If you are going to set up a household budget, you’re going to need to prioritize your spending. You simply cannot buy everything you want. You have to purchase the things you really need first.

So, how do you separate your “wants” and “needs” so your household budget will be successful?

To set up a household budget you will need to do three activities:

- List your income.

- List your expenses.

- Set priorities and make changes so that your income will be greater than your expenses.

Listing your expenses is important because it allows you to see where your money goes. Setting priorities will help you control spending so it is less than your income.

You’ll need to keep an accurate record of everything you spend. Carry a notepad with you so you can write down the cost and short description every item you buy.

You can group individual items into categories to make your expenses more understandable. Keep recording your expenses for a full month.

After a month of recording everything you spend, you’re ready to set some priorities. This means that your household budget may reduce or eliminate spending for some items in order to make your expenses come below your income.

It’s always painful to begin cutting back. But, you will probably be the first to admit that your spending has been somewhat out of control.

So, are there objective ways to establish priorities within your household budget that can help minimize the pain of setting spending limits?

=== Objective Standards for Household Budget ===

Yes. The primary contribution of respected psychologist Abraham Maslow was a hierarchy of human needs. This prioritizing of needs can give you some guidance for setting your household budget priorities. This hierarchy has been described in the following form (starting with the most important level):

1) Physiological needs (food, water, sleep, personal hygiene)

2) Safety needs (employment, security of income, protection from violence, family security, health)

3) Love / Belonging needs (friendship, family relationships, social networks)

4) Esteem needs (recognition, self-respect, sense of contribution)

5) Self-actualization (ability to use your talents, creativity, appreciate life)

=== Applying The Hierarchy to Your Household Budget ===

In setting up a household budget, you should allot money for items that satisfy the physiological and safety needs before allocating money for needs at other levels. Let’s see how this works.

The physiological needs are the most important. You need food, water, sleep, and personal hygiene to survive. This helps set your household budget priorities.

Expenses related to these needs take first priority. Basic nutrition, shelter, and personal hygiene expenses take first place in your household budget.

Next in line are the safety needs. These needs include enabling you to support your family and keep them safe. Basic expenses for transportation to and from work, clothing for work, making your home and neighborhood secure (which include taxes), and health care are included here.

But, here is where you need to be careful.

Let’s look at some of the household budget items included in these first two areas such as food (basic nutrition) and transportation to and from work.

It is easy spend more money than is required to satisfy these basic needs. You may confuse expenses for basic necessities with money that would contribute to recognition and self-esteem (need levels beyond the basic levels).

For example, buying nutritious groceries and making healthful meals at home helps fulfill your basic physiological needs. But dining out in fine restaurants goes beyond the basic needs. Frequenting fast food restaurants may be convenient, but is probably more expense than a simple nutritious meal at home–and fast food is likely to be much less nutritious.

You could also consider transportation requirements for work. There is a basic level of transportation that fulfills the requirement to safely and reliably go between home and work. And there is a more luxurious, and expensive, level of transportation that fulfills the self-esteem needs.

In setting up a household budget you must carefully consider how much to budget to satisfy these basic physiological and safety needs. Reducing expenses for some items may be inconvenient and seem a little harsh. But, if there is money left over after satisfying these basic needs, you can allocate money to other levels of needs.

So, let’s say you do have money left over in your household budget after estimating how much you must spend to satisfy the needs in the first two levels.

You can then allocate money for “Love / Belonging needs”. These activities might include family entertainment, occasional dining out, or for a family trip or vacation. Other items to consider here are cable TV, Internet, and attending a movie. You could also include magazines and newspapers in this category.

If you have money in your household budget left over after allocating it to this category you can allocate money to items that fulfill the next category.

When the money you can budget runs out, you know that spending for items not yet covered will have to be deferred. This is the part of making a household budget that seems painful. But, it also relieves you of the anxiety of wondering when the bill collector is going to call or the court is going issue a wage garnishment order.

So, you can prioritize the items in your household budget in a fairly objective way using Maslow’s hierarchy of human needs. Maslow’s hierarchy of human needs will help everyone understand your household budget, give it their support, and make it successful.

Are you interested in having more money in your savings account and getting out of debt? Did you know that if you use a budget spreadsheet you will have a much better chance to get out of the debts you might have and you will have a better control over your finances? There are many ways to make sure you can pay off debts and save money. Here are some reasons why the right system will help you so much.

First, when you use a tool to help you budget you will actually be doing something very good for your financial situation. The tools that are available for you to help you with your financial problems can literally change your life and the life of your family. This is very important to know and you should understand that most people struggle with money so you are not alone when it comes to needing help with your finances.

Second, a budget spreadsheet can make life much easier for you because it can literally break down your expenses and your income into categories so that you know where your money belongs instead of going into your finances blind. Using the right budget spreadsheet will help you stay organized and really will help you to know where you money belongs each and every time you get paid.

Last, you should also know that you can usually get one of these types of tools to help you with managing your money for free. They are all over the place and even though there are some great ones that do cost money you should be able to find something that is very good for free somewhere online. Then, you can customize it to fit your life and what your expenses and income are. The main thing is that you get the help you need to get out of debt and begin to save some of your hard earned money.

Making a household budget may seem like a chore. An unreasonable and unnecessary addition to your already long list of duties. But the benefits of making a household budget greatly outweigh any disadvantages of having to do so. Here is why.

Have you ever received a letter from the bank telling you that your account is overdrawn? The charges incurred from the overdraft can be amazing. Most banks charge on average $35 for each item that is overdrawn. Making a household budget can save you lots of money in overdraft charges.

For example, if have gone over and you have five checks that come through you will be charged $35 times five which equals $175. Ouch!! Now most times the reason you go over is because you had more money going out than you did coming in and that $175 is going to cause even more problems.

This is the main reason why making a household budget is needed. A budget will help you to have a better understanding of your money. It will show you where it goes and it will help you to eliminate the overdraft fees and headaches.

Making a household budget doesn’t have to be difficult. I recommend you start out with one month. When you try to do more than that, you will build stress and you don’t need that.

Start out by collecting all of your monthly bills and your check book. You will need several pieces of paper and a pencil. Blank paper with no lines would work better, but any type of paper will work.

Write out all of your monthly bills, amount due, and due date. Here are some examples of monthly bills that are important when making a household budget:

Mortgage
Electric
Water
Insurance
Gasoline
Credit card
Groceries
Internet
Phone
Car payment

Once you have the monthly bills, amounts, and due dates you are ready to add the miscellaneous items. These items include the following.

Clothing
Vehicle Repair
Movie rentals
Entertainment

These things are ones that you could remove or do without if you had to, due to the money going to something else. These could also be one time items like registration fees for a sport or a birthday gift. You are almost down making your household budget.

Now you need to add all of these items up and add them to a different piece of paper. Add your income to the sheet as well. Now subtract your income from the amount of your bills. If you are in the black you are off to a great start, but if you are in the red, you need to reevaluate what you are spending your money on each month. You don’t want to live pay check to pay check and spend every last dime. You will want to have a cushion in your checking account just in case something happens.

Part of making a household budget is writing down the dollar amounts and what it was for, for every purchase you make. You need to do this with every purchase because you want to know where your money is going. You may have more than enough funds to cover your monthly bills but still have nothing in your account or over draw it. When you write down all of your purchases you will be able to figure out where the problem areas are and you will be able to fix them.

Making a household budget will help you to have more money each month and it will help you save for the future. Its also a great way to show you children show your children responsibility. Be sure to include them when making your household budget so that they will learn how to do it with their own money as well.

Are you sick of finding out that you don’t have enough money to go on vacations or do the things you want to do with your family or friends? Do you want to know how you can get the budget planning assistance that will help you manage your money better and save more for the fun things you want to do? There are ways to budget correctly and most people do not use the right methods. Here is what can happen if you don’t manage your money very well.

Let’s use a family of 4 for the first example with a husband, wife, and two children. Of course, this family is going to want to have a home, a couple of cars, and take vacations a couple of times a year. This is all things that have to be budgeted for or they will end up losing their home, cars, and will never end up on vacations. What happens if the major bread winner in the home loses his or her job? Do they have savings to help them through this situation?

For the second budget planning assistance example we will use a single college graduate. This person only has to budget for themselves, but in most cases they go out to eat more and go out for social drinks more often. This can add up in a hurry. What happens if this single person does not manage their money to accommodate their lifestyle? Do you want to be driving a buy here pay here vehicle because your credit is bad? This could happen if you don’t get good budget planning assistance.

The last thing we will talk about is retirement. For those that are under 30 you might not have thought about this yet, but you should be thinking about it. Retirement does not have to happen in your 60s or 70s. If you start saving a little bit now it will add up to quite a bit later when it comes down to it and the interest has piled up. You could retire in your 40s or 50s if you wanted to.