Starting a Household Budget--and Sticking to It

Starting a household budget and sticking to it is analogous to living a health-conscious lifestyle. Just as exercise and a good diet are needed to stay physically healthy, wise spending and living within your means are needed to stay financially healthy. With a bit of discipline and an eye to keeping records, you'll find it easy to live on a budget.

Count your financial calories
You may need to slash your spending to stay on budget. The only way to do this is through some time in the office doing some adding and subtracting, tracking your expenses and your income. Many people prefer to track their finances online or using specialized budget software, but a simple spreadsheet on your computer or a pad of paper and pencil will do just as well.

List all of the big, monthly expenses such as rent or mortgage payments, car payment, utilities, insurance (which may be annual or biannual), food and entertainment. Make sure you include everything that is considered a need in your family budget, which are the things you just can't live without. Total up the needs and mark that number down.

Now take the time to add up your expenses and see what you're really spending each month. If you primarily use debit or credit cards for your daily expenses, you'll want to go over these carefully and make note of where your money is going. If you like to use cash, buy yourself a tiny notebook and take it with you for the next month to write down everything you spend.

You may be surprised when you add up all the little expenses from the month. Determine how many of those little expenses were really needs and add that number to the "needs" column. Record the amount spent on "wants" or extras in another column and total up how much your family is spending on wants. Your target budget will consist of numbers from both columns.

Add another segment to your wants column for family vacations, holiday expenses and goals, such as saving to build a vacation home or expensive travel plans.

Now compare the numbers to your income. How is the budget shaping up?

If your income is greater than the wants and needs columns combined, you may decide you want to leave things as is. If you decide you need more cash flow in your budget, you will have to change something up. Think of the needs column as wholesome foods and the wants column as snacks and junk foods. Living healthy means saying no to sweets, and living on a budget may be as simple as reducing your monthly spending on wants.

Firm up your income
Getting more income is another way to live on a budget. Ask yourself if you are making the most you can for your skill level and experience. Is it time to start looking for a new job that pays better? When was the last time you discussed your salary with your boss? Is there a side business or second job you might enjoy doing for extra cash? Consider your options and see if there might be a way for you to increase your income without decreasing your expenses.

Burn off that junk spending
Be inventive as you look for ways to stay on your budget. Holidays and family events are obvious budget busters if you spend to excess, but there are also little things you can do every day to trim your spending.

• Don't blow your budget on holidays. Decide you will value and celebrate relationships, quality time and gestures of goodwill over expensive gifts.
• Instead of expensive dates out, try staying in and renting movies, cooking together and inviting friends over to play cards or relax. If you have children, trade babysitting services with a friend or relative who also has children.
• Do your own hair, nails and facials at home or at low-cost salons until your budget allows for such indulgences.
• Bring your own beverages-buying coffee or a soda while you're out is much more expensive than bringing your own from home.
• Pack your lunch at home and reduce budget-breaking lunches out.
• Use the library instead of buying CDs, DVDs and books.

Try to wait an extra six months before buying a new car or new furniture. Do your best to anticipate what big expenses will be coming up and plan your budget accordingly. Wait until you actually have the cash on hand to purchase expensive splurges, such as a new game system for the kids or a new lawn mower for yourself.

Pay off your credit cards, starting with the cards that charge the highest interest rates. Make payments on time so you don't waste money on late charges. If you're carrying a balance on more than one credit card and you pay one off, apply that money to the balance on the next card so that you're reducing principal and minimizing the amount you pay in interest.

Reward yourself for meeting budget goals
Identify your financial goals, and remind yourself and your family of these goals often. You can use charts and rewards such as celebrating with a special meal once a car loan is paid off or you've saved enough money to book flights to Disney. Post photos of wants such as a cabin in the woods or a vacation to the beach, and remind yourself that's why you're sticking to your budget.