Budgeting and forecasting household expenses is a bit of an art that you get better at over time. A period of trial and error is to be expected especially if you are not used to tracking every penny. It can be quite tedious at first and you may very well feel like giving up, but persistence and consistency will pay off with money in the bank.
Most budgeting spreadsheets found on the internet are far too complicated and they certainly don’t need to be. You can take these spreadsheets and dummy them down, or simply create your own. To avoid duplication, try to limit the number of categories to five or less with clearly marked subcategories.
At the end of the month, if there is money left over you can do a sweep. A sweep it splitting the left over amount into categories where you over-spent, thus balancing the budget. If there is still money left over, it can be used to pay down debt or added to a savings account.
Category: Utilities
Utilities include all phones, gas and electricity, water, sewer and garbage collection. When budgeting, enter the previous month’s amount. These amounts can fluctuate, but you can adjust them in the budget as the bills come in.
Category: Food
Figuring out what to spend for groceries is the toughest part of budgeting and forecasting. It take months to finally come up with an amount that allows what you need, but not so much that you are over-spending. Common sense is the rule here – $700 a month for a family of six is reasonable, but not for a family of three.
This category includes eating out as well. Set a realistic dollar limit and stick to it.
Category: Personal
Any expenses that don’t fit in the other main categories can be put in here. You will discover all of them in time. This category includes some fun money. Having funds for a hobby or interest is important. $25 to $50 a month per person is a good amount. Medical expenses can added in here as well.
Category: Housing and Maintenance
This category includes the rent or monthly mortgage payment and any general household maintenance needed.
Category: Transportation
Transportation includes gas, car payments and any car maintenance or repairs.
Occasional Expenses
It is easy to forget expenses that don’t happen every month such as a quarterly subscription for an online service, or annual car registrations. Budgeting and forecasting these in can be done by noting when they occur and adding it to that month’s budget. You may need to save a little each month for larger amounts, but avoid temptation to use a credit card for these expenses.
Perseverance will turn financial forecasting into a habit that leaves you in control of your money and gives you peace of mind.
