Establishing a household budget is a great way for men and women to control their money and secure their financial futures. Without a carefully designed budget, families can easily overspend and eventually find themselves facing financial peril.
Building a household budget can be intimidating. Men and women do not always enjoy facing their finances head-on, but creating a household budget does not have to be an unwelcomed experience.
• Discuss your goals. Men and women working together to create their household budgets should use their goals as the foundation for their budgets. Recently married couples who want to one day start a family will have different financial priorities than couples who have no intention of having a family. In addition to goals regarding a potential family, discuss your goals about retirement. Distinguishing between short-term goals, such as eliminating credit card debt, and long-term goals, such as saving for retirement, is an important step to establishing a budget. Once your goals have been discussed and set, you can then begin to formulate a budget that makes achieving those goals possible.
• Assess your financial situation. After you have set your goals, examine your financial situation. Identify your net income and then make a list of your outstanding debts and monthly expenses. When establishing your budget, prioritize eliminating your debts. Getting out of debt, especially consumer debt, should take precedence over saving for retirement. Once you have eliminated your debt, you can then allocate more funds to saving for retirement. An honest assessment of your financial situation should provide you with a solid understanding of how you're spending your money, and which areas, if any, you can spend less in an effort to save more each month.
• Put your plan in motion. Once you have identified your net income and monthly expenses, you can put your plan in motion. If you have prioritized eliminating debt, then devote as much of your monthly budget to paying down your debts as possible. Resolve to pay at least 'X' amount of money to pay down debt each month, paying more if possible, until you are debt-free. You may need to adjust this plan as unforeseen circumstances arise, but try to stick to your initial plan as closely as possible, especially if you find it's working.
• Continue to monitor your spending. An effective household budget should free up some of your funds, but it's important that you continue to monitor your spending even if your budget is affording you some financial freedom. Frivolous spending may have landed you in financial hot water to begin with, so don't allow it to jeopardize your finances once again. As you monitor your spending, look for ways to spend less. Spending less now can make it easier to realize your long-term financial goals.
• Discuss your budget each month. A household budget is a fluid thing, so together with your spouse or partner examine your budget each month. Discuss what's working, what's not working and any potential changes you can make to increase the likelihood that you realize your financial goals. Make an effort to have this discussion each month, as the longer you ignore your finances the more time issues will have to fester.