by One key aspect of creating a successful financial plan for a year is establishing a workable home budget that manages your expenses, manages your debt, and builds your savings at the same time! A home budget can be defined as a plan that pre-determines your spending goals, spread over a certain period of time (in this instance, one year).
Your income and cash flow
It would help to consider your income when creating a workable home budget. It must include all forms of income that you receive, like your pay cheque, interests and dividends you earn from investments, tax refunds and gifts. When calculating the “Cash Flow”, however, you need to consider your expenses too – anticipated expenditures like food, conveyance, loan payments, taxes, supplies, etc., and unanticipated ones like medical bills and car repair costs. The incoming and outgoing money in your household is your cash flow. Good home budgeting can better your cash flow, i.e., it will help you ensure more inflow and fewer outflows, while reckless spending can do just the opposite! The bottom line, therefore, should be to manage and tackle the cash flow successfully.
Home budgeting tips
Manage your home budget by tracking all the income/expenses in your household month on month to figure out the bigger picture for a whole year! This will help you understand your weekly, monthly, and annual cash flow and provide you with a good understanding of how your money is spent and saved! You will notice an improvement in savings with each month’s progress, as the stringent tracking of expenses will help you take a disciplined approach to excessive spending!
Once you understand the patterns of your income and savings graph, you will be able to forecast your expenditures for the upcoming year, set new goals regarding repaying your debts, plan your investments, and improve your savings! To secure your finances for the future, it is important that you save a minimum of 5-10% of your income every year!
Your sample home budget checklist
Mortgage/Loan repayments
Groceries and supplies
Utilities
Children’s education
Insurance premiums
Car/ Gas maintenance bills
Communication expenses like phone bills, cell phone bills, internet and cable TV charges
Subscription charges
Medical expenses
Entertainment costs
‘Entertainment’ finds a place right at the end primarily because it needs to be the first to be sacrificed in a month when an unplanned or emergency expense crops up!
Paying the bills (even if you are not working and everything is being paid for with your spouse’s money) must be a prerogative of both partners. Remember that you can chalk out a workable home budget and better the prospects of your family’s financial planning only if you have a clear-cut idea of the financial dealings you must make monthly.
Emergency fund
The most successful budgets always include a contingency fund or an emergency account to meet unexpected costs that may arise in a household due to unforeseen events like a job loss, for instance! This account must always contain between 2 and 6 months of average income.
