A Guide to Building Your Household Budget | St. Johns Bank
If you are trying to get your finances under control and make an effort to save more money, building a household budget is the best place to start. It is impossible to know how much you can save without knowing how much you have to spend each month, and by categorizing all your expenses, you can better evaluate areas where it may be possible to cut back.
There are many structures out there that can work for budgeting, but if you are just getting started, the 50/30/20 method is often the easiest place to begin. This gives you a framework where 50% of your expenses are needs, 30% of your expenses are wants and 20% of your expenses go to debt repayment.
Understanding the Process of Building a Budget
Evaluate all your post-tax income sources to begin. To establish what your budget should ultimately look like, it is important to evaluate all your sources of income coming in each month, including a regular paycheck, money from any side hustles, child support and more.
Evaluate your expenses next. To budget well, you will have to get a good idea of what you spend each month—and where you might be able to cut back. Consider your household expenses, insurance, gas, groceries and any other relatively static expenses first, then add in the more periodic ones (i.e. bi-monthly cleaning fees) as needed.
See how much is left over. Once you subtract your expenses from your income, you will have a good measure of where you are at financially. If you are already in the red, start looking at things you can cut. If your fixed expenses are about 50% of your income, start considering what should be allocated to discretionary spending (such as meals out) and debt or savings. This is where the 30 and 20% categories come in, respectively.
Be sure to track everything. While frameworks such as the 50/30/20 plan are a great place to start, budgeting does not end there. Track your spending carefully so you know exactly what your expenses are instead of what they are projected to be, and be sure to assign every dollar a “job,” whether that be paying off student loans or going right into your savings account.
If you need help establishing a safe place to store your money, that is what we are here for! Contact us today for information about the accounts we offer.