How to Keep Household and Personal Accounts

Household Financial Planning & Managing Expenses to Stay Out of Debt

Many people make a New Year’s resolution to manage money better. But for effective household financial planning, it is necessary to know exactly how much money is being earned, and where the outgoings are. This is how to start doing this.

Calculating Household Income

It is important to decide at the start of this exercise whether to use annual income, monthly, or weekly. It doesn’t matter which is used, but it is necessary to stick to one of these throughout. Annual may be easiest, as much expenditure, such as insurance, is on an annual basis.

Calculate exactly how much money is coming into the household. Consider all earnings, including part time or casual jobs. This can be done as gross pay or take-home pay, but if gross pay is considered, an amount for tax will have to be considered when calculating expenditure.

Calculating Household Expenses

This is more difficult for most people. Write down exactly how much is spent on everything the household uses or does. Be honest; if spending money on clothes or holidays is always done, then include it – it can be removed later if necessary. For most households, the following are necessary expenses:

• Mortgage or Rent

• Food and General Household Expenses

• Car, Servicing, and Petrol

• Insurance

• Heating and Other Regular Bills

• Council Tax

• Water Rates

• Clothes and Entertainment

• Holidays

• Subscriptions

• Phone

• Income Tax (if income considered gross)

Household Budgeting

Now look at income and expenditure, and see if the family is living within their means. If so, congratulations! Now all that is necessary is to keep a check on the figures to make sure they are correct.

If income exceeds expenditure, then and only then is it OK to spend more – although perhaps saving for an emergency or rainy day would be a good idea.

If expenditure exceeds income, then something needs to be done. Perhaps the household could cut down on entertainment, or do things which are cheaper. The other alternative is to increase the household income. For instance, suppose there is a $2000 shortfall annually. This is less than $200 a month, or $50 a week. Perhaps one family member could take a part time job, sell items on eBay, or otherwise increase the household income by a small amount each week.

Every household will be different, and it is difficult to manage money this precisely, especially if one has children and household expenses vary dramatically. But careful accounting and planning like this enable a household to start living within their means,