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StreetSide Developments Blog

7 Steps to Making a Helpful Home Budget

Posted on September 15, 2017

7 Steps to Making a Helpful Home Budget woman imageWhile we all love the idea of complete financial freedom, the reality is most of us need to operate under some sort of budget to stay within our means. That being said, if you still find yourself tight at the end of the month, now might be the time to buckle down and establish a functional financial plan you can stick to. It should be simple and will pay off over the long-term!

Here are a few sure-fire ways to help you create a helpful home budget.

1. Calculate Your Needs

“Need” expenses cover living necessities such as your mortgage, utilities, medication, groceries, and transit. Add up all your must-haves and deduct them from your overall monthly income to get an idea of how much you need to set aside for non-negotiable expenses. Your needs should be taken care of first and always. 

7 Steps to Making a Helpful Home Budget couple image2. Decrease Your Debt

After your basic needs, paying down your debt should be your next priority. With long payoff periods and interest, debt can quickly multiply. One way to reduce debt is to immediately cease the use of credit cards for excess spending. Paying more than required on a monthly basis will also help reduce the principal balance faster, resulting in less incurred interest and a shorter pay off time. 

Consider using a credit card debt calculator to figure out how much you can pay per month and how long it will take you to pay it off. 

3. Calculate Your Wants 

“Want” expenses would be things like eating out and online shopping. Get a handle on how much you're spending on your "wants" by keeping your receipts and analyzing your bank statements for the past six months to come up with an average. You can then take off your “wants” total from what was left of your income after subtracting your “needs” and debt payments.

One thing to keep in mind as you're going over your finances: Look for any excessive spending patterns and think of ways you can cut back. 

4. Keep Track 

In order to successfully eliminate unnecessary expenses, you need to identify where each debit transaction goes. Keeping track of all expenditures for a month can help you identify spending trends. In doing so, you may be surprised at how those daily lunches or morning coffees add up, creating excess spending. Use a worksheet to help you stay on track and keep you accountable.

5. Be Shrewd

When investing in items or services you find necessary, shop around to find the lowest price. By comparing prices, you can determine what an acceptable cost and quality entail. Another way to limit spending is to simply create a list and follow it when making detailed shopping trips, such as grocery shopping. 

While it is impossible to avoid special occasions and holidays, following a budget and limiting spending to these times is beneficial. Well-thought out gifts are often preferred over random gifts that are usually purchased on large shopping sprees.

6. Pay Yourself First 

It is said you should pay yourself first when you get paid in order to grow your savings. Place the money in a separate account that isn't used for daily or necessary expenses. 

One way to begin stashing money away is to create automatic transfers that move money from your chequing to savings account on a weekly or monthly basis. Even $10 a week will add up quickly and create a cushion for unexpected expenses. By adding loose change and extra cash into this account, your savings can add up even faster. 

7. Save or Invest Free Money

Monies received through tax returns, monetary gifts, and bonuses can help pay off debt, establish an emergency fund, or pay down your mortgage. Saving or investing "free" money in a smart manner can help alleviate stress in the long run. 

Investing in retirement savings can also help you financially prepare for the later years of your life. Work incentives such as employee-matched retirement funds can help you double your savings influx and enhance savings. While it does take a little self-discipline and dedication, the more you stick to your budget, the more financial freedom you'll enjoy overall. Consider the above tips as a guide in helping you create a financial plan that will benefit you now and for many years to come. 

Click here to get your monthly budget worksheet now!

Photo credits: womancouple

 

Click here to get your monthly budget worksheet now!

Topics: mortgage & financial

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