Managing our household spending - Accounts & Budget
In my last post, 'Taking stock of your personal finances during COVID19', I said that I would share how I've set up our household budget in another post. Well, here it is!
Don't get too excited, I made up the numbers in this spreadsheet.
If I motivated anyone to create or update their personal budget, I figure this could be an example of how you could set it up. Keep in mind we use this budget format for our household spending. We manage our personal spending accounts separately.
Basically, my husband and I have one goal about our finances - Live without money worries. That is the basis on which we manage our household accounts.
How we use this budget to manage our finances
1. Determine individual contributions. We both get paid bi-weekly, so we calculate the minimum amount we need to contribute to cover our expenses.
Note: We actually contribute more than needed to keep a buffer in the account for unexpected expenses.
2. Spread out the burden of our expenses. Have you ever received your last paycheck of the month and realized you needed to use most of it to pay your rent? With this budget, we set aside money each pay period to avoid such situations.
Let's use figures from the spreadsheet as an example. If we deposited $2,900 on January 2nd but our total expenses for the period; before our next paycheck on January 16th, are $1,400, we're left with a surplus of $1,500 in the account. For the period of January 16th, we had a deficit of -$560, but we already had enough money in the account to make up for this deficit. This way, we never have to worry about being able to pay scheduled bills.
3. Prepare for potential shortfalls in the account. I forecast our expenses for the entire year (based on their due dates) on the Transactions tab and use the Account Balance to know ahead of time if the account will not have enough money to cover our expenses at any given time. Therefore, I have enough time to make adjustments to cover the shortfall; increase contributions or decrease spending on non-essentials items.
Note: I do not pay too much attention to the 'Surplus/Deficit' amounts because I'm not as concerned with having a surplus every period as long as the Account Balance is healthy.
4. Simplify our monthly review. We've set up pre-authorized payments for most of our bills, so twice a month; when I make my contributions, I compare the spreadsheet and the actual account. I highlight the amounts on the spreadsheet that have been withdrawn from the account and make adjustments as needed.
I've heard people say that it is can difficult for spouses to discuss finances. Thankfully, I haven't had that issue with Douviere. We regularly check in on our progress and make adjustments if necessary. If we're on the same page we're more likely to keep to the budget we've set.
Things I recommend you to do if you're interested in using this template:
1. Keep your household funds in a separate account. Open a separate household account if you don't already have one. To simplify the transfer of funds between accounts, I recommend using the bank where you receive your paycheck.
Note: You could use this template for any budget - household, personal, or a combination.
2. Gather a summary of your spending over the last 3 months. This will help you get accurate amounts for your expenses.
3. This is optional - Designate one credit card for household spending. I'm lazy and I hate having to check multiple statements every month.
4. Remain consistent. Regardless of what format you use, maintaining a budget will help you develop healthy spending habits, resulting in more savings.
If you're still unsure of where to begin on your budgeting journey, I found this great resource on building a budget you may find useful.
If you're interested in customizing this template to suit your needs and have any questions or need some help, feel free to reach out to me. I'd be happy to help if I can.
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