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    Couple working on a budget

    Owning a home is a big responsibility and it’s the single largest investment most people will ever make. Building a household budget will help you save money and help you keep up with your expenses. This monthly budget and expenses calculator will be a useful resource.

    Track your income and spending

    The first step toward building a household budget is getting into the habit of tracking your income and spending. You can use personal finance software, create a spreadsheet or simply track your income and expenses in a notebook. Finding a tracking strategy that is easy for you to follow is more important than spending money on a high tech solution.

    Create categories

    However you choose to track your budget, divide your money into categories based on how it is spent. Typically, you will mark each entry as being income or an expense, and also assign it to a specific category such as salary, utilities, mortgage payment, groceries or entertainment. Create categories which work best for your needs. You will use these categories to decide how much you can afford to pay for different types of expenses each month.

    Exclude bonus income

    When planning your monthly budget, it is best to leave out income that is not guaranteed, such as end-of-the-year bonuses or anticipated tax returns. Instead, base your budget on your regular monthly income. If you receive spousal or child support and you include it with your income, be sure to categorize it separately so you can see how your budget would be affected if it were to stop.

    Divide your expenses

    To build a manageable budget, it’s important to think of your expenses in two broad categories:

    • Non-discretionary expenses: These are the expenses that you must pay each month. This includes payments for things like mortgage, utilities and
      car insurance.
    • Discretionary expenses: These are expenses that you can control by setting limits or cutting out luxuries. It includes categories for things like entertainment, eating out at restaurants, new clothes and vacations. Items like groceries and cable TV might seem like necessities, but they are discretionary expenses because you can limit your spending by clipping coupons, shopping for sales or cutting back on the channels you receive.

    Set aside money for savings

    Whether you are saving for a down payment on a new car or setting aside money for the future, it’s always a good idea to include monthly savings in your budget. Plan to move a certain amount of money into your savings account as soon as you receive your paycheck. If you wait to save whatever is left over at the month, you may never get around to building up your savings.

    Budget for outstanding debt

    Consider your outstanding debt and make a plan to pay off credit cards and other high-interest loans. Budgeting for more than your minimum payments will help you eliminate high-interest debt and eventually have more money for the future. Be careful that you aren’t adding to your credit card balance faster than you are paying it off each month.

    Decide on spending limits

    Once you categorize all of your expenses, you can decide on spending limits for your budget. You don’t have much control over your non-discretionary expenses, but you can find ways to cut your spending for discretionary categories. Look at where you have been spending money and decide if it’s time for some changes. Simple steps like cooking at home more often or getting rid of the movie channels on your cable package can make a big difference over time.

    Keep tracking your budget

    Building your household budget is the first step to managing your personal finances, but it’s even more important that you continue to track your spending from month to month. Compare your income and expenses to your budgeted limits. If you are having trouble staying within your budget, you may need to make some modifications.
    When creating and tracking your household budget, remember that you have control over your spending. You can modify your plan as needed until you find the perfect budget for your financial needs.

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