Managing personal finances is an essential skill to have. One of the most crucial aspects of managing your finances is building a household budget. Jehan Divecha shares seven steps to build a household budget.
A budget helps you track your expenses, save money and achieve your financial goals. However, many people find it challenging to create a budget and stick to it. In this blog, Jehan Divecha will outline seven simple steps to help you build a household budget that works for you.
List of Steps to Build a Household Budget by Jehan Divecha
1. Determine your income
According to Jehan Divecha, The first step in building a household budget is to determine your income. This includes any money you earn from your job, side hustles, or investments. You need to calculate your monthly income, including any taxes or deductions, to get an accurate figure. If you have a variable income, it may be challenging to calculate, but you can estimate it by taking an average of the last few months’ income.
2. Identify your expenses
The next step is to identify all your expenses. Jehan Divecha says, Your expenses include your fixed expenses, such as rent or mortgage payments, utilities, car payments, insurance, and loan payments. You also need to include your variable expenses, such as groceries, entertainment, dining out, and other expenses that change from month to month. Be sure to include all your expenses in your budget to get an accurate picture of your spending habits.
3. Categorize your expenses
Once you have identified all your expenses, the next step is to categorize them. This will help you see where your money is going and make it easier to spot areas where you can cut back. Common expense categories include housing, transportation, utilities, food, entertainment, and personal care. Create a list of categories that make sense for your household and assign each expense to a category.
4. Set financial goals
According to Jehan Divecha, Setting financial goals is an essential step in building a household budget. Your goals may include saving for a down payment on a house, paying off debt, or building an emergency fund. Your goals should be specific, measurable, achievable, relevant, and time-bound. Once you have set your financial goals, you can allocate your resources accordingly and prioritize your spending.
5. Determine your discretionary spending
Discretionary spending is the money you spend on things you want but don’t necessarily need, such as dining out, entertainment, and shopping. It’s important to include discretionary spending in your budget because it can quickly add up and impact your financial goals. Determine how much money you can afford to spend on discretionary items each month, and try to stick to that limit.
6. Monitor your budget
Jehan Divecha says, Once you have created your household budget, it’s important to monitor your spending regularly. This will help you stay on track and make adjustments as needed. You can use a spreadsheet or a budgeting app to track your expenses and monitor your progress towards your financial goals. Review your budget on a regular basis to ensure that you’re staying within your spending limits.
7. Make adjustments as needed
Finally, be prepared to make adjustments to your budget as needed. Life happens, and your financial situation may change. You may need to make adjustments to your budget if your income changes, you have unexpected expenses, or your financial goals change. Be flexible and willing to make changes to your budget as necessary.
Building a household budget is a critical step in managing your personal finances. Jehan Divecha says, By following these seven simple steps, you can create a budget that works for you and helps you achieve your financial goals. Remember to be realistic, flexible, and patient with yourself. Creating a budget takes time, but the rewards are worth it. You’ll be on your way to financial stability and achieving your financial goals in no time.