Quantcast

Household Budget Plan How to Achieve Financial Freedom

When you first prepare your household budget plan, it is common to find expenses totaling more than your income. You will see this as you use our free budget template. This is OK provided you are ready to make adjustments and changes. You'll either clock more work hours to increase your income or make adjustments to your expenses until you achieve a balance. Even though both options are viable, the latter is the quickest and easiest option to take.

Organizing and managing expenses from the start is critical to your success. That way you will easily make changes and adjustments without a lot of stress and soon be on the road learning how to achieve financial freedom!


Why a Household Budget Plan Fails

The reason many people have so much anxiety over their finances is because they have no idea what their household expenses really are. Other reasons include:

  • Failure to prioritize expenses
  • Failure to account for discretionary
  • Failure to include periodic expenses (weekly, quarterly, or annual)
  • Failure to plan for the unexpected

So, how should you go about creating an efficient and effective household budget plan? Here are three easy steps.


How to Achieve Financial Freedom in Three Easy Steps


    1. List all Monthly Expenses Including:

    • Periodic expenses: although most expenses are monthly, some are weekly, quarterly, or yearly. Transform these weekly purchases into monthly by multiplying by four and divide annual and quarterly expenses by 12 and three respectively to calculate a monthly figure for your budget. If these expenses are not due this month, add these funds to savings and pay them when they are due.

    • Discretionary expenses: these are part of your normal doubt of pocket expenses; things that you typically buy that you could live without. This is one of the top budget busters.

    • The unexpected: no matter how meticulously we prepare, there will always be expenses which will arise that we had not factored in. Therefore, include an amount for building in an emergency (reserve) fund for such expenses.


    2. Categorize Expenses for Easier Management

    After listing your expenses, categorized them for easier management. Divide your household budget plan into:

    • Fixed expenses. These include things that remained unchanged every month such as house rented or mortgage, loan repayments, insurance premiums, etc.

    • Variable expenses. These fluctuate depending on needs, time of year, health, economic conditions, and other factors. They include such items as food, clothing, utility bills, etc.

    • Discretionary expenses. These are things you can live with the out.

    Why categorize into fixed, variable, and discretionary? You will find it much easier to manage your finances effectively. When you want to make changes or adjustments and your spending, you'll know which expense category to go after. Mostly, you'll find that it's mostly the variable and discretionary expenses categories which will be involved to balance your household budget plan.

    Before I for get, be sure to carefully monitor how these categories are doing as they will work to undermine your efforts if you're not careful.


    3. Prioritize Expenses

    Finally, after listing and categorizing, it is very important to prioritize your expenses and two top, medium, and low priorities. Discretionary expenses should be and the low priority group.

    If you are faced with a situation that requires you to make changes or adjustments, be sure your household budget takes care of top priority expenses first and then consider the rest. If an expense is not a priority, roll it over to the next month. And look over all discretionary expenses to see what you realistically are willing to sacrifice to make your budget balance.

To help get you started on your own household budget plan, my friend Eddy over at Personal Finance Insights created this free budget template for you to start organizing your expenses now. Print it, sit down in a nice quiet place and began filling it out. This is an amazing tool to get you started learning how to achieve financial freedom.

When you have worked on your own household budget plan, learn how living on a budget is a boundary to ensure financial freedom and protection. What? Boundaries allows freedom and protection? Absolutely!

The next article in this making a budget series gets to the nuts and bolts of how to make a budget.



Return from Household Budget Plan
to Household Budget Made Easy
.

Have Your Say! Please give us your thoughts in the box below.
Share this page:
Did you enjoy this page? Please link to it on your website ....

Would you prefer to share this page with others by linking to it?

  1. Click on the HTML link code below.
  2. Copy and paste it, adding a note of your own, into your blog, a Web page, forums, a blog comment, your Facebook account, or anywhere that someone would find this page valuable.