Financial life planning – Setting up household budget

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Financial life planning - Setting up household budget

Financial life planning – One of the best ways to save money and manage household finances is to establish a budget or proper financial life planning so that income and expenses can be clearly monitored. A budget ensures that bills are paid on time, as well as helping families to clear debts and achieve savings goals.

Even simple home financial life budget solutions can help to bring order to chaotic finances.

Step 1 – Household Budget Preparation

Collect all receipts in a box for one month. A shoebox is ideal. If no receipt is issued, note the date, item and amount on a piece of paper and include with the other receipts. At the end of the month, divide the receipts into appropriate groups.

List regular expenses, including all weekly, monthly, quarterly and yearly payments. These will include bills such as telephone, gas/electricity/water, rent, mortgage, rates, insurance, school fees, etc.

Step 2 – Assessment of Household Budget Items

Income and expense totals in financial life planning can now be compared. Assess where changes need to be made in spending habits to create a workable budget that will balance and achieve any savings or debt repayment goals.

Divide current expenses into categories:

NECESSITIES (utilities, rent/mortgage, insurance) – These bills are a fact of life and can’t be avoided. Shop around to get the best deal to limit these expenses as much as possible.

ADAPTABLE – haircuts, groceries, entertainment and activities. These are necessary expenses that can be modified more easily to fit in with budget restrictions. Groceries are necessary, but there are less expensive alternatives for most items and some stores have lower prices than others. Allowances need to be made for children’s sporting/extracurricular activities, but it is sometimes necessary to limit the number of activities undertaken.

EXPENDABLE – Doing without some luxury items in the short term can have a big impact on balancing a budget, especially if aiming to pay off debts and/or achieve savings goals. Limit these purchases to ensure long-term financial stability. Expensive clothing and jewelry, regular meals at expensive restaurants, magazine subscriptions, pay-TV and regular CD and DVD purchases can all be excluded from the budget or limited to an occasional ‘treat’.

Step 3 – Implementation of the Household Budget

Draw up a new budget or financial life planning form showing planned allowances for each category. Be practical. A previous grocery bill of $250/week is unlikely to be reduced to $100/week overnight. Ensure that there is an amount allocated to saving and/or paying off debt. To provide motivation to stick with the new budget, have a specific short-term (reducing the weekly grocery bill by 10%) and long-term (such as paying off the credit card debt within 18 months) goal.

Reassess the budget after one month, making any adjustments that are necessary. Assess again after three months.

Money management and financial life planning come easily to some and not to others. If preparing a budget seems too daunting a task to tackle alone, ask for help from a more financially organized friend or family member. There are a variety of helpful organizations and businesses that can also assist with bringing order to disorganized finances.

Top 3 Tips for Organizing Bills

Managing bills and important documents is a skill that must be practiced several times a month. Putting a system in place to manage bills can help eliminate stress and worry regarding misplaced bills. College students, young families, singles, and anyone experiencing financial problems can benefit from organizing bills. Here are three tips to help address each bill before payment is due.

Millions of dollars are collected each year by companies, due to late payment fees. Handling paper bills in a timely fashion ensures that personal income is not lost to late fees. Time spent making sure that bills are paid will save the household budget thousands of dollars annually. Examples of high late payment fees are credit card payments, department store credit cards, installment loans, and utility payments.

Mail Sorter

Invest in a system to sort mail. This mail sorter could be a divider system that holds different size documents or a simple flat bin from an office supply store. If personal time each week is extremely limited choose a specific day each week to go through and open each piece of mail. This task could easily be included in written weekly chore lists.

Bill Organizer

Decide when bills are going to be paid. This could be on the first of the month or weekly. Place all bills in a file folder, bill organizer, or organized family binder. This binder can be opened for quick reference on all household bills paid. If over the phone or online payments are made to make a record of the confirmation code on the bill with the amount paid and payment method. Be consistent in the way bills are stored and paid. If illness struck, a trusted friend or family member should be able to understand records of these bill payments. When billing errors are made be organized enough to quickly locate proof of all payments made on an open account.

Online Bill Pay

Online bill pay can help keep track of bill payments easily. Routine bills that occur each month can be scheduled in advance. One online session of paying bills can create peace of mind, and a record of paid transactions. Online bill payment records can be printed and filed for household records.

Taking time to open and go through bills can help the household financially. Bills left unopened can create additional financial problems. Reviewing all bills helps to quickly clarify any deficiencies in the budget before the outstanding amount is due. Use these tips to help stay out of debt, organize mail, and keep organized family household records.

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