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Budgeting for a household is a monotonous, though very useful money management based task, which is based on household monthly income and outgoings. So here in a nutshell is what budgeting is based upon, cash in and cash out. Any cash left (surplus) can be used to pay for the next month's or year's spending plans. Any deficit will ultimately mean debt finance, or essentially having to make do with less for the proceeding budgeting term. Budgeting, naturally can be used as a guide to monitor spending on items individually or as a whole.

The way in which this exercise has its advantage, is by getting senior members of the household together and setting up a spending and income plan. The money budgeted, coming in would be a realistic assumption of income from a number of sources. It may be from work employment pay cheques, dividends from stock ownership, cash received on asset sales. On a spreadsheet different headings are used to classify each income and also expenditure. The way in which the spreadsheet is written up, is more straightforward than it might seem to people who have never or who will not budget for there families budget.

Either method can be used, the Cash income can be at the top, or similarly left last. This part is irrelevant. On the left hand side of the Excel spreadsheet say starting at cell A9 until A15 for example type in all sources of income. In Cell C above the first heading the month and year description is entered i.e January. After all 12 months are written up this is the main layout of a budget.

Secondly the expenditure headings are written up in using the Cell A columns, though below the Income headings. The way in which a budget works is by detailing the planned forecast with an actual result based spending pattern. Each day, week and month income and outgoings budgeted vs actual are recorded. So if say i budgeted i would spend $10 on travel and i spent $20. This shows i am spending too much on travel. Similarly if the overall budget shows i am receiving $2000 a month, this is how much i can spend before i need to borrow. So the budget process works as a measuring tool for households to know what they are spending money on, and the accurate level of disposable income is.

Another method of use in using a forecast vs planned budget is that unnecessary items i have bought can be eliminated. Say for example i am going to the pub for entertainment too regularly or going to the soccer match, my receipts, my credit card statements and bank statements will show where my money is going, how much is coming in and out etc.

From the main cashflow budget, there are many more analytical approaches a family budget can be made, though it does divert more time away from relaxing and general enjoyment. Say for instance a $200 shopping grocery bill for a week. The shopping receipts if copied onto a excel sheet will provide a guide as to exactly if i am spending too much on a particular product. This serves the purpose of deciding if spending is too excessive or too little, for shopping as a whole.

A further guide would be to save the money left over. The whole way in which a family decides how much to save in % terms will vary naturally, though working with these numbers and monetary totals will help to determine a realistic target to aim for. The household's bank statement will be the ultimate deciding factor of their money management. The budget can also help those household's who plan to do tasks such as buying a new or second hand car, or going on holiday.

Learn more about this author, Costas Chryanthou.
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