You can work this out by going through the documents you brought out earlier, as they’ll clearly state how much you’re spending on things like groceries, mortgage payments and gas and electricity bills. Now you have a clear idea of how much money is coming in every month and where it’s going, it’s time to drill down into how much is going towards essential expenditure – in other words, your basic living costs. Admittedly, it can be a time-consuming task.īut it’s worth taking that time, so you can be sure you have accurate figures in front of you when you’re calculating your budget. Some of this paperwork will be physical documents that have dropped through your letterbox, while much of this will be in your email inbox and online accounts. That can be anything from bank statements to shopping receipts, as well as paperwork from pension and insurance providers, household bills and details of any investments you may have in place. The next step is to find out where your money is going, so spend at least an hour or so going through any relevant documents containing this important information. You should do this for at least the previous three months, as your income may vary slightly from month to month, so you can calculate a realistic average. Work out what you have left from your pay packet once you factor in tax deductions and pension contributions, alongside other possible sources of income, such as investments that generate returns. To work out a household budget, it’s important to know exactly how much money you have coming in. If you decide to set a weekly budget, here are five steps you should go through first: 1. Not only can it put you in a stronger position to withstand the current crisis, it can also keep you on course to achieve your longer-term ambitions. While this isn’t a hard and fast rule, it does show the various factors you have to keep in mind as you find a figure that works for you and your family. Many families work to the 50/30/20 rule, with 50% of your income going on essentials, 30% on non-essentials, and 20% going into savings. One simple step you can take is setting a household budget, so you can be sure you’re living within your means and identifying where positive changes and improvements can be made. If you’re missing your target, it might be worth readjusting your savings goal until you can start saving this amount more easily.As inflation hovers around its highest level in 40 years, more of us are looking closely at where our money is going and how we can make it go further. If you’re regularly hitting your target, it might be time to increase how much you put aside each month. If a pattern arises over time, it’s time to make some adjustments. As you’ll check your budget at least once a month, you’ll be able to keep track of how often you’re either reaching or missing your savings targets.If you want to make some more drastic savings, consider cutting down on some of your fixed costs, and/or bringing in another stream of income. A list of any variable costs that you’d either like to cut down on or eliminate altogether.Taking this calculation into account, settle on a projected amount that you’d like to save each month, based on the above calculation.The total sum left after your fixed and variable costs are added together and subtracted from your total net income.A detailed list of all monthly variable costs (including money spent on groceries, nights out, subscription services).A detailed list of all monthly fixed costs (including rent, utility bills, car insurance).A breakdown of all income streams after tax (including regular salary, income from freelance work, any income from government stipends).Here’s what a typical household budget looks likeīelow, you’ll find all the components of a standard household budget:
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