Creating A Household Budget And Sticking To It

by Carlo Miguel Castañeda, on category "In-Depth Guides,Money Matters,Personal Finance"

June 22, 2017

household budget
Budgeting for yourself is usually less complicated. You know what your wants and needs are and how to ensure that your budget works out exactly the way it’s supposed to. Creating a budget for an entire household’s expenses is a different thing entirely.
It can be difficult to cobble a budget together for a household because it forces you and your family to look at how much is consumed every month. It’s a necessary conversation to have with the members of your household.
Here’s how you can go about creating a household budget and sticking to it.

Portrait of a mature couple planning their financial budgetStep 1 – Get it together

If you feel that your household spends unnecessarily, then you’ll need to sit everyone down and talk it out. Talk about the bills that everyone has to contribute to, just to make sure that everyone’s on the same page about it.
Next, you’ll want to put together the general household bills that everyone contributes to. This may include the following:

  • Monthly Utility Bills
  • Pay Stubs
  • Monthly Grocery Receipts
  • Credit Card Statements

These are just some of the general items, some households may have bills from fuel, car loans, home loans, and the like.
In the case of most households in the Philippines, the members who are working should shell out an equal amount for monthly expenses.

PH_BudgetTipsForFamilies_blog_nologoStep 2 – Figure out the Income Source

Separate the personal budgets everyone has from the household income source. When it comes to the household income source, you’ll want to determine how everyone is paid. Here are a couple of calculations to help you, based on a household with four working members:
Paid Bi-Monthly: As most employers use a bi-monthly payment schedule, simply add the two amounts to get your average monthly income.
Paid Monthly: Some employers pay out once a month, and this figure should stay as-is unless your monthly income varies. In this case, add up four months’ worth of income and divide it by the four to get your average.
Paid Weekly: If you’re paid weekly, take the four income totals and subtotal them. Divide that number by two to get your average monthly income.
Fluctuating Pay: Total the last four months’ worth of income and divide by four to reach the average, but this can change if your income isn’t always the same every month. This will mean having to look at the budget over and over again each month.

expensesStep 3 – Determine fixed and discretionary expenses

Certain bills for a household are fixed, meaning they will arrive every month without fail. Electricity, water, the internet, and rent/mortgage are four expenses that a good chunk of households will have. Other expenses may include the family credit card or the payments on a car loan.
For the fixed bills, you’ll want to take the last three months of each bill and average those to get the typical amount you pay each month. Bills like the ones for the internet and rent/mortgage are usually the same amount every month, so you’ll already have the average amount. The bill amounts for electricity and water consumption can vary, so you’ll want to take the highest amounts into consideration.
Discretionary expenses are those that are usually in flux, meaning you spend more or less on these every month. Groceries fall under this category, as does the family credit card, and fuel (if there’s a household car).

PH_BudgetingApps_nologoStep 4 – Put it all together

You’re almost done. What remains is to put the numbers together to get the total expenses that you need to budget for. There are a lot of apps that you can use to help you out in this department, or you can use a Google spreadsheet to track it all. This spreadsheet from PennyPinchinMom is pretty detailed.
When you’ve got all the numbers in, you’ll want to total all the expenses and the income then subtract them from each other. If the result is zero, then you’re good to go. If it’s a negative number, then you’ll want to change your spending habits. A positive number means that you’ve actually got a little extra cash to spread around, but it’s ideal to use that extra money for savings or to pay off debts.

Final Thoughts

Sticking to a household budget doesn’t mean that everything needs to be rigid. It means that a household just needs to adapt to the more important needs, instead of the wants.
With some refinement, you’ll be able to create a budget that’s both comfortable for the household and easy to stick to.