Monday, September 15, 2014

How I Made Our Household Budget

Great resource if you're planning a personal or household budget!

(You can now find an updated version of this post here!)

I know some people might cringe at this topic, but it's actually been one I've been very interested in lately!  Noah and I are really starting to look at some of our long-term goals - namely, buying/building a house in the next couple of years.  So I've made it a priority to get our finances in order in the past few months.  And, believe it or not, it's actually been kind of fun! :) There's just something so freeing and comforting about knowing where your money is going and knowing you're using your budget to its fullest potential.

Making our budget was kind of tricky.  Our household income is pretty variable from month to month - no two are the same, so no two monthly budgets can be the same.  So, I waited a little bit after Noah started his job last September to really buckle down to a budget.  

My first step was actually looking at what I was working with. I took the average of what we were bringing in each month, minus taxes, insurance, and anything else taken out of our paycheck before we get to spend it. I used the past 6 months to figure that. I based the total monthly budget off of that number.

If we make less than average in a month, we reduce the amount we put in savings for that month.  If we make more, we increase the savings for that month.  It all really balances out in the end.  Savings is a great area to catch some of the windfall if you have a variable income!

(Each of the following graphics has a printable version that fits standard printer paper - just click the graphic to go to my google drive account to download!)

Free printable for personal budget categories

Next, I sat down and listed out our budget categories.  The list above is a good reference to what you might want to list - of course, each household is going to be different.  For each category, I listed the items that were the same expense each month (rent, car payments, internet subscriptions, etc.) first in each category - since those have to be the same month to month, you want to make sure there is room in the monthly budget for them first.  Everything else can have wiggle room,  so you can tailor how much you spend on each item to how much you're willing to spend in that category.

Free printable planning sheet for your personal/household budget

After I listed our fixed expenses and estimated our variable expenses, I totaled it up.  Chances are it isn't going to match your income the first time you total everything - so, increase or decrease those areas with wiggle room as needed.  This is the trickiest part of the process, as you have to balance your budget while keeping enough money in each category.

The percentages you see above is how I finally divided our budget up.  This was after sitting down and listing each expense, listing the constant costs and giving the areas with wiggle room an estimated number, until everything fit into our overall budget.  Once again, every household is different, so you might find that you need to raise/lower the percentage for each category.

A few tips/notes for each category...

General Bills
This is an area that has lots of costs that are consistent, so it can be difficult to tailor it into a budget sometimes.  I do have some tips on how to reduce your utility expenses here.

This is an area that we have really tried to maximize in our current budget.  We would love to have a great down payment for when we decide to buy/build a house, so that's really been prioritized in our current budget.  We do have a small, set amount that we put aside for vacations and Christmas each month...that makes the sting of those expenses a lot less dramatic!

Of course, this area can take up a lot less of your budget if you don't have a car payment.  We're working on paying those down soon, via our savings.  You can also minimize gas expenses by using rewards programs at grocery stores.

Debt Reduction
This is another priority for us right now.  We don't have a ton of debt, but the little bit of credit card debt we have makes me cringe. :)  If you have no debt (lucky duck!), I would default the money from this category into your savings budget. 

Though this might be a small portion of the budget, I think it's important to set aside some for your pets each month!  Especially those medical bills can sneak up on you.  If that's something you worry about, pet insurance might be a good option.

Daily Living
In my opinion, this is the area of the budget that has the most wiggle room.  I've written about how to save on your grocery budget here.  This is a big area to ask yourself, "do I really need this?"

I've also had to let go of planned weekly/bi-weekly grocery trips because of this budget.  If you have enough food for your family, there's no point in going to buy more just because you normally shop every Wednesday!  This might require you get kind of creative in the kitchen, but your budget will benefit in the long run.

Charitable Gifts
Unless you're in dire circumstances, I really think this area should be kept in the budget.  We have the majority of this going to our monthly tithing at church.  Check into whether or not your church has an automatic payment for this - it makes it so much easier!  I feel it's important to give back some of what you're earning.

This area can be really variable, depending on whether or not your health insurance is automatically drafted from your paycheck.  It is for us, so I don't even write health insurance into our monthly budget - so, if you don't pay this out of a paycheck, it very well might take up more of your budget.  Of course, medical costs can sneak up too, whether you have insurance or not.  You might want to consider a medical expense area of savings if your costs fluctuate!

Home Maintenance
This is an area that is really minimized for us, as we rent right now.  It might be higher if you own and are responsible for your own repairs.

This is also an area with a lot of wiggle room.  If it's looking like you're going to be over budget for the month, this is definitely an area that can go!

If you haven't done this for your home yet, I'd highly recommend it.  Not only is it an easy reference for how much you're able to spend on any given item in a month, but you're going to benefit in the long run from the savings you're planning.  If you have any questions, please comment below - I'll be glad to answer them!