You have made the wise decision of making a budget for yourself. You will soon sit down with your pen and paper, and write a list of all the things you will buy and pay for your home. This is just the first step towards not only making a household budget but also understanding your financial situation. When you are making your family budget, you will also very likely sit down with your spouse and children and consider all their needs and input in the budget. Here are a few necessary things that should not be missed when making your budget.
This is the first thing you should consider. It is important to know the difference between your gross and net income. Gross income is the salary you are paid prior to deductions. Net pay is what you get after all the deductions are made. Thus, the net pay is your “take home pay.” This is the amount you should be working with for your budget. Make sure you include all your sources of income.
This is where most people go wrong. It is highly recommended that your home should not be more than 25% of your net income. This includes all expenses that go into the mortgage, the insurance and taxes.
Groceries and Food
You must eat properly to stay healthy and alive. The amount of food you take will definitely depend on the size of your family. However, when making this budget, do consider your family’s eating habits. This will include things like eating out in restaurants, orders for pizzas and even occasional treats that you may wish to have for your family. It is recommended that you spend at least 15% for this.
You definitely need to pay for electricity bills, water bills and heating and cooling. These are all essential for the proper running of your home. Here, experts suggest that you should spend at least 10% of your income on these.
Your family’s health factors should not be avoided in the budget. You will need to set some money aside for health care covers, dental insurance as well as other medical needs. Ideally, you should consider having a long term plan here, such as a life insurance cover.
This will include expenses in areas like car rentals, car insurance, student loans, credit card payments, etc. This will of course vary depending on the needs of your family. However, it is recommended that you must spend at least 10% of your income on this.
Personal Care Items
This will include things like clothing, shoes, bags, personal care items among other things that each member of your family will need for their own personal care. Clothing should ideally take 5% of your income and the rest should collectively take 10% of your income.