How to plan a home budget

The prospect of planning a home budget seems daunting. Many dread the notion of evaluating and potentially having to re-evaluate where their money is spent.

Keep your household budget on track

In these economic times, setting a budget is more important than ever. Here are a few ideas to get you started.

Plusses and minuses

Planning a home budget really isn’t that difficult when you break it down to a simple equation of addition and subtraction. It’s true many households are heavy on the subtraction side, but that is the primary reason for establishing a budget. It’s like a food journal when you’re trying to lose weight. Sometimes, you have no idea exactly how many calories you’re consuming in a day until you actually sit down and add them all up. The same concept applies here. Add up how much money is coming into your home, accounting for bonuses, etc. Then take a look at the last six months of expenses. It may surprise you the types of things you’re spending money on and how those things are adding up.

Assess hard costs

Every household has fixed costs. What are yours? You'll typically have house or rent payments, utilities and cell phone bills. What’s left over after these costs are backed out of your monthly income? This is where things get dicey. Where should the remaining funds go? Financial experts like Suze Orman suggest putting money in your savings account as if it were a hard cost. In other words, planning for job loss and your retirement should be as important as paying your rent on time.

Consider getting software

Budgeting software choices and apps are abundant. Do a little research and find one that is a fit for your financial goals. This will help you track income and expenses, help you set a budget and assist you in managing your finances. Sometimes, evaluating a colorful pie chart that has a large portion dedicated to Macy's can provide perspective. These tools will give you wake-up calls that are hard to ignore.

Budget for semi-monthly and quarterly items over $50

You get your hair cut and colored every eight weeks for $80. Instead of taking a hit of almost $100 every two months for your hair, set aside $20 out of four paychecks (most get paid bi-weekly so the math works out). That equates to $10/week instead of one big hit every two months. Do this for all bi-monthly, bi-annual, quarterly or annual bills. Instead of paying for your car registration in one painful payment, divide and save that amount over a 12-month period. You’ll barely notice the difference if you do it this way, but you will certainly feel the pinch if you write a check for $300 to register your car in one month.

Keep your eye on the prize

You decided to set a budget for a reason. What is it? You want to save up for a down payment on a house? You want a nicer car? You intend to buy a pair of Christian Louboutins? Whatever the reason, set a goal and remind yourself of it often. Feeling like you are working toward a reward will help you stay focused and increase your chances of success. Everyone knows that making a budget is the easy part. Sticking to it is a whole different story.

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