8 Tips To Create Home Budgeting Plan

2019/02/25

There are plenty of factors that must be taken into account when it comes to creating a perfect home budgeting plan. Your budget plan must be designed in a way that should help you survive efficiently even when the worst recession hits the economy.

It should avoid financial crisis and should protect you in times of trouble. In order to create this plan, you need to follow certain steps. You will also need some basic tools, such as a calculator, a notepad and a pencil. Other important things you need are financial discipline, strong determination, regular monitoring and consistent efforts. Following is your 8-step guide to create a budget plan that always works.

Review Your Current Financial Health

Before you start creating a home budgeting plan, the first thing you have to do is to review your current financial situation. This step requires you to bring all your family members (especially your spouse) on board. You must have a very clear, practical idea about the following things.

How financial decisions are made in your home? Who is the main decision-making authority and how other family members participate in the process?
Do your family members address the topic of money rationally or emotionally?
How much emergency savings you have? Is there any emergency fund at all? How do you maintain it? What are the factors that are responsible for your current financial health? What are the major financial challenges you are currently facing?

Set Financial Goals

Once you get a clear picture about your current financial health, the next step is to set some financial goals that you want to achieve through your home budgeting plan. The goals may include things like your long, medium and, short-term financial priorities, some specific big purchases you want to save money for, debts you want to get rid off and other specific things, such as a relocation or a career change (if applicable in your situation).

Make sure you have a notepad and a pencil to write down all the details. Do not do all the calculations in your brain. Even if you are very good at mathematics, writing down the minutest details has its own advantages.

Review Your Spending Pattern

Do a thorough review of your bank statements, credit card statements, monthly utility bills, the purchases you made within the last one or two months, the money you earned and other things like that. This way, you will be able to understand your current spending pattern. Again, write down all the details. Generally, people do not realize that they are overspending, but when you write all the numbers down on a paper, you can easily see how much money you are actually overspending every month.

Find Out Where Your Hard-Earned Money Is Leaking From; Plug Those Holes

The next step of your home budgeting plan is to find out all those areas where you are wasting your hard-earned money. Once you find out those holes, plug them tightly. Following are some examples on how to do it.

You must immediately cancel all those membership cards that you are not using anymore but are still paying for. Switch to prepaid cell phone service if you are currently using a postpaid connection (it gives you better control on how much you spend on phone). Shop for lower-rates for the various insurance policies you have. Shop for only those things that you practically need.

Avoid impulse shopping. Understand the difference between what you want and what you need. Avoid other indulgent or wasteful practices, such as expensive lunches. Review your monthly utility bills and look out for ideas that can help you reduce these bills. For example, you can save on electricity bill by keeping the air condition and heating system off when not needed.

Make Savings Your Top Priority

Saving must be your top priority while you are creating a home budgeting plan. Even if there are debts to pay off, you must always set aside certain sum of money every year toward your savings account. You need three types of savings – one to fulfill your long-term goals (such as, the big purchases you want to make in the next few years), two to fulfill your medium term goals (such as the things you want to purchase or do this year) and three to meet your short-term necessities. Decide about the amount of money you will deposit in the savings fund every month and stick to it.

Prepare An Action Plan For Credit Cards

Most people damage their finances through unwise and careless use of credit cards. Therefore, it is very important for you to have an action plan for it. Implement the following strategies.

• Always pay off the balances in full every month. Do not just make the minimum payment.
• Shop for low-rate credit cards.
• Do not carry more than two cards.
• Most importantly, spend only as much as you can afford to pay every month.
• Use cash for most of your purchases. Using cash curbs excessive consumerism and thus tames debts.

Take Advantage Of The Electronic Banking Facility

Many people often fail to pay their utility bills payments in time not because they do not have money, but because they do not have time. This results in hefty penalty charges. An easy way to avoid these penalty charges is by paying your bills electronically. You can do this online right from the comfort and convince of your home. If you have to pay a fixed sum of money every month, such as toward a debt, set your bank account for automatic electronic payment.

Make Some Smart Investments

A perfect home budgeting plan must also have some room for retirement savings and investments. If you are not sure about how to do this, consider hiring a financial consultant. Once you develop a practical investment plan, stick with it. This step will help you grow both financially as well as personally.

However, it is very important for you to understand that just creating a good budget plan is not going to be very useful unless you implement the same thoroughly with strong financial discipline. Be consistent in your efforts. Besides that, you must also monitor the progress on regular intervals, identify the areas of improvement and bring necessary changes to your home budgeting plan as and when needed.

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