Do you ever wonder where your money goes? Are you living pay-cheque-to-pay-cheque? Have you decided that 2020 will be the year where you will finally get control of your personal finances? If you are, I have a Wealth-Builder Tip for you! In this article, you will learn How to Start a Household Budget!
This How to Start a Household Budget is not your typical sum up your income, list all your expenses, make sure you spend less than what you earn kind of thing – although I will touch on those too :D. This tip is designed for people who never did a budget before.
Reality of Budgeting
Here is what I believe.
- Budgeting is not a to-do list. Budgeting is a habit and like any other habit, it doesn’t happen overnight!
- Saving is easier if you have a goal!
Budgeting is not a To-Do List, it is a lifestyle
There are hundreds of strategies out there that will guide you how to budget, but I can assure you none of them will work the first, second or even the third time. Trust me. Just knowing how to budget or using the best budgeting strategy means you will be able to do it 100% on your first try.
Think of budgeting like toning your body. You can buy the latest programs, or go to a gym and hire a trainer but I can assure you that you will not succeed on your first try.
To tone your body, you would need to start small, be consistent, then gradually improve and intensify your training routine.
Likewise, in this Starting-A-Household-Budget tip, I would ask of you to start small. I want you to build one budgeting habit per month and be consistent in doing it every month after you learned it. I would also advise you to gradually intensify/complicate the budgeting habits that you need to create each month.
Saving is Easier if You Have A Goal
Another reality of budgeting is having a personal goal. Having a goal would give you a reason why you shouldn’t buy this or that. Without one, it would be easier for you to give in to your compulsion to buy random things that you don’t really need.
Just think about it. If you want to buy a laptop, you will most likely gonna cut your spending until you save enough. In contrast, if your goal is only to save $1000, then you will probably have a harder time resisting buying a cup of coffee or binge shopping.
Again, the goal should be personal and if possible create a SMART goal.
How to Start a Household Budget?
1. Tell Yourself It is Okay to Fail
Many people are afraid to fail maybe because our culture punishes those who don’t do good and rewards those who are. Ironically, to be successful in life, one must embrace failure and see it as a stepping stone to success.
This simple lesson is also true when it comes to budgeting.
Many people fail to do a household budget because they stop trying after they fail to be consistent with their budget. If this is you, stop being hard to yourself. Remember it is okay to fail but it is bad to give up.
Budgeting is not a project. It is a habit and a habit takes a while before it is developed.
I am not gonna lie, I would admit that I am not great with my budgeting. I know I know. Admitting that somewhat tarnishes the credibility of this tip, but at the same time, I want to let you know that it is okay not to be perfect at it.
The key to successfully starting a household budget budgeting is to develop the habit of budgeting first. I am convinced that his method will work better than if you try to do it perfectly and quit when you fail to achieve the result you are aiming. For me, it is better to have a crappy budget than not having one at all.
2. Know Why You Need to Budget – Set a Goal
If you don’t know why you need to budget, then you would not budget. Likewise, if your reason for creating a budget is NOT specific, important, or challenging to you, then you will fail in budgeting.
How to determine the “Why You Need to Budget”?
Simply ask the following:
- What will happen if I budget?
- When will I use the money?
- Who will benefit from the household budget?
- Where will I use the money?
3. Develop One Budgeting Habit per Month
Before we dive in, I just want to reiterate that this strategy is very basic.
What I want you to get out of here is to develop the habit of creating a budget and not to get the best strategy. Once you are confident with your budgeting habit, then you are free to try other strategies or other budgeting strategies that I mentioned here.
In this step, what you need to do is to decide a simple or baby budgeting habit that you want to develop. Do not try to perfectly follow a household budgeting strategy in one go because you are just setting yourself to failure. This is especially true if you never tried budgeting in your life.
Below is my suggested Timeline – Baby Habit to Develop that you might wanna do to develop a budgeting habit.
| Month | Budgeting Habit to Create |
|---|---|
| January | Collect Receipts |
| February | Read price tags/ Make a mental note of your purchases + January habits |
| March | Know your receipts (spending total) + January and February habits |
| April | Read each line of your credit card statement + January to March habits |
| May | Repeat April habits |
| June | Write down monthly expenses + April habits |
| July | Repeat June habits |
| August | Determine how much of your money is left (or owe) at the end of the month + June habits |
| September | Repeat August habits |
| October | Categorize your spending to Essential or Discretionary expense + August habits |
| November | Eliminate or Reduce Discretionary expenses + October habits |
| December | Use the extra cash to pay off bills, save, or invest |
4. Refine your Budgeting Strategy
Once you are confident with your budgeting habit, it is now time for you to refine your budgeting strategy.
There are hundreds of ways to do budgeting and each creator of the strategy claims theirs is the best. I can even claim my How to Budget and Save Money strategy is the best. At the end of the day, I want to remind you the success rate of following a strategy is not based on how clever they came up with the strategy or how foolproof their system is, but it is based on your budgeting habit.
Now that you develop one, go ahead and learn several strategies and pick one that suits your personality, belief, and financial situation.
Will you Start a Household Budget?
That’s it! Do the 4 steps I mentioned above and I can guarantee you that you will have one of the best household budgets a few years down the road.
Remember! Do not try to make a perfect household budget the first time. There is a high chance that you will fail on your first couple of tries and that might make you don’t want to do it. Please don’t give up. Try it over and over again, and next thing you know, you’ll be doing a household budget like a pro.