Are you saving up for traveling or buying a house? Then knowing your finances is key. But it’s hard keeping track of one’s money, that’s where a household budget plan comes in handy. Before you lose track of where all your money goes to every month, listen up. Because getting a handle on your own finances will open up some amazing opportunities for you. Here’s the easiest way how to create a household budget plan:
How to Create a Household Budget Plan
Step 0.5: The Right Tools
Before you start, think about how and where you would like to create your budget plan. There are many apps and applications on the Internet that offer useful functions. If you like it simpler, an Excel or Google Sheets spreadsheet can also be a helpful tool. The simplest solution? Just take a pen and paper in your hand and start writing!
Here, it’s really important to simply pick the tool that is easiest to use for you personally – after all, you will be using it regularly in the future.
Step 1: Monthly income
Before a budget plan can be drawn up, you first have to determine how much money is available to spend each month. To start with, the net income of your household should be noted. So put down your monthly income, subtract all deductions and the number you have left is what money you have available to spend each month.
Step 2: Define your monthly repeating expenses
It’s time to define your monthly expenses that are mandatory. That means payments like monthly rent, health insurance contributions, insurances, subscriptions (mobile phone, internet, Netflix, etc.)…
Take a moment here and think about which expenses are really essential and which ones you could maybe live without. These expenses look a little different for each person in detail. For some people the gym subscription is indispensable, while others might not be able to live without Netflix or Spotify! This is the first spot during your budgeting where you might be able to save some money after realizing what expenses you can get rid of.
Important: Don’t forget your credit card expenses here! If you have subscribed to a service via Paypal or credit card, a monthly amount will be deducted here. Of course, this amount has to be paid regularly.
Once you have defined your mandatory expenses, list them properly and deduct the respective amount from your monthly income.
Step 3: Saving Goals (optional)
It’s advisable for everyone to have a certain amount of money stored away in a savings account at all times. This way you are prepared for the unexpected, such as medical expenses or repairs. Whether and how much you want to save is up to you.
I personally put money aside every month for holidays and unexpected expenses. So these are my two savings goals. Maybe you want to save for a new car or you have debts that need to be paid off. Set your monthly savings goal and think about how much you want to set aside per month for this goal.
Think about what amount is appropriate to get by on your remaining budget for the rest of the month and enter the amount in your budget plan. Subtract the amount from the total and you will have a free budget to spend for the month.
Step 4: Freely available budget
What remains after all these deductions is money that you can spend at your will during the month! Whether you go shopping, have a 5-course meal in a restaurant, stop by Starbucks every morning or need the money for your favorite hobby, this money is there to spend.
If you – like me – have not predefined the monthly budget for food and household expenses in the mandatory expenses, you should divide your money here at the latest.
And if there is anything left at the end of the month: Even better! Decide for yourself whether you want to move the money into your savings account or transfer it to next month’s budget.
How do you divide your monthly budget? Let me know in the comments!
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