The cost of living has risen exponentially over the past decade, as has the number of outgoing costs such as electricity and water bills and other “essentials” like internet and Netflix.
Calculating everyday costs doesn’t have to be a migraine-inducing exercise, nor does sticking to a budget mean depriving yourself of nice things. It’s worth crunching the numbers so you can have a little money left over for treats like the family holiday or that new pair of shoes you’ve been eyeing.
Here, we look at some simple ways to best to manage household expenses, both daily and long-term, by staying on top of your bills and setting up a household budget (that’s easy to stick to).
Find out where your money is going.
In order to create a realistic budget and pinpoint where you can save, you need to know where your money goes each month. Create a record of all of your incomings and outgoings for the year. If a year is too hard, use a representative three-month period. Either way, you should then be able to get a reasonable idea of your average monthly income and expenditure. Tally up all household income then, print out bank statements and record everything you’ve spent by category. Note also if expenses are fixed (rent or health insurance); variable (gas, groceries); occasional (doctor’s appointments), or curve balls (major dental work).
This exercise will give you a good ideal of your current financial situation. If you discover you don’t actually have enough money coming in to cover all of your expenses, then your debt is almost certainly growing. If this is the case, you need to identify where you can cut back. On the other hand, should you discover that you already have a cash surplus (joy, oh joy!), you can decide where best to direct this money and perhaps even bump up your savings.
Decide where your money should go.
When creating a budget, focus only on those areas you can actually change, such as spending less on groceries and entertainment, and set new targets that will increase your cash surplus. Be sure to factor in occasional but unavoidable expenses — a “safety” account, if you will. Also, decide what your non-negotiable expenses are; these are the things that you don’t strictly need but you consider essential nonetheless, like a yoga membership or that previously mentioned Netflix account. Keep tinkering with your budget over time as you discover what is, and isn’t, important to you and find new ways to save.
Keep track of your spending.
In order to stick to your budget, you’ll need to record your spending, weekly or monthly. You can do this the old-fashioned way using a pen and notebook or Excel spreadsheet or, you can make this task less of a chore by taking advantage of the many financial software packages and apps now available — many free, some subscription, some one-off purchases. Some great free personal finance apps to start with include Penny, Mint, and YNAB.
This article originally appeared on our sister site, Homes to Love.