How to Handle Your Household Budget

With household budgets being squeezed from every direction right now, the need for firm control over your finances has never been stronger.

If your budget is constantly getting the better of you, here’s a tried and tested method for bringing things back under control.

We’re not taught much about how money works at school, and often it’s not a subject that comes up at home either when we’re children. The result is usually a lot of financial mistakes that can take years to put right, and this naturally makes money the enemy.

Seeing managing money as a rewarding exercise takes a bit of mental adjustment. It helps if you can start seeing your personal finances in a more business-like manner. Just like in accounting for business, managing your household budget is largely about balancing what’s coming in with what’s going out.

You also need to pay attention to the everyday small spends, because these are the ones that can mount up behind your back. For instance, £40 a month on a subscription might sound like a lot but having coffee with friends in your lunchbreak every day can easily be costing that much.

Once you get a handle on where you’re spending money, you can start making informed, intelligent decisions about whether you want to carry on, or trim back a bit.

It’s the knowing that makes the difference.

It’s easy, and you don’t need any special knowledge or computer skill to do it. Spreadsheets are fine if you like them, but a notebook will work just as well. 

So, in a notebook or spreadsheet, make four columns:

Date - this is when the transaction happens. 

Item - what you bought, or what you earned since you also need to track income. 

Cost - how much was spent or made. 

Balance - this is a running total of how much you have available to spend. 

Start the balance column off by checking your latest bank statement. Write the figure at the top of the column, then add or subtract what you’re spending or earning each time you make an entry. Don’t forget direct debits or standing orders. You can add those in immediately if you want, then you won’t forget them as the month goes on.

Depending on how many transactions you have, you might need a new page each week or each month. Do what works for you. Add the balance at the bottom of one page to the top of the next page to start the new column.

A tracker like this doesn’t have to be a permanent fixture in your life if you find it a chore. If you can do it for a year you’ll have a solid data bank, but just keeping it up for a couple of months will give info you can work with.

Having amassed all this data on your spending, what do you do with it?

Because you wrote down what each item was, you’ll have a record of the things you buy so nothing gets forgotten. Armed with this history, you can delve into category spending.

How much spent on groceries (there’s a great resource about supermarket spending here) 

How much spent on motoring. 

How much on clothes. 

How much on take-aways. 

How much on entertainment. 

How much on phones or other tech. 

How much on rent or utilities. 

The list goes on, but you get the idea. 

By sorting your spending into categories, you can see clearly where the money is going. And once you know exactly where your money is going, you can choose how and where to cut back if you decide that’s necessary. 

By budgeting like this, you can choose the least painful ways to cut spending so you can save more for special things like travelling or celebrations. You can make informed decisions, such as maybe carrying on going out with friends but cancelling a magazine subscription or looking for a cheaper phone contract. You start to see options, and your choices will be smarter.

For lots of us, anything to do with money or accounting sounds like it’ll be a painful exercise. But it doesn’t have to be. Once you really get a hold of what’s happening with money, it can become fun and a rewarding personal challenge. And if you find you enjoy a creative financial juggle, it might even lead you to a lucrative new career in accounting.