Ask any stay-at-home parent and they’ll tell you that managing a household is a full time job for which they never get paid. Household management is far more than just sweeping floors and folding laundry – it’s coordinating schedules, balancing competing priorities, and a truly tremendous amount of financial planning.
If your house isn’t already run on a budget, creating one can be a daunting task. But, it’s one of the most responsible things you can do when it comes to managing your household. If you’re feeling overwhelmed at the idea, compare that to how overwhelmed you feel when you don’t have a budget: remember what it feels like to suddenly be out of money at the end of the month, to lose control over your debt, or to not be able to put food on the table? Budgeting may not be fun, but it’s certainly worth it to avoid all of that, isn’t it? So here are a few steps you can take to start managing your household on a budget effectively:
The first step in creating any budget is to figure out how much money you’re working with. Grab your pay stubs and load up your bank statements, and find anything that adds to your overall income. That means your paycheck(s) after any withholdings (taxes, health insurance, etc) are subtracted, plus any additional sources of income you may have, such as family support, social security, unemployment checks, investment property income, etc. Once that’s all added up, you’ll have a sense of how much money you have to budget each month.
A fixed expense is a regular, recurring cost that stays the same every pay period. This commonly means a debt payment, such as a mortgage or car loan bill, but it can also mean non-debt-related expenses that stay consistent from month to month, like internet bills, phone or insurance payment plans, subscription and streaming service costs, and the like.
What a fixed expense isn’t is anything that can be different each month or each payment period, even if it stays in the same ballpark. For example, you may find yourself paying approximately $100 in gas each month, but if it waivers even a little (maybe $90 one month, $105 the next, etc.), then that’s not a fixed expense; it’s variable spending – which we’ll get to in just a bit.
Having some amount of savings is absolutely crucial for ongoing financial stability. It allows you to cover your variable spending costs when they fluctuate, helps soften the blow of unexpected emergency expenses, and can give you a cushion to help further pay down debt or plan for your retirement.
Whether you have a big enough paycheck to put aside half your income into savings, or you’re setting aside $10 a month just to get things started, planning savings contributions into your budget is one of the smartest choices you can make. That’s why it’s so early in the budget process, too – if you set aside your savings as soon as your paycheck comes in each month, you’re far more likely to succeed in actually saving it than if you were to treat it as more discretionary income.
Debt can weigh down just about any household, and just like with savings, managing debt should come early in your budgeting process to give you the greatest chance at success. If at all possible, you want to – at minimum – budget to be able to make all your minimum debt payments to reduce the chance of harming your credit score. But ideally, you can create a debt management plan that allows you to start actively paying that debt down. Whether that’s setting aside big chunks to pay off a mortgage or student loans, or using the Snowball Method to start paying off smaller debts, simply having a plan and integrating it into your budget each month will help you get on top of what you owe.
Once you’ve calculated your fixed expenses and set aside some money for savings and debt repayment, it’s time to fill out the rest of those squishy, not-so-consistent expenses known as variable spending. Some of these categories are crucial to your survival and maintaining your income – like groceries, utilities, and gas costs – while others (like entertainment and vacations) can be much lower priority.
The key is to find a realistic average of what you’re spending on each category per month, and revise your budget accordingly if and when that changes. Once you have a bit of money in savings and a semi-consistent sense of what you’re spending each month, you’ll be in a much greater position to ride out any fluctuations and make smart, reasonable decisions as to where you can cut back and by how much.
Once you’ve created (and stuck to) your first budget, give yourself a pat on the back – that’s a huge deal! If you’re wondering what the next step is, well, it’s to create your second budget. Budgeting is more than just a skill; it’s a habit. And like any habit, it takes commitment and determination to keep going and practicing until it becomes second-nature.
But once that budgeting habit is in place, you’ll be amazed at how much you can reduce your financial stress and start planning for the future. And if you find yourself in an emergency or difficult time where you need a bit more than your budget allows? At Spotloan, our simple online application process can help you qualify for the money you need, even if you have bad credit or need a loan quickly. All you have to do is go fill out our application to see if you qualify, and you could receive a decision within minutes. Fill out our application now!