a property rent, account or deposit interest banking, a donation or a prize of lottery.
- Expenses: This includes all outgoings, ranging from your monthly rent or mortgage payment to the cup coffee you buy every morning. The can be divided as follows:
- Fixed: Those compulsory expenses and regular (monthly, quarterly, annual...) and whose amount hardly is modifiable: mortgage or rent, electricity, water, telephone, resident's association fees, insurance, schools, etc. If you do not pay on time, you could be charged a surcharge and you may have legal problems.
- Variables: They include necessary expenses, as the food, the transportation or the clothes;superfluous expenses, anyone who do but of which would be able to prescindir, as a trip in couple or a nocturnal exit; and incidental expenses, that they arrive unexpectedly and us see obliged to attend, as a repair of the car.
It is necessary some tool?
Although there are applications that you will provide the elaboration of your budget (apps mobile phones, spreadsheets, etc.), with a simple leaf and a pen or pencil is enough.
We recommend you draw up a basic template that you can use every month and later file.
Analysis of results
Once registered all income and expenses of a month (and the proportional part of the annual expenses) is moment of analysing ones results that, probably, surprise you. Do your accounts tally? Are you an ant or a cicada? Is what you spend on leisure or clothes really necessary?
If expenses exceed to income, there is a problem. The expenses should not exceed the 90 % of income. You have gone out perhaps moves forward compensating months of saving with other of great expenses, but it is necessary to control and to equilibrate the situation so that savings do not run out.
Correcting errors: readjustment of the budget
With details in the hand, is easy to identify errors committed and quickly know what reductions to do or what additional fundings are going to be necessary. And, as possibilities of increasing income are limited, the solution involves reduce expenses, starting for the non-essential ones.
Readjust the budget for months on end you will allow acting with anticipation, to have control on your family economics and to plan your financial future.
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