household budget blog

What Factors Into A Monthly Household Budget?

Creating a monthly household budget can help you reach short-term goals like debt relief, save for long-term goals such as retirement, or make sure that you are on a solid financial footing for the future. What factors go into making a monthly budget for your family?

Budgeting can be quite simple, not more than a detailed sheet of spending decisions, estimates of how much money will come in during the months ahead, and allocations that can cover expenditures. Here’s what you should factor into your monthly household budget!

Calculating Monthly Income

household budget blogThe first factor you should calculate for your monthly budget is the income you take home; this is the only income you need to know. It’s the amount you can spend or save beyond the money taken off for taxes and what you are putting into a retirement account. Include other sources like social security, disability, pension, interest or dividend earnings, freelance work, child support and alimony.

Calculating your monthly income is easy; all you have to do is multiply take-home pay for one paycheck by the number of paychecks in a year, then divide this number by 12. If you receive biweekly payments, multiply the amount of one check by 26; if weekly, 52.

If you have extra income coming in, make sure your budget accounts for savings towards taxes. If this or other sources like tips, hours, and commissions make what you take home fluctuate, calculate an estimate by adding up three months of income and dividing the figure by three.


List Regular Fixed Expenditures

Collected all the relevant financial statements and other documents to calculate what you spend every month on home, insurance, and other bills that are the same every month. These are your fixed expenses, and they include:

  • Mortgage or rent
  • Car payments
  • Car insurance
  • Health insurance
  • Home insurance
  • Some utility bills, such as gas and water heater
  • Internet, TV and phone services


List Variable Expenses

Variable expenses can differ significantly from month to month based on your lifestyle, choices and spending habits. You can classify most variable costs as wants, meaning the amount can be adjusted so that more of your budget can be routed to other goals. Examples of variable expenses:

  • Dininghousehold budget blog
  • Entertainment
  • Travel
  • Gifts

Use your past spending habits as a guide when predicting some of these expenses. However, utility bills like water and electricity fall into the variable category for families, too. The hydro bill often changes based on the time of year, such as in the summer and winter if your heating and cooling run on electricity.


Take Into Account Regular Savings

household budget blogA budget isn’t just money for immediate needs – it can blaze a trail to financial destinations, too. Putting aside money each month can prevent your finances from becoming stretched beyond financial capacity, which would increase levels of debt and insecurity. Your household budget must allocate money for savings so that when something unexpected comes up, you aren’t in over your head.


Make A Plan

Now that you have compiled all the variable and fixed expenses, you can make a plan. You can start where you have money left areas where you can cut back to have more funds for other goals. Try adjusting the numbers to see how much money you can free up to keep you out of debt and saving for the future. You can turn to professional help with the planning, but much of the budgeting work can be done right at home!

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