How to make a household budget?

How to make a household budget. How to prepare a good budget?

Preparing a household budget and its control requires work, time and knowledge of current prices, including tracking their changes. However, we should not be frightened of these burdens, as the implementation of the household budget practice can bring us many benefits.

It can be carried out in a notebook, saving individual items or using a computer - a spreadsheet (e.g. Excel) or more advanced computer programs.

In order to better understand what it is like to build a household budget, let us look at the process of developing it. Andy, a fifth-grade primary school student, has taken up this challenge. With the help of his parents, he analysed the planned and actual expenditure and income for the month of January for his four-person family.

Household budget step by step

Step 1

Revenue

We start the budgeting process by establishing our financial situation (in our case the financial situation of Andy's family). For this purpose, we write down the name of month and under it the planned monthly income (even small ones) of each member of the family. At the end of the month we enter the actual earned income, which may differ from the planned income, and then we add up everything.

Step 2

Expenses

The next step in creating a household budget is to determine the costs that our family has to bear every month. In order to do this, we need to carefully record all the expenses we incur. Gathering receipts for shopping can be very helpful in this task.

In the table we enter all categories of expenses that we will incur in a given month and the amounts that we plan to incur. It is worth to specify particular categories in order to to review our expenditure as precisely as possible.

Step 3

Correction 

Having information about income and actual expenditures, we can prepare ourselves for planning the next month's budget by introducing certain changes, limiting expenditures or resigning from some of them.

Step 4

Implementation of the objectives

It is important that we consistently implement the expenditure targets set out in the household budget. If we have planned to spend an amount of X on a given objective, we should not exceed it.

Such a restrictive implementation of plans allows us to find significant free amounts. We must remember that during the year we incur expenses which are not repeated every month, e.g. school expenses, purchase of clothes or shoes, insurance of a flat or a car, holiday trip, etc. We have to remember that we do not have to spend the same amount every month.

What is more, there are moments in life when suddenly a certain, usually large amount of money is needed. Everyone should be prepared for such an eventuality. If you start to draw up a household budget, and as a result of the implementation of the assumptions you spend less than you earned, it means that you managed your finances well.

You can spend the money you have earned:

• locate in a bank - follow the money saving offers proposed by banks and choose the right offer for your needs and opportunities,
• invest (e.g. on the stock exchange).