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How to Set Up a Household Budget and Stick to It

Late last year, I spent endless hours on Pinterest trying to find the perfect template to set up a household budget worksheet that I could use to organise my house finances. The reason for this, is that I finally decided to separate my personal budget from my household budget. In the past, I’ve always included my household budget expenses with my personal budget. However, because I’m not the only adult in house who contributes to the bills, I’ve decided that I should create a budget for my home related expenses.

The Difference Between a Household Budget and a Personal Budget

At a very high level, the household budget and the personal budget may be seen as the same. They both allocate funds to various categories and guide how funds are spent. However, when you get down to the fine details, the household budget and the personal budget are very separate and distinct tools.

1. The Household Budget is a Collaborative Effort

If there are several working adults in the home, the household budget becomes a collaborative effort that relies on the input of everyone. The thinking behind this stems from the premise that everyone who contributes to the running of the home, should have some say in how plans and decisions are made. The success of the household budget requires that everyone is involved and agrees with it.

2. The Household Budget is for Household Expenditure

The household budget should contain expenses that relate to the management of the household. Expenses such as utilities, home insurance, motor vehicle insurance (if the car is used by all members of the family) are examples of the types of items that should be in the budget. The key to deciding whether an item counts as a household expense is to determine who ultimately benefits from the expenditure? If the entire family benefits, then it should be included in the household budget. If one person benefits, it should be included in that person’s personal budget.

3. The Entire Family is Responsible for the Household Budget

Unlike the personal budget, where one person is responsible for the expenses, in the household budget, the entire family is responsible. In order to determine what items are the responsibility of the group, there should be some discussion on what responsibility is and some agreement on who is responsible for the specific expense. A simple agreement can be made that all family members will contribute to the shared utilities and other home related bills.

How to Set Up a Household Budget

If you are ready and willing to manage your household’s spending, then you can use the following steps to create a tailored household budget. You can decide whether to use a simple spreadsheet on the computer or the Beginners’ Household Budget Worksheet printable.

1. Make a list

Make a list of the household’s expenses and how much they are (round up to the nearest ten). You can take this a step further by grouping the expenses into categories and then into essential, non-essential and miscellaneous categories. Examples are:

  • Essential
    • Utilities (water, electricity and gas)
    • Home Maintenance (lawn care, housekeeping, repairs)
    • Mortgage/ Rent
    • Home Expenses (Insurance, property taxes)
    • Transportation (Car, gas, public transportation fares, insurance)
    • Food (Groceries, restaurants)
    • Children (School expenses, extra-curricular activities)
  • Non-Essential
    • Entertainment
    • Paid Vacations

2. Determine contributions.

Determine how much each person can contribute to the household budget. This is a very important step because each person may contribute different amounts based on their salary and personal commitments. This step should be completed with consideration of each individual’s personal budget.

3. Allocate contributions

Allocate the contributions to the budget. For this step, you should allocate funds to the essential expenses first and then to the non-essential expenses. In an ideal situation, the family or household contributors should have enough funds to adequately cover the essential expenses. If the expenses are more than the income, you have to cut back and make adjustments until your income is greater than your expenses.

4. Create goals

Create goals for the household budget. Although the budget may be very useful in determining how money is spent, it can be used as a way to improve the family’s financial standing. Think about the goals that you would like to achieve as a family. Some examples of goals that can be set are:

  • Pay off the mortgage debt in 15 years
  • Save extra cash towards a family vacation
  • Reduce non-essential expenses

5. Hold monthly meetings

Hold monthly meetings to discuss the family budget. When you set up a household budget, it should not be a one-off exercise. Instead the family should meet at least monthly to track and review the budget together. In the meeting, you can discuss anything from problems that came up during the previous month to suggestions on how the budget can be improved on.

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