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Articles - Issues Of Home Economics:

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Money makes the world go around. This adage can also be applied to the world within your own four walls. Whether you are single or part of a family with children, your money has to be divided up properly, because the budget you have available defines your lifestyle and determines what you can and can’t afford.

In some cases, planning a domestic budget is totally straightforward. In others, particularly if you are in a multiple-person household, it is easy to lose track of things. Therefore, it is a good idea to keep an eye on your finances, especially if you are on a low income. After all, in this world where consumerism is everywhere, larger purchases or goals are often only available to those with the necessary financial means. Therefore: if there’s a lot of month left at the end of your money, simple budget planning can help you to keep your long-term financial goals in mind.

In a household just as in a company there are incomings and outgoings. The first step is to define your monthly income, which should be updated on a regular basis (at the start of the year or if there are any changes in your circumstances).

 

Outgoings should be divided into two groups:

  • Fixed outgoings
  • Variable outgoings

Variable outgoings must be divided into different categories, with a monthly budget being specified for each one. There should not be more than 10 categories for any given household. Of course, several categories can be combined into one.

 

Examples of categories include:

  • Food
  • Household goods (cleaning products, toiletries, etc.)
  • Clothes/shoes     
  • Drugs/medication   
  • Services (hairdressing, garage services, tradesmen, etc.)
  • Transport costs (petrol, bus, train, taxi, etc.)
  • Furniture and appliances     
  • Landline/mobile phone/Internet (excluding fixed price offers)   
  • Gifts    
  • School equipment/pocket money
  • Sport/leisure/hobbies
  • Pets    
  • Holidays    
  • Garden   
  • Luxuries   
  • One-off outgoings

Fixed outgoings are those which are the same every month and usually only have to be determined on an annual basis. These include rent or mortgage costs, utilities, insurance, home loan savings schemes, flat rate landline and mobile phone contracts, newspaper and magazine subscriptions, memberships of professional bodies, childcare costs, etc. These payments, which often become due at different times and at different intervals, must be converted into a monthly amount. This makes things easier in terms of creating a budget plan.

 

It is essential that you keep a book of household accounts if you are going to be able to introduce a practical form of budgeting. Only by consistently and regularly noting down all your outgoings can you keep track of your costs. It is important not to forget payments made on credit and debit cards. It is sufficient to note down your outgoings in full pounds (either rounded up or down); this makes subsequent calculations much easier and is precise enough for our purposes.

Receipts are enormously helpful when it comes to keeping a book of household accounts, but it is still best if you make a note of all payments as soon as possible after they have been made. It is best to use a box, stored in a place that can be accessed by all members of the household, to keep your receipts all together. The box shouldn’t be too big though, as this could encourage you to wait too long before entering the figures in your accounts book. We also recommend keeping a small notepad and pen in the box, so that small outgoings for which there is no receipt (such as payments made in the bakery, for example) are not missed.

At the end of the month you can now work out whether you have kept to your budget for each category and where there is potential to make further savings. If all members of the household are included in the accounting process and it becomes a habit to note down your outgoings, you will never again be left scratching your head at the end of the month, wondering where all your money has gone. After all, you’ll have it down in black and white.

In addition to a monthly assessment, it also makes sense to create an overview for the entire year. You should use a separate sheet to note down the fixed and variable outgoings for each separate month and deduct them from your monthly income. This will enable you to get a clear overview of which months you stayed in the black and when you strayed into the red. If there is a surplus, you can either use it to make a special purchase, to fulfil a long-held dream or to top up your savings for a rainy day.