In many respects, running a household is the same as running a business. Money comes in, money goes out, and at the end of the month there is a profit or loss balance.
Like any business, to keep a handle on things (and especially if there is a minus at the end of the month!) you need to have a “board meeting” with yourself at the kitchen table. As Financial Director, you need to draw up a Household Budget. You will need:
- Bank statements
- Credit card statements
- Details of any savings or investments
- Utility bills (ideally over 12 months)
- Full breakdown of income – regular and sporadic
- A list of fixed outgoings – mortgage or rent, minimum credit card payments, children’s expenses, household food, utility bills, car expenses etc.
- A list of variable outgoings – entertainment, holidays, gifts, clothes etc.
- Other occasions to budget for – birthdays, Christmas etc.
The most important thing is not to leave anything out.
If you do your budgeting carefully, you should be able to account for every pound that passes through your home. You can use this great budget planner to help you put things down.
Keep a record
Next you need to draw up a spreadsheet for every month. This can be on paper, or on your computer. Put outgoings down the left column, day of the month along the top.
The fixed outgoings can be put on the spreadsheet immediately, based on your bank statements and utility bills; the variable can be added as the month goes on.
Here’s the clever bit. Based on your historical spending and the amount of money you have to play with, you need to work out a “Target Spend” for each category.
Carry a small notebook with you everywhere you go, and record absolutely everything that you spend. It just takes 5 minutes at the end of every day to update your spreadsheet with your daily figures.
At the end of the month you will be able to enter your “Actual Spend” for each category. How have you done?
You should start to get a very clear picture of where you are overspending and areas where you can save. If you have excess funds left over you can choose to repay debts, or save for future variable outgoings.
Henrietta Oxlade is an Independent Financial Planner with Radcliffe & Newlands and MyFamilyClub’s in-house finance sage! She has been advising individual clients since March 1988, which is why many of her clients consider her part of the family. If you want to get in touch with Henrietta, email us on firstname.lastname@example.org and we’ll put you in touch.