Tips to Make Your Household Budgeting Successful
Is Household Budgeting Really Necessary?
The necessity, or lack thereof, of household budgeting depends on your personal situation and circumstances. If you are extremely wealthy or if you live alone and your income is more than adequate to cover even irresponsible expenses, then perhaps it would not be worth the effort. However, if your household is large and money is an issue, looking at your household expenses and ways to reduce them can save you at least some money. Moreover, it helps to get everyone accustomed to less wasteful habits around the house. Household budgeting may not be absolutely necessary for everyone, but it can be helpful for anyone.
Setting Goals and Targets
As is the case with more complex financial planning, it is important to clearly define your household budgeting goals and to establish metrics that will enable you to see how well you are doing. The first step is to write down all of your household expenses, both regular expenses (such as utilities, services and grocery costs) and irregular expenses (like periodic maintenance, seasonal and miscellaneous expenses). Once you have all of your regular expenses written down, look back to see how much you actually spent on these expenses previously and set solid goals for reducing these expenditures. Reviewing your past spending also provides you with something to compare against in order to see if your efforts are working or not.
Get the Whole Household Involved
A great deal of household expense stems from personal actions conducted by individual members of the household. For example, if you always turn off the lights when leaving a room but no one else does, then your efforts are likely to be in vain. To produce noticeable savings, everyone living in the household will have to be actively engaged in the money-saving measures. If your household includes children, it is easy to turn the money saving measures into a game or to provide reward-based incentives to get everyone enthusiastically on board with the new measures. Further, once the budgeting goals are defined and ideas for reaching those goals are agreed to, it is important to write it all down and keep this written version of the plan available to all members of the household to serve as a constant reminder.
Separating Discretionary and Non-Discretionary Expenses
While many of your regular household expenses are non-discretionary – like utilities or food – many others are discretionary, from your cable television to having expensive meals at home. Once you have the whole household on board with your expense cutting, you may want to separate the expenses you documented earlier by whether or not they are discretionary and review these matters with the rest of the household. Perhaps there is something included that no one in the household regularly uses, or perhaps there are conflicting opinions about the value of this or that service. This also gives you an opportunity to let the entire household make recommendations about what can be cut out. This will give you a much better idea of what can be cut out and what should stay without dropping any unwelcome surprises on other members of your household.
Sticking to the Plan
Despite the best intentions, many people who start with an aggressive agenda to trim household expenses only stick to it for a few months. A lot of household savings measures require changing deep-seated standing habits, so change is easy to forget if the budgeting initiative is not actively being promoted. This is where the metrics based on previous spending become useful. Perhaps once a month or after the arrival of each bill, your progress should be measured and everyone praised if the goals are being met. Simply drawing up a comprehensive budgeting plan is not enough. The plan has to be constantly reinforced and you have to keep the entire household informed on how well they are doing.