Household Budgeting - How to Plan a Budget

The financial aspect of running a household should be looked at as if it were a business. Household budgeting is the title to give to your family money management scheme. It is most important to learn how to plan a budget and then take steps to implement the plan into everyday living.

There are two main categories to balance out: Income and Outgoing. When the month is over, it is time to look at the results of both areas and see who won. If Income wins and there is money left over, the family business is in the black. If Outgoing wins and there is a money deficit or bills went unpaid, the family business is in the red.

Planning ahead is what makes flexibility in the budget possible. If you know in advance that there are increased or additional expenses coming up, it is possible to plan to accommodate those extras. Place such planned expenses alongside other regular payments, such as monthly direct debits or payments to energy suppliers. If you find that you are over committed, planning ahead allows you to make needed adjustments in spending or earning.

Shop around for advice on spending, and gather up some tools to work with in creating your plans.

Planning the Budget

- Detail on paper all Income from all sources.

- Detail on paper all Outgoings, including bills, direct debits (for example, phone bills, standing orders to gas suppliers council tax payments and so on), everyday items and occasional costs.

- See which way the balance goes; more Income on the plus side or more Outgoings on the negative side.

Priorities

- Food and shelter should always top this list.

- Transportation to work.

- Special child costs for day care, medical care.

- Everything else. This includes credit and debit bills and miscellaneous spending.

Laying out the Budget

- This is the easy part. Make five columns across a page, one for each week of the month. Every three months there will be an "extra" week. At the top of the page, list the month name. At the top of each column, enter the date of the week with the week beginning on a Sunday.

- In each weekly column, list every item that is due during that week, with the date next to it.

- At the bottom of each column, put the total for Outgoings for that week. This will tell you how much money you need for every week of a month. Do this at least three months in advance.

- Now list all Income on a separate page, including any tax credits, child credits and other benefits for each month.

Now that you can physically see where the money goes each month, prioritise spending. See where bills can be reduced or adjusted. Most of this will be under discretionary spending like entertainment and eating out. Plan how you might increase Income through using new work income, play group savings, flex time and other ways to boost income. Planning ahead will cut costs in the long run, allowing the family financial business to remain balanced.

Marcus Galon is a regular contributor and expert on UK energy suppliers