Household Budgeting & Debt Consolidation
Household Budgeting is an important task that most people don't enjoy doing. However, without a properly balanced family budget you will find that expenses and credit card debts can very easily get out of hand and outstrip your income. To make sure that this sort of thing does not happen you can utilize a good budgeting and forecasting software to keep your finances on track.
One of the most important aspects of balancing your budget is that of debt consolidation. If you have more than one type of debt with high interest rates such as a car or personal loan, credit card balance or department store purchase then consolidating debts will potentially be able to save you a lot of money in interest repayments, as well as the stress of having these debts constantly hanging over your head.
With a little bit of discipline and help from the tried and true home budgeting techniques listed below you should be able to make sure that your family budget is quickly brought under control. You can also get help to improve your financial situation with some great home budgeting tips from this website. Not only will implementing these strategies make you feel more secure financially but it will also help you to save money for those really important things that you need (ie: house, new car, holiday, etc).
You only need to work out your household budget once and after that it only occasionally needs to be altered or readjusted. It really can be quite simple. The only thing that makes it difficult is a lack of discipline.
It doesn't matter where you money comes from and how much you earn, the first and most important thing to do is to list and add up your regular and reliable income for each pay period. This can be weekly, fortnightly or monthly, it does not really matter which (although for this example we will take it as being weekly). Make sure that you put in the net income that you receive, because we are only interested in the amount that you actually have to spend each period. If taxes and fees have already been deducted from your pay then all the better, because this means that you will not have to put them into your budget under the expenses heading. Income that is not regular or reliable should NOT be added here as it is best left in reserve as bonus income that will increase your Household Savings when it does come in.
|Take home pay||$810|
|Other regular income||$70|
|Total Income (A)||$880|
The next step to household budgeting is to make a comprehensive list of all your household expenses under a few different headings. The expenses will be made up of the items in the following example, however they will differ based on your own particular circumstances. Feel free to copy the table below into an excel spreadsheet and add any other necessary expense items in order to create your own household budget template.
When calculating your expense amounts make sure that you put in a weekly expense figure. For example yearly bills must be divided by 52, quarterly bills must be divided by 13 and monthly bills must be times by 12 and then divided by 52.
|Home loan mortgage or rent||$300|
|Home & contents insurance||$10|
|Mobile, phone & internet||$20|
|Food & groceries||$100|
|Eating out & entertainment||$30|
|Clothes & shoes||$30|
|Christmas and birthday presents||$15|
|Health insurance & medical expenses||$40|
|School fees & books||$30|
|Kids pocket money||$20|
|Other weekly household spending||$25|
|Safety margin for unexpected purchases||$40|
|Petrol for car||$40|
|Car insurance costs||$15|
|Maintenance & servicing||$10|
|Total Expenses (B)||$800|
Now make a list of all of your overdue debts and bills which will need to be paid off as soon as possible. These can be any number of things from money owed to family or friends through to credit cards debts and personal loans where the interest rates are really high. Include on this table the minimum weekly repayments that are required to be made, as well as a priority which indicates which debts need to be paid back first. (ie: 1=not that important and 9=pay up or else).
If you have a lot of overdue debts or simply just a few large amounts on this table then you may want to look into how debt consolidation can help you. For proper debt assistance and management I would suggest that you seek out a professional debt counselling service and listen to what that have to say about your personal situation. Some social welfare groups give free debt advice, whilst other companies are able to tailor a debt solution to your specific needs and help you out of debt gradually.
The best advice about paying off personal loans and credit cards that I can give you is for you to have a clear idea in your head about what it is that you want to achieve before you go and see one of these debt consolidation counsellors for help. Also NEVER make a hasty decision and be pressured into any form of debt consolidation or solution unless you are happy with the arrangements and repayment schedule that they devise for you. After all most of them earn a commission based on the solution that they are offering you, so make sure that they are woking in your best interests and not their own.
|Overdue Debts & Bills||Weekly Repayments||Min Payment Required||Priority|
|Credit card debt||$900||$30||7|
|Layby amounts owed||$90||$0||2|
|Money borrowed from friends/family||$50||$0||1|
|Rent/Mortgage (in Arrears only)||$200||$10||8|
|Personal loans with high interest||$0||$0|
|Total Overdue Debts||$2040||$40|
|Overdue Debt Repayments (C)||$60|
Next comes the fun bit of household budgeting, putting all of the numbers together in order to balance your household budget. Simply total all of your regular and reliable income together and call this 'A'.
Then total all of your Household Bills, Living Expenses, House and Transport Costs together to arrive at your Total Weekly Expenses, which we will call 'B'.
Finally total all of your Current Overdue Debts and Bills and work out how much you think that you can comfortably afford to repay each week to get rid of these debts. Make this repayment figure, which we will call 'C', larger than the Minimum Payments that are required. You will be able to come back and adjust this figure later on so that you can balance your household budget properly. Also make sure that the people that you owe the money to are agreeable to your new repayment plan (ie: you are allowed to pay back more in a shorter period of time without incurring any penalties). This repayment figure we will call 'C'.
|Total weekly income (A)||$880|
|Total weekly expenses (B)||$800|
|Overdue debt repayments (C)||$60|
|Household Savings (A - B - C)||$20|
In order to work out how much you and your family can put aside into your Bank Savings Accounts for the future simply subtract figures 'B' and 'C' from the income figure 'A'. If at this point you end up with a negative value then your expenses and debt repayments are greater that your income so you will have to do one of the following things. Either adjust figure 'C', the amount that you allowed for the repaying of your Overdue Debts, or reduce your budget for household spending that you have allocated in figure 'B'. In order to do this you may wish to take advantage of some of the money management tips for saving on personal finances or reducing your household spending found on this website.
If you do not want to use the above household budget template to look after your family's finances then there are numerous Household Budget Software Programs and tools which you can use instead. Some of the more basic budgeting software packages are available online for free, whilst the more feature packed software packages can be purchased as an investment in your financial future. Alternatively you can make a budget template or budgeting worksheet of your own using a spreadsheet program like Microsoft Excel and the steps outlined above.
Good luck and happy home budgeting!