Budgeting is a financial skill that everyone needs to learn. Not only does it...Read More →
It can be tough living on a small income. According to the Survey of Income and Housing, the average household income in Australia in 2013-14 was $998 per week, but many have less to live on. If your household struggles to stay within budget, and if you want to save money, there are a few household tips we have for you. One way is to download or use an online budget planner or budget calculator.
Using a household budget planner or a household budget calculator is a great way to understand your finances. A budget planner is a spread sheet template that can be opened on your own computer and fill out. Each area of your household expenses has its own field such as transportation, housing, utilities and groceries. A budget planner makes it easy for you to see where your money goes and helps you avoid overlooking grey areas of spending.
A household budget calculator does something similar. There are many free, online versions that can help you calculate where your money goes and how much you have left after all big expenses. You simply enter your income and expenses into the calculator, and it gives you the result in a matter of seconds. Some are also designed to calculate specific things such as what kind of mortgage you can fit into your budget.
Here are some great ways you can build a budget using budget planners or calculators:
One of the benefits of using a household budget template or planner is that you get to see exactly how much you spend and on what. It can be difficult to remember intuitively what you spend in a month, or to realise that you are spending more than you earn. Most people usually pay for daily things like groceries, coffee and other shopping without noting it or writing it down. That can make it hard to keep track. A little cash here and there can quickly grow to a surprisingly significant amount. No matter if you use a budget planner or if you keep track in a notebook or on your phone, being conscious about where the money goes is an important first step in building a budget.
A household budget planner is a good help in the sense that it requires very little time to fill in. There are many free versions online but you can also make your own planner by creating your own categories in a spread sheet. Using a household budget planner, you can write down everything that goes out of your account in an easy and visual way. You will then be able to see if you use more than you earn, and what your money goes towards. Maybe you dine out more than you thought you did. Maybe the car is taking up a surprisingly huge chunk of your salary. Maybe you buy your groceries in an expensive supermarket. Maybe you are not paying back your debts, or maybe you spent two hundred dollars on take away coffee last month. The numbers don’t lie, so it can be a sobering experience using a budget planning tool.
Now that you know where your money is going, it’s time to find out what you can afford. A budget calculator can help you answer two questions that are essential for building a healthy budget: Are you spending more than you earn? Can you afford your current lifestyle?
Contrary to what many believe, designing your lifestyle around your financial capabilities works better than doing it the other way around. This means that what you earn should shape how much you spend instead of trying to make your lifestyle “fit” into your budget. Trying to squeeze a specific lifestyle or material desires into a small budget isn’t going to work.
Asking first what you can afford before deciding what you want can also help you avoid things getting out of hand on occasions such as Christmas and the summer holidays. Often many budgets fail because they don’t take into account the occasional spending such as getting a new car, buying presents, going on holidays and so on. When you shape your budget around what you can afford, you avoid that problem.
A household budget calculator can calculate for you how much money you have for certain things. You can use the results in different ways to build your budget. If the calculator shows you that you have next to no money left after paying your big expenses, it might be a clue for you to rethink if you can cut down by for example moving somewhere cheaper or selling your car. The calculator can also help you visualize exactly how much money you can spend after rent, transportation and groceries. You can then decide in advance what you will have to cut out of your life for your budget to work out. That way, you will never be caught overspending. Deciding to only spend what you have means having to compromise, but it also leads to much healthier finances.
Some household budget planners shows you your budget in a pie chart, so you can see visually how much money goes into the different areas of your life. Even if you are not spending an excessive amount of money, the planner will still make it easier to find areas, where you can save. Making small changes in your life such as brewing your own coffee and making a packed lunch can save you money in the end.
This doesn’t mean that you necessarily have to save on everything. Only you know what’s important to you. The budget planner can only help you to see clearly if you are spending money on things that are more about convenience and habit than a conscious choice.
There are many different planners and many different ways to use them. Pick one that you find easy to use and has some of the categories you need. If you mostly use public transport, there is no need for too many categories to do with car, gas and car insurance. You will always have some categories that you don’t need all the time, however, as some are only used for example a few times a year. It’s still important, however, to take them into account.
One way to build a budget using a household budget planner is to use the 50/20/30 method, where you keep necessary expenses such as housing, utilities, groceries and transportation less than 50% of your take-home pay. 20% goes to saving or paying off debt while 30% goes to all extra expenses such as dining out, gym, donations and doing other activities. These numbers don’t work for everyone. If your income for example doesn’t allow for a 20% savings, you can change the number to something that fits your lifestyle. The most important thing is that you make a plan that you can keep. A household budget planner can help you visualize if you stay within the ratio you set up for yourself, whether it be 65/5/30, 60/10/30, 70/0/30 or something different altogether.
Staying within your household budget can be difficult, but it is possible with the right tools and mindset. Planners and calculators can make things a lot easier, because they help you see where your money goes, if you spend more than you earn and what you can actually afford. It can also help you visualise how much of your money goes to things you find important and where you can save.
Using a household budget planning tool is just one way to build a budget, but it’s entirely up to you what works for your household. There is a myriad of different planners out there, so you can research and choose the one you like the most, if you decide to try it out. Some templates make a pie chart for easy visualization. Others have a more old fashioned simple style with a list of numbers while others again let calculates specific things such as how much mortgage you can afford with your current budget. The good thing is that there are many free online resources you can use, so you can plough through a few different kinds without committing to one.