The secret to successful budget planning is finding the right method that works for you. In this article, we'll walk you through four ways that could help you succeed as a household budget planner.
The 40 per cent can be divided differently depending on your circumstances and goals. For example, if paying off a credit card or a big holiday is on the horizon, bump up savings in one of the categories.
The zero-based budget is where all your spending is accounted for – that is, every pound of your monthly income is accounted for and used.
To get started with this method, calculate how much monthly income you take home from your salary, benefits, or other sources of income. Then write down all monthly expenses – including any entertainment and leisure activities. Subtract your expenses from your incomes, what you put into savings and what you put toward paying off debt, and you should end up with zero.
And that's how you achieve a zero-based budget. It's a good idea to track all monthly expenses for a couple of months to identify areas where you could cut back.
Then, create a budget covering all your expenses – essentials, long-term savings and short-term savings for a trip or new car – and make sure your spending matches the budget.
Commonly used within companies, this method takes considerable work and requires you to keep careful tabs on all your spending. On the upside, you'll know exactly where your money is going.
Traditional budgeting usually involves adding up all expenses and allocating the remaining cash toward savings. With reverse budgeting, there's a twist. Here, you put the focus on saving; you're paying yourself first, building your budget based around savings goals.
Establish your savings goals, set aside the amount of money from each month's salary that's to go into your savings account, and then put the remaining amount toward essentials. Whatever remains after that is discretionary cash – i.e., money you can use however you please, whether you want to treat yourself to five speciality coffees every day or pay for a weekend getaway.
So far, we've talked about the different types of budget planning, and hopefully, you've got an idea of which one works best for you. The next step is to plan your household budget.
It's important to include all the money that comes into your household each month and everything that goes out. That might sound obvious, but it's easy to forget the small things like paper bills.
Once you've got your household budget up and running, it's essential to monitor it continuously.
Food prices, the cost of fuel, household bills and other living costs can increase over time. On the other hand, your household income can also change. That's why it's important to monitor your budget regularly and make any changes needed to deal with any changesin income or expenditure.
Remember, these budget ideas are not set in stone. If you’ve tried one of methods and it didn’t work for you, don’t be afraid to try a different one. We’ve covered several methods so you can find the one that suits you best.