Creating a Household Budget for 2020

budgeting saving money Dec 18, 2019

There are so many benefits to creating a household budget. From having a handle on your finances to always knowing what kind of spending abilities you have, you’ll quickly find that a budget can make your life easier. While it may seem like a lot of work when you’re setting it up, they are worth it! Are you thinking of creating a budget for 2020? Here’s how to do it! 

Set Up the Framework for Creating a Household Budget

The hardest part of creating your household budget is setting a framework for the budget. By doing this, you’ll always have a template that you can fill in. Many people choose to use a spreadsheet to keep track of their income and expenses while others prefer the more traditional approach of using a notebook or calendar. No matter which method you prefer, you can get prepared to fill in your budget with specifics by setting up a solid template. 

As your making your budget, consider the future. You’ll likely have changes that will need to be addressed, and you should make the budget easily accessible to make these changes! A budget should never be concrete and should be set up in a way that you can move things if necessary. 

Add Up Realistic Income 

When you’re looking at the income you make, be conservative. Base your budget on the lowest possible amount you’ll make for the year. In other words, don't assume you'll earn discretionary bonuses and be conservative when it comes to projecting commissions.

Don’t forget to calculate the tax you’re required to pay and any amount that automatically comes out of your paycheck (auto savings, health insurance, and other deductions). This is especially helpful if you are an hourly employee or if your check changes from month to month.  By figuring out the lowest amount, anything above that will be extra that you can save or spend! 

Calculate Your Expenses 

First, calculate your regular on-going expenses. This will make it easier to figure out exactly what you need to pay from month-to-month. From there, you can add in expenses that are recurring but may not be every month.

Don’t forget to include things that are not ordinary expenses. Having this section in your budget will make it less of a surprise when these things crop up. 

Related post: 10 Easy Ways to Minimize Your Household Expenses

Checklist of Expenses to Include in Your Household Budget

Here's a list of items to help jog your memory as you plan your budget for the year:

  • Emergency savings
  • Retirement savings contributions
  • Mortgage/rent
  • Homeowners or renter's insurance
  • Property taxes (if they're not included in your mortgage payment)
  • Car insurance
  • Car payment/lease payment
  • Vehicle maintenance
  • Transportation expenses (including vehicle registration)
  • Health insurance
  • Life insurance
  • Groceries
  • Medical expenses
  • Utilities
  • Phone/internet
  • Loan payments
  • Child care
  • Child support
  • Memberships
  • Travel
  • Entertainment
  • Charitable contributions
  • Gifts

Make Sure Your Household Budget Includes Fun 

It’s unrealistic to think all of your money should go to bills and savings. Even if you want to plan a very strict budget, you should work in some fun. You deserve to have fun, and it’s important to reflect that in your budget.

The type of fun that you have could be anything from money set aside for a date night to money set aside for a shopping spree or even a weekend getaway! By doing this, your budget will be more than just work. 

Related post: Planning a Staycation for Winter Break?

Consider Budgeting Software

If you’re struggling to come up with a budget or if you’re having trouble sticking to the budget, you can use budgeting software to help you. While you’ll still need to do the work of sticking to it, the software can be helpful by inputting your income and expenses. It can also help come up with plans for saving money and goals you need to reach. Many budgeting software options are free or inexpensive. 

When I'm working with clients, I use professional software. Some popular options available to consumers include mint.com and ynab.com.

Related post: 15 Best Budgeting Apps

Creating a Household Budget Isn't Enough - Use It! 

The most significant step you can take in making sure your budget works for you is actually using the budget in your day-to-day life. You won’t be able to help yourself financially by just creating a budget in 2020, but having the strength to stick to the budget and take it seriously will make your financial life more manageable. Whether you’re saving for a goal or you’re just trying to get on top of your finances, you’ll be able to enjoy the great benefits of staying on budget at all times. Some people struggle to stick with their budget. This is often a result of not having budgeted for fun or other expenses that might come up throughout the month!

Related post: How to Save Money While Raising a Family 

Update Your Household Budget Regularly 

Just having your budget available shouldn’t be the only thing you do. Like everything else in your financial life, your budget should be updated regularly. It should be treated as a living document in that it needs to be updated periodically. Change income to match any changes in your income or expenses to reflect changes in each category. You may also need to put new expenses in or take old ones out, depending on circumstances in your life. When you’re setting your budget up, make sure you’re planning it in a way that you can make necessary adjustments to it if you need to. Life changes regularly, and you need to make sure that you can update your budget if something needs to be changed!

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