4 Steps to a Home Budget that Works

Across the world, Americans have an image of being rich, and to some that means every American is rich and will always live in style, right up until their dying day.

I notice this where I now live in Europe. The vast majority of people here would not easily believe that 70 percent of all Americans live week to week, and don’t have a savings account.

Whether you are American, English or South Korean, the problems of credit card debt are the same.

Those wishing to improve their family finances all face similar problems, whatever country they may come from.

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Have you personally ever created, and then tried to live within, a household budget? If so, and it just did not seem to work out well, you may have found it very frustrating.

Home budgeting doesn’t have to be that way!

You could live with much less financial stress if you make a firm commitment to create a workable budget.

Here are four simple steps to get you started on a budget that will work for you.

Step One: Put it in Writing

You have to write down your budget, or at least get it on computer.

Many people believe that they know approximately how much they have coming in, and more or less what their monthly expenses are, so they’ve got a budget.

Wrong! Well, they do have an approximate and half baked budget, but it is not a good budget. A sound budget is a complete plan that should include:

a. Spending records for at least the past three months,

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b. Estimated or actual income, and

c. Projected spending, including any out-of-the ordinary expenses.

All of this needs to be written down in an easy-to-reference manner that will allow you to know, at a glance, where you are financially .

It would quite simply be impossible to keep all of this precisely in your head! You will probably find you will remember everything if you write it down, with bank and credit card statements at hand.

Buy a notebook (or use one that you already have!) and start to keep a record of your expenses. Once you have created a plan—write it down.

Step Two: Call A Budget Meeting

Having a budget meeting, as a large corporation would do, may sound silly.

But even if you are the only person in the household who has charge of the money, it is much better to involve all who are affected, especially spouse and older children.

If you are married, then the budget should be joint effort and you should work together as partners.

If your children are of school age, then you should explain what it will mean to them.

It could be that your children will have some of their expenditure cut. It is far better if they understand fully, rather than just be told later:

“No discos from now on” or “no tenpin bowling”, or whatever their favourite pastime may be.

Step Three: Do the Budget in Advance

Do not wait until you are in crisis mode to create your budget.

Instead, sit down at the beginning of every month and write down exactly what your incoming money will be, and then plan for your expenses.

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Don’t worry about creating a budget for the next year—those are never realistic and will only add to your frustration!

Do the budget month by month, and always look at the past month as not only a guideline, but also for ways that you may improve your budget.

Step Four: Don’t Make it too Complicated

One reason that many budgets fail is because they’re simply too complicated!

By keeping it simple, you’ will not only have a better chance of success, but you’ll also be able to create your budget quickly every month.

Two columns: one incoming and one outgoing—it doesn’t have to be more complicated than that!

That is enough to start. If you become confident with your budgeting, and want to see how your debts will reduce in the future, you may look further ahead.

But the important thing is to get the budget started, and down on paper.