Give me a moment to guess where your financial situation is at this moment. I bet that you have a strict budget set up, but you seem to go over budget every month. No matter how hard you try to stay on budget you just keep coming up short. Or maybe you have given up on budgeting altogether. As a married mama of 3 living on one income, I get it! My family feeds 2 adults, 3 kids, a handful of cows, 2 dogs, 2 cat, a couple of horses, + chickens & pigs on just my husband’s paycheck. How do we manage that?? You will find several money saving resources throughout this blog, but the post that you are reading now should be your foundation. This post outlines the most basic step to living well on a tight income…learning how to create an effective household budget!
You might already have a budget that works, high fives all around if this is you, but I might have a couple of ideas that you could add in to make it more effective, so don’t stop reading!
Create an Effective Household Budget That You Can Stick to
1. Know Your Financial Goal
Are you budgeting to help yourself be more frugal, to be intentional with your money, to pay off debt and achieve financial freedom, to save for vacation or another big money item, a mix of these? Knowing your “why” will help you to create a focused budget that will work the best for your family.
2. Be Realistic When Creating Your Budget
I cannot stress this enough! I have felt like a failure at the end of so many months because I set unrealistic limits which caused me to overspend in almost every budgeted category. When I give myself $200 for groceries/month for my family of five I am just setting myself up to fail. I try not to add too much wiggle room, but an effective household budget only comes when you set goals that you can reach.
3. Know Your Spending Habits
You should keep a ledger for at least a month that records all of your spending. Write down every single thing that you spend money on. If you only use a debit card linked to your checking account then you can just review your bank statements for previous months.
Break your expenses down into categories so you can get a good idea of what a realistic budget for each category might be. This is a tough task for some because we want to jump right in to the money saving part, but you can’t get there if you don’t prepare.
4. Figure Your Net Income
You will need to know what your total monthly income is after taxes and other deductions are taken out. Do you receive paychecks weekly, bi-weekly, or monthly? Make your budget out accordingly. I have my budget laid out in a bi-weekly format. How much money do you make on each check? Be sure to use your net income here, not what the amount would be before deductions come out. Creating your budget according to you paycheck dates ensures that you have enough money to cover bills that are due at different times of the month.
5. Figure & Categorize Your Expenses
At this point, you should have an idea of what your monthly expenses are from the ledger or bank statements that you reviewed. Write these expense amounts down into your spreadsheet, notebook, budget planner, or whatever you are using to keep up with your finances.
Place each expense into a category such as Fixed (payments that are the same amount every month like the cell phone bill), Variable (payments that change each month like electricity, water, and eating out), Debt, Donations, etc. You can add debt into the fixed or variable category if you like, but I prefer to keep this separate. This is because it is something that I can work hard to get rid of while the other payments will be sticking around because they are giving me a service in return. Add a miscellaneous category for purchases made throughout the month that don’t fit into your other categories..
A Cash Envelope category is also added to my budget. I take a certain amount of cash out of the bank after our first paycheck so that I can purchase things in this category solely with cash. Check out my Cash Envelope System post to learn more about how I make cash work for us!
An effective household budget should keep spending expenses should around 70% or below of your income according to the financial gurus
6. Save & Give
Now that you have your expenses (spending) figured, you can easily split out the money that is left after regular expenses into savings (20%) and giving (10%). If you want to save or give more than these percentages, just lower your spending expenses to allow for that.
Savings–> Every effective budget has a spot for savings. Set a goal to save a certain amount of money in an emergency fund ($1000 was our amount) and then save as much as you can each month until you reach that goal. Don’t stop saving after your goal is reached, though. You might drop back a bit on the amount going into the account, but keep at it! After you have reached this goal, you can use that 20% to knock down your debt. When your debt is paid off, resume saving.
Give–> I always always have my tithe listed in my budget. God has blessed my family with so much and we are called to be a good steward of everything that he pours out. We have found that we have a much more effective household budget when we are giving out of it. You can tithe or give in the form of a local church offering, a donation to a local charity, helping a family in need, sponsoring a child, or any other way that you can lift others up & glorify God with a small portion of your income.
[click_to_tweet tweet=”One who is faithful in a very little is also faithful in much, and one who is dishonest in a very little is also dishonest in much. Luke 16:10″ quote=”One who is faithful in a very little is also faithful in much, and one who is dishonest in a very little is also dishonest in much. Luke 16:10″]
7. What Expenses Can Be Cut?
You can now see if you spend more than you earn or earn more than you spend. If you need to cut back on your expenses to fit your income now is the time to do it. Do you really need satellite television or a $200 phone bill? You really don’t!
Cut those things out and you will be amazed at how much more you are able to pack into that savings account! Here are some simple changes that I have made to save hundreds of dollars every month:
-
Stop Using a Contract Cell Phone Network
- We went from a $200+ Verizon cellphone payment that always had hidden fees and new charges to a $100 payment for both of us ($50 each) that included unlimited talk and text with no hidden charges with Straight Talk. We are now using MetroPCS and we pay $80 for both of us including unlimited talk and text. This made a HUGE difference when we created our effective household budget!
-
Buy Reusable Products Instead of Consumable
- If you find yourself spending a big chunk of money on consumable products each month, see if you can replace them with reusable products. Try using unpaper towels or flour sack towels instead of paper towels, switch to a reusable coffee filter, make or buy reusable snack bags, and invest in a reusable ear cleaner instead of Q-Tips. See more ideas in these posts–> 17 Ways to Reduce Paper Waste at Home & Affordable Eco-Friendly Household Products.
- If you find yourself spending a big chunk of money on consumable products each month, see if you can replace them with reusable products. Try using unpaper towels or flour sack towels instead of paper towels, switch to a reusable coffee filter, make or buy reusable snack bags, and invest in a reusable ear cleaner instead of Q-Tips. See more ideas in these posts–> 17 Ways to Reduce Paper Waste at Home & Affordable Eco-Friendly Household Products.
-
Replace Cable & Satellite with Roku or Amazon Fire Stick
- I was very nervous about making this change, but I haven’t regretted it for a second! We went back and forth between Dish and Direct TV for a while. That ended because it was such a hassle to deal with customer service and to figure out why we were always paying more than our contract amount. I finally got our contract cancelled early with no extra fee and they paid our last month back to us. We now use a Roku that allows us to watch Netflix, ABC, PBS Kids, Nick Jr., and just about anything else that we want. We pay $8/month for Netflix and $25/month during football season for Sling TV. Amazon Fire Stick is another option that is similar to a Roku. I haven’t personally used this one, but I have heard many good reviews.
-
Shop Secondhand
- This one gets a bad rap, but shopping secondhand doesn’t mean that you are purchasing junk. I shop online at ThredUp where I can buy brand new name brand clothing for 1/3 of the price. I also shop at a local consignment store that carries quality, affordable, on-trend clothing. You can read more about how I save money without sacrificing quality buy shopping secondhand in this post–> Secondhand Shopping Secrets- How I Shop for {almost} Free!
-
Use Grocery Rebate Apps
- Using rebate apps like Ibotta, Checkout51, and Walmart Savings Catcher can give you money back every single time you shop. I go into detail about each of these apps in this post–> Grocery Rebate Apps That Put $$ Back in Your Pocket
-
Make Your Own Cleaning Supplies
- Making your own all-purpose spray, dish detergent, and laundry detergent can also make a significant difference in your monthly budget. My All-Purpose Antibacterial Spray is what I use for almost all of my cleaning and it only requires water, vinegar, tea tree oil, and a drop of dish soap. I haven’t purchased a household cleaner in at least a year because of this homemade product.
8. Have Nothing Left Over
Budget.Every.Penny! If you leave extra cash sitting in your account then it isn’t doing you any good. Everything that enters the bank account needs to be accounted for. As Dave Ramsey
[click_to_tweet tweet=”‘You’ve got to tell your money what to do or it will leave!’ Dave Ramsey” quote=”‘You’ve got to tell your money what to do or it will leave!’ Dave Ramsey”]
You can’t know all of the miscellaneous expenses that might come up during the month. That is exactly why it is a good idea to allocate money to a “miscellaneous” category. This way the money doesn’t sit around not being used and it doesn’t get used on things of little to no value. If money in the miscellaneous category isn’t spent at the end of the month, it goes into savings or toward debt.
9. Choose How To Manage Your Money
How are you going to manage your money to make sure that this effective household budget sticks? Will you use a cash envelope system? A debit card only? Will you use a credit card and pay it back every month (this option is risky and has led to failure multiple times for me so I don’t recommend it)?
Make the decision, set up your payment system, and be consistent with it.
10. Don’t Give Up!
Trust me, I wanted to give it up too. I felt like budgeting was putting a huge constraint on me and that I would never get it right. It is still a work in progress for me, but now that I have a system in place I feel like creating an effective household budget has freed me!
I can buy what I need without feeling guilty because I am pulling from money allocated specifically for what I am purchasing. I am able to save and utilize every red cent that God blesses my family with.
11. Revise as Needed
As your family changes, your income and expenses will change. An effective household budget will need to be revised periodically to reflect debt payoff, a change in income or expenses, or a switch in money management system. Your budget isn’t written in stone so don’t be afraid to make changes when you need to.
You can download your own Household Income Tracker & Household Expense Tracker for FREE in the Member Resource Library!
Get started creating your effective household budget today!
Pin It for later!
Linked up with The Thrifty Home
[pt_view id=”cd7b49bniz”]
Leave a Reply