With the start of summer and the warmer days, most of us turn our thoughts to having fun, relaxing and taking vacations. It may be the last thing you want to do, but it’s actually the perfect time to evaluate and possibly create your ideal household budget. It may be the perfect time to do it, but it may not be the easiest. Here we’re going to talk about some guidelines and tips the financial experts recommend we all work into a budgets.
One of the first categories to consider when creating the ideal household budget is the cost of housing. Depending on which financial expert you listen to, your total housing costs should be no more than 25 to 30% of your income. This includes everything it takes to run a house: rent/mortgage, utilities, and household cleaning supplies. So, how do you break it down even further to stay within your ideal household budget? Use this guideline to divide up your 25%:
- Rent or Mortgage-58%
- Furnishings and Other Equipment-9.2%
- Operations (cleaning/lawn services-6.8%
- Household Cleaning Supplies-3.6%
While utilities area one of the big variables in your monthly costs, you can arrive at your average monthly cost by tracking your utility payments over several months. Use a spreadsheet and you will begin to see patterns in your bill. This is a great tool to evaluate where you can begin changing your energy consumption habits to decrease your monthly bill and help you maintain your ideal household budget.
According to statistics provided by the US government, the majority of American citizens spend 17% of their income on the costs of transportation. This is more than twice the amount that financial planners advise. When creating your ideal household budget for transportation, follow these tips.
- When considering transportation costs, include fuel, cost of repairs as well as your car payment. You also need to include automobile insurance in this category.
- The recommended amount of your income for transportation costs is 8%.
- If you’re considering purchasing a car, a quick way to know if the price is right is to add up how much you will pay for automobile expenses in one year’s time. If that number is more than the amount you bring home in a month, keep looking.
To create your ideal household budget, experts seem to agree that you should set aside up to 15% for food items. This does not include any non-food items such as laundry supplies or cleaning products-these items go into your housing category. If you spend less than that number, you’re doing well. If you’re spending more, here are some ways to help trim the fat.
- Find the non-essential or high priced items you’re purchasing and eliminate them.
- Shop bulk when possible. Your cost per unit will decrease.
- Avoid impulse purchases when grocery shopping.
- Take the time to find and use coupons.
By cutting as little as $10 a week off your grocery spending, you can bring your food costs down into the recommended amount.
Once you’ve created the ideal household budget for all of the above categories, you still have to look at the areas of clothing, entertainment, insurance and debt repayment. The unexpected costs are where many of us fail to stay within our budget parameters. It’s crucial that you think about items like car repairs or medical co pay expenses. Experts give us some important tips to manage the impact of unexpected costs.
- First of all, most unexpected costs are really not unexpected at all. Things like the costs of purchasing back to school supplies, vacation or holiday expenses are really just part of life. The fact is they don’t come up every month, so we tend to ignore the fact that they are coming.
- Set up different accounts for each type of expense: have a Christmas fund or car repair fund already established. Deposit a set amount of money, even if it’s a small amount, every month.
- Decrease your budget expenditures in other areas to create the ability to save a portion of your monthly income for these types of expenses.
The Cost of No Budget
If you’re still putting off creating the ideal household budget, you’re not alone. Statistics reveal that most of us don’t budget well or we don’t budget at all. Mistakes made are mixing all their funds into one pot, instead of labeling each fund for a specific purpose or spending money in one area that’s allocated for another area. The result is a nation of people living “paycheck to paycheck” and being one event away from financial disaster.
Creating and following the ideal household budget is never a pleasant or easy task. It takes some time and a great deal of commitment, but the benefits to your family and your peace of mind are worth it.