Recent statistics from the USA have shown that more than 30 percent of American households routinely prepare a detailed household budget each month to track their income and expenditures, either on paper or by using a computer spreadsheet.
As UK debt hits record levels, and more families than ever find themselves struggling to make ends meet, is this a practice that more of us should be adopting? Here we take a look at how to draw up a family budget and regain control of your finances.
Those of a technophobic nature might prefer a traditional pen and paper, but for the vast majority a spreadsheet program like Microsoft Excel is the best bet. You could even use some simple accounting software such as Quickbooks if you are familiar with it.
If you are using a basic spreadsheet, take a look at the pre-loaded templates, and you will probably find one that is already set up for household budgeting. You will still need to adjust this to your specific needs, but it is easier than starting from a blank sheet.
Once it is formatted to your satisfaction, you are ready to get started.
You will need to be disciplined and record all your expenses, as well as your income, regularly. Ideally, do it every day, or it is easy to start slipping. A software program with a mobile app where you can record expenses as and when you incur them is ideal.
Keep track of the payment method, eg cash, debit card, bank transfer, etc, and run a reconciliation at the end of each month. This way you can also track your own performance – for example, if you withdrew £300 in cash over the month and incurred cash expenses of £200, there should be £100 in your wallet. If not, there is something going wrong somewhere!
Also record the types of expenses, for example, mortgage, utilities, insurance, groceries, leisure, etc. You might be surprised at just how much you spend in certain areas.
Be honest with yourself and include those big ticket items too – only by analysing the big picture can you get a clear view of how to manage your finances better.
Start to reap the benefits
You are now in a position to understand what is coming in and what is going out. If there is an imbalance, set yourself a revised family budget that is within your means. This does not just mean economising on the finer things in life. You can also keep an eye on any cost fluctuations and spot opportunities for savings there – for example, heating costs are going to increase in the winter, but by analysing the figures you might see a way to take advantage of super saver oil deals during the summer months.
With a clear picture of your incomings and outgoings, the next step is to start saving. It is not always feasible for everyone, but add a “savings” line item as an expense, and give it a try. Ten percent of your income is a good starting point – see how it goes for a month or two, and you might just surprise yourself!