How to Create the Perfect 2019 Household Budget
Posted By Macey Farnsworth on December 3rd, 2018
New year, new you, old debts and expenses. To gain financial mastery and stop stressing over bills, set up a budget that you’ll actually stick to in 2019.
No matter what your income is, you can set up a system to pay off bills while managing to save money. Here’s how.
Determine Your Income
Your income can be from your primary employment, side-hustles you might have set up or the odd job you take on every once in a while, such as babysitting, mowing other people’s lawn or selling plasma.
Add up the incomes you typically get for one month and keep that number in mind. Let’s say it’s $4,000
Establish Your Fixed Expenses
Grab some pen and paper or pull up a spreadsheet, folks.
Write down all the things you absolutely cannot live without that you pay for monthly, such as rent, water, electricity and insurance. Hopefully, this number is less than your income.
Determine a Safety Cushion
Once you get your annual fixed costs down, determine another necessary fund: a fixed amount of money to keep in your savings to use in emergencies.
The size of this fund is, ultimately, up to your comfort level, as it can be insurance should your pet get sick, you or a spouse break an arm, the car needs a repair and so forth.
Or, goodness forbid, if you lose your job, you need to have enough money set aside to keep you afloat while you find a new job. The amount in your emergency fund changes depending on your current monthly expenses, current liquid savings and your ease of finding a new job.
Use an emergency fund calculator to figure out how much money you’ll need to survive for a certain number of months. Depending on the job availability, this could be three to nine months. Once you have this number down, add “savings” as one of your fixed costs. Let’s say $400 a month.
While emergency funds seem pointless and paranoid, they’re an asset you’ll desperately wish you had should hardship fall on you.
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List Other Necessary Expenses
These include essential purchases like gas, food, haircuts. The total cost of each category varies from month to month depending on how much you buy.
Check bank statements to be sure where money is going. Keep all receipts to figure out where cash ends up as well. Measuring these expenses will help you later on in your budgeting process.
List All Other Costs
Such costs include the fun things you do that aren’t essential to living but sure do make living more fun.
However, after seeing the amount of money spent on drinks, coffee and the cat-shaped welcome mat you bought last month, you’ll wish you had started budgeting sooner.
Figure Out Where You’re Wasting Money
At first, this can be easy. Of course, you know to buy coffee in bulk and make it at home. Of course, you don’t need cute but ultimately pointless welcome mats to adorn your front door.
No matter how frugal you are, there is always an unnecessary cost in your budget. Figure these costs out and be sure to categorize them.
You don’t have to nix them all together just yet, but for a perfect budget for the new year, you have to know where every single cent is going.
Determine a Budgeting Goal
What are you trying to do with the money you save from budgeting? Save enough for your kid to go to college? Or are you ambitious and trying to retire early in your 30s?
The end goal dictates how strictly you should set up your budget. For instance, if your child was just born and you plan on retiring when you’re sixty, you can set aside $200 a month for your child while still enjoying pleasurable expenses like coffee and movie nights.
However, if you want to save up a large amount of money quickly and retire early, you’ll have to cut away all non-crucial expenses like buying clothes, downgrade to a cheaper living space, be frugal with food and so forth.
Such frugal living puts more money in your savings but means you’ll have to forgo opportunities for social or personal enrichment, such as traveling. While some people think this is worth the cost of retiring early, others want to enjoy their lives in the moment.
Assess your future goals to figure out what kind of budget you should have. This goal motivates you to stick to your budget every month.
Set Up Your Budget According to Your Goal
Now that you know your monthly costs, monthly earnings and the amount to put aside in an emergency fund, consider all expenses you have and figure out what you can get rid of immediately (coffee from coffee shops, junk food, soft drinks, alcohol, etc.).
Then, determine the maximum amount to give to essential but fluctuating items (food, gasoline, haircuts) and figure out limits to put on each category. Budget for fun things as well, like movies or drinks.
With that, there should be a gap between your total costs and the amount you’ve earned. Let’s say you have $1000 to play with after cutting out unnecessary expenses.
You can put these $1000 straight into your savings account, put it into financial investments or use it to increase your safety cushion even more.
Monthly income: $4,000
- Rent: $750
- Electricity/Water: $100
- Insurance: $150
- Phone: $100
- Savings: $400
Total fixed costs: $1,500
New Budget for 2019:
- Food: $400
- Gas: $100
- Child Services: $300
- Clothes: $100
- Pet costs: $300
- Wifi: $50
- Other (movies, drinks, etc.): $250
Total other expenses: $1,500
Total savings: $1,000
By setting up a budget, you’ll figure out how to cut costs and save money by addressing leaky holes in your spending habits as you enter the new year.