What are the basic steps to make a household budget?
The reason for a budget is because it is a vital part of your financial plan. You must set goals for what you want to save for retirement, for living expenses, vacations and a lifestyle.
Calculate your income. The majority will come from employment which is easy to estimate if you have a salaried job. If you earn commissions this may have to be averaged and even adjusted for seasonal sales. If you earn commissions on the sale of yard maintenance equipment the summer months are more profitable than the winter.
Calculate your fixed monthly expenses. These include your housing expenses, vehicle loans, credit card payments and similar items.
Calculate your discretionary spending. This is for items that you do not absolutely have to have and will include an entry for gifts such as birthdays and anniversaries.
That provides you with a budget. At this point it may be necessary to adjust the numbers by increasing income through secondary employment, reducing tax withholding or part time income. Expenses may be reduced by first cutting back on fast food meals, saving on utilities, choosing different foods in the grocery store and walking short distances instead of driving.
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