Learn Budgeting 101 How to Create a Household Budget?

Create an Effective Household Budget

A household budget is a financial plan that compares your monthly and yearly income against your expenses. Household expenses include housing payments, utilities bills, transportation, food, and other necessities.

Paying attention to a monthly household budget is essential to understanding your spending patterns and ensuring you are not overspending on living expenses. This strategy requires you to break down your costs into different categories.

While it can be a time-consuming task, it will save you time and – more importantly – money in the long run. Not only that but having an effective family budget that you stick to monthly can relieve the stress of worrying about finances and potentially putting you in a tough spot. However, there are trusted online lenders like iCASH to help cover monthly bills or unforeseen costs that may arise.

Creating a plan for your household and living expenses eliminates the stress of payments. This way, you’ll be aware of what percentage of your monthly income each family member can allocate towards savings, debt payments, and recreation after all has been properly paid. The questions, “Will I be able to pay my bills?” or “Can I afford to do that?” will no longer be as prevalent.

The following article will outline how to create an effective household budget with easy-to-follow steps and advice to keep your finances healthy and stable.

3 Steps to Build a Household Budget

Building a household budget doesn’t have to be complicated nor does it have to take ages to put together. We know how quickly emergency expenses can creep up on your finances, but with the following tips and ideas, you’ll be well on your way to a solid budget that will ensure you have those rainy-day-funds, and can always cover your bills.

How to make a household budget

Step #1 Have a goal in mind

One of the first steps to take when building a solid household expense plan is having a goal. Such a goal could be paying of a debt within a certain timeframe, saving for college or putting money aside for that trip you’ve always dreamed to take. Write down your goals when you start to outline your budget and keep them in mind as you work on maintaining your plan.

Your goals will offer you an inspiration to not only create your budget but to stick to it. They can act as prizes you give yourself when you meet your household budgeting objectives.

Not only that but having these objectives means they’ll be incorporated into your budget, so enjoying the payoff will be stress-free because you know you’re not spending money that should be going towards rent or utilities!

Step #2 Determine your net income and map it out

Your net income is the total amount you earned minus your expenses.

Write down your yearly, monthly, and even weekly after-taxes income to determine how much you should be spending on certain things within that time frame. This will help you determine what percentage you should or can put towards specific expenses. A great way to allot money towards specific areas of your budget is to incorporate the 50/30/20 budgeting rule to help you differentiate between your wants and needs.

You can also use resources such as a monthly family budget worksheet, a household bills calculator or a free budget app to help you evaluate your income to expenses ratios and breakdowns.

Step #3 Calculate your household expenses

Adding up your household expenses each month and comparing them to your income can help you determine your excess or deficit within that timeframe.

Calculating your expenses on a regular basis will also let you know if by the end of the month you may need to apply for a quick cash loan from a direct lender.

How Much Should I allocate for Living Expenses?

When planning your monthly household budget, it’s important to know where to allocate your funds and how much to give to each category (savings/debt/recreational activities). The Credit Counselling Society breaks down monthly spending by category and outlines what each income level includes.

The recommended monthly budget breakdown for the average Canadian household is:

- Housing 35%
- Transportation 15%-20%
- Food 10%-20%
- Debt Payment 5%-15%
- Savings 5%-10%
- Entertainment 5%-10%
- Clothing 3%-5%
- Utilities 5%
- Medical 3%

Pie chart showing recommended living expenses by category

Source: Credit Counselling Society

This breakdown of living expenses should act as a good household budget template to follow and give you an idea of what a monthly spending plan looks like. It should help you in the creation of your family budget plan.

8 Tips for Sticking to Your Family Budget

Making a budget is one thing – sticking with it and developing your money management skills is another. It will not be flawless on your first try – that’s okay! Like anything else, creating and maintaining an effective household budget takes practice. Committing yourself to create a family expenses plan is a success in and of itself.

Here are 8 tips for maintaining an effective monthly living budget:

How to stick to a household budget

1. Cut non-essential expenses

In order to stick to your family budget, you need to make sure that after you subtract your spending from your income, that you aren’t left with a negative number. If you are, it means you’ve got to make some changes. Cutting back or eliminating personal or leisurely purchases and activities is the place to start.

It’s not easy – but it’s only temporary. Use the money you would typically put towards these activities or purchases to pay off your installment loans and get that income number into the positives. Once your debt is paid off or significantly reduced, you can resume spending some money on those “want” items again.

2. Review and adjust your budget regularly

Did you get a new pet? Did your child get their drivers’ license or take up a new sport? These things cost money you’ll have to add to your family budget accordingly. Adjusting your expenses to include even what may seem like small changes will make sure you stay on the right path.

Reviewing your regularly – on a weekly or monthly basis – allows you to know how well you’re working towards your goals, if anything is included that shouldn’t be or if something needs to be added that you didn’t previously consider. A budget is not set in stone – it changes as you and your family change.

3. Control what you spend on food

Creating a grocery budget and a list before hitting the store is a great tip for sticking to your family budget and will help you buy only the necessities.

Monitor what favourite products are on sale and use this as an advantage to cut back on how much you regularly spend on food. It may not seem like you’re saving much every trip to the store, but it adds up!

4. Give yourself a weekly allowance

Just as you give your kids an allowance with the idea that “once it’s gone, it’s gone,” this is a good rule to follow yourself. Creating a solid household budget means you need to give yourself a maximum amount to spend on unnecessary things each week, such as dining out or personal care products.

This will allow you to treat yourself to some small amenities without building resentment against your restricted budget and splurging later.

5. Keep your receipts and review them weekly

Keeping track of your receipts will help you have an honest view of your spending and keep you on track.

Sorting through any receipts in your pockets or purse at the end of the day and reviewing them every week will teach you things about your spending habits you may not already realize.

6. Overestimate necessary expenses

Adding 10% to your estimate of expenses gives you a good safety margin. Necessary expenses include food, electricity, water, transportation, and insurance. That way, if you spend a little more on these things than you anticipated, you’re still within your planned budget.

Of course, for those moments when even the best laid plans don’t always work out, you can always turn to safe, reliable e-transfer payday loans to help with those unexpected costs along the way.

7. Use household budgeting tools to monitor your spending

Using online tools or a spreadsheet (download our free household budget template here!), even something as simple as Google Sheets will help you monitor your spending and track changes.

If you keep up with it – entering receipts, credit card bills, mortgage payments, and other living expenses – it will ensure your living expenses budget accurately reflects your spending and income.

8. Get the whole family involved

A family budget works best when everyone is on board! Have your children help you make shopping lists and collect coupons. Encourage older kids to chip in from their paychecks and learn about keeping a successful budget.

Promote saving and keeping money aside for big-ticket items or experiences/vacations. Teach monthly payments to older children by charging minimal rent or asking them to cover their own gas when they drive the family car.

Having everyone on the same page will ensure you stick to your outlined budget and keep it as effective as possible.

What are the Average Canadian Household Expenses?

A survey conducted by Statistics Canada titled “Survey of Household Spending, 2017” analyzes monthly spending by household type. These are the statistics collected via the survey on household expenditures:

The largest household expense comes from shelter - this ranges between $1,084 and $2,071 monthly, depending on the familial makeup; single person households tend to spend the least, while couples with children spend the most.

After household expenses comes transportation, ranging from $498 to $1,517 per month - once again, couples with children outspend households consisting of one person, a couple without children, and single-parent households.

Food is the next highest expense - depending on family type, the average Canadian home spends between $388 and $993 on food every month. Clothing expenses typically range between $132 and $437, and communications services - such as cell phone bills - cost between $120 and $259 every month.

Education varies significantly based on family makeup - a single person may spend, on average, $52 per month on education, and couples without children spend $81. Expenses for single-parent households are typically $165, while couples with children spend an average of $261 monthly.

Based on the survey results, single household occupants spend $3,071 per month on the above necessities while couples without children spend $5,413. Single-parent households spend $4,691 monthly, and couples with children spend $7,341.

Montly results from the survey of Household spending, 2017 in Canada.

Source: Survey of Household Spending, 2017

Key Takeaways: Household and Family Budgeting

Creating a household or family budget may seem like a daunting task – but don’t let it intimidate you. A budget is an extremely helpful resource that allows you to track your spending, know your net income, and work towards your financial goals.

It will improve your finances and help you pay bills on time because you’ll have a clear idea of what you’re spending versus what you’re bringing in.

Many people don’t keep a budget and tend to overspend – don’t let that be you! There are plenty of free tools and online resources available to help you sort out your expenses and plan for the future.

Make sure you set goals and keep them in mind, especially when budgeting gets frustrating. It takes practice, but practice makes perfect. Having a clear, effective budget will ensure you’re able to pay your bills and build up savings for fun activities or unexpected expenses down the road.

Even when you try to stick to a budget, unanticipated life events happen. If you need some extra cash quickly, get a loan with iCASH. We offer small money loans of up to $1,500, quickly and safely online every day of the week 24 hours a day.