Budgeting household costs is an effective way to have a look at household expense and great starting point to starting reducing debt.  The next question is where to start?

The best thing to do is to grab a piece of paper and a pen. Having the information written down makes it easier when reviewing your budget to see if you have missed anything out. The aim of the budget is to understand exactly how much money is coming into the household and pinpointing where the money is being spent.  Once you know exactly what you are spending you money on, you can look at ways at reducing costs and working with your budget to make your income stretch further.

The next step in trying to create a budget is to gather all the relevant information regarding income and household costs.

We will first create two columns on the piece of paper, income and expenditure. In the income column write down any source from which the household receives money each month. This could be your salary, your partner’s salary, any state benefits, pension etc. Add up all the numbers to give your total income figure.

Now you have to look at the fixed and variable household costs. What do we mean by fixed household costs? Well a fixed household cost is something that is exactly the same every month. For example your rent or your mortgage payment would be an example of a fixed household cost.  You may want to look at old bank statements and look at any direct debits or standing orders that you many have on there. This is a good way to locate the fixed household costs.
 
The next household costs that you need to look at for your budget are the variable ones. These can change each month, for example food bills, petrol, phone bills. Once again by looking at your bank statements or by checking receipts you can work out roughly how much you are spending each month.

In order for the budget to help, you must be realistic on how much you are actually spending on certain items. It may take a month of writing down everything the household spends money on to gain an accurate view.

Once you have written down all the costs in the second column add them up. The ideal scenario is to have your income figure larger than your expenditure figure. This means you have spare cash. If your budget looks like this but this isn’t the same as real life, you need to review your budget to see what else money is being spent on that isn’t written down in the expenditure column.
Once you are happy you have all the information written down on the budget regarding income and expenditure is correct you can then look at how to save money.  Some items may jump out the page at you. For example you may have a car insurance policy for an old car you forgot to cancel.

You can look at specific ways to review the expenditure column in your budget by reading the deeper into the household budget page and the personal finance section.  By looking at your income and expenditure you can get a real understanding of where your money is being spent, and then start to save. So before reading on, grab a pen, a piece of paper and write down your household budget.