Household budgets are a great way to get your finances in control and minimize your expenses. However, have you ever considered using an annual household budget to set and achieve savings targets? In case you haven’t, it’s a good time to start thinking about it. What you need to do is sit down with your family and make an annual budget, listing down all your planned expenses for the rest of the year. You can then distribute those expenses throughout the year and put together more detailed, monthly budgets every few months. This way, you can easily determine what you can afford and how much money you have for optional expenses.
The Better You Plan, The Better Your Savings
Once you know what you will be spending, you can see where most of your money is being spent and plan everything else accordingly. The keyword here is planning. The better you plan your expenses; the better off you’ll be at the end of the year. Make sure you include all your expenses, large or small, and make sure that you try to cut down on whatever you can. Start with the larger expenses, and work your way down to the smaller expenses. You can then determine and set your savings targets by comparing your household income and expenses. This will help you determine where you can cut down and save.
Highest Contributor To Expenses?
The bulk of our routine expenditure is usually on food, specially restaurant food. You can easily cut down on this spending by making lunch at home and taking it to work with you. Have family picnics at the park, rather than a family outing at some restaurant. Another way you can cut down on food expenses is by opting for cheaper canned food brands, buying fresh produce directly from the farm, and buying nonperishable goods from wholesalers or warehouses. Here are some fingertip rules that you must remember when doing your budget!
1. List Down Everything!
No matter what you do, don’t leave out anything from the budget. Even the cup of coffee you pick up on your way to work every day. These things all add up at the end up the year and a lot of our money actually trickles out through these smaller expenses. This is where you can save a lot of money over the year. It all adds up!
2. Include Savings & Emergency Funds!
Emergency funds and savings are a definite part of our annual expenses because we take money out of our income pool and set it aside. Emergency funds are useful for when you have to replace a hot water heater or repair your car after a major breakdown, and hence should be incorporated into your budget as a safety measure. Savings are also equally important and help you plan for long term goals such as your retirement or getting your children through college. Make sure you include enough money into both these ‘accounts’ because you never know when you might need some extra cash.
3. Back a Backup Plan!
In case something does go wrong, you should always have a backup plan ready. Sometimes even emergency funds may not be enough, and for this reason you should always have an alternative means of obtaining funds. If borrowing from family and friends is not an option, consider loaning solutions from banks or private institutions. Have a nominated lender selected who best complies with your financial status, and be ready to take out cash loans or short term loans when it is necessary. You don’t want to be caught by surprise and not know what to do in the midst of chaos.
4. Record All Your Expenses Properly!
Prepare a list of expenses that you incur over the month, and compare it to your budget. If you record all your expenses properly, you can easily determine where you spent too much, and where you saved some money. This way, you can plan for the coming months better. You can also record all your expenses for a few weeks if you aren’t sure how much you are spending on certain items throughout the month. These smaller amounts might not seem like much, but they usually make you go over your annual budget.