The end of summer is the perfect time to re-plan expenses and reconsider the family household budget in preparation for the remainder of the year. Often overlooked or in some cases, considered ridiculous; budgeting, for most people, has become an essential part of everyday life.
Most people will spend the majority of their household budget across the summer holiday period on trips abroad, to the beach, hotels or on the unavoidable back-to-school campaigns.No-one is saying budgeting is easy, but the summer period creates the perfect opportunity to start planning.
The first step to any budget is to put together a list of expenditures that your household will likely incur over the next few months. Here are a few of the main areas to consider:
A home is one of the most expensive ‘big ticket’ items that many people will purchase in their lifetime. Housing costs are constantly on the rise, and so are mortgages and rental prices, and when you start to add on the additional cost of home insurance and utilities, the expenses begin to stack up.
Budgeting experts are constantly talking about this issue and suggest that a family should only set aside 30% of their household income, whilst others have even suggested as low as 20%. The best way to budget for housing expenses is to split it up into the following areas:
– Mortgages: 52%
– Gas, Water & Electricity: 20%
– Furnishings: 15%
– Household Supplies: 7%
– Other: 6%
[See: Citizens Advice – How To Work Out Your Budget]
How do you plan for events which come out of the blue? It may seem like there are an infinite number of expenditures to plan for since the cost of energy, travel, insurance and debt repayments are all on the rise. So how do you make sure you always have money in the bank when unexpected costs crop up?
The trick is to consider the unexpected costs as expected. It is unlikely that you will be able to plan for every single eventuality, but by making preparations in your budget and setting money aside you can make unexpected costs a lot easier to deal with. The holiday period is notorious for catching out the majority of people with unanticipated bills on top of the tidal wave of outgoings and this can tighten up a household budget significantly.
Sculpt and whittle down your budget for the household so you are no longer working from pay day to pay day with very little disposable income left over. The best approach is to list out all your key expenditures and look at the number of pounds you can afford to save. 20% is the recommended saving threshold, but even if you manage to save 10% of your income, it could help in the long run. It’s also a good idea to keep an eye out for any nifty little techniques to save money friends or colleagues might have found.
Travel and Transport Expenses
Transport does not just apply to the payment for a vehicle every month, it also includes the refuelling and repair costs which can occur on even the newest of cars.
Budgeting for travel is an essential part of everyone’s life and the determining factor of whether you use public transport or your own car does depend on distance, job type and location, but where possible the overriding factor should be cost. Most Brits will spend around 16% of their monthly budget on commuting, 8% more than the recommended amount. However, this is not something to be worried about as the majority of this budget is necessary and in the main, out of your control.
Cars are often a status symbol for people and for those who are in the market for a new one, we would suggest shopping around by going to a number of dealerships to get a feel for price – but remember to stick to the budget that you can afford! It’s important to remember the high maintenance costs from higher-end brands and the increasing road tax on less economical engines.
The Food Shop
Generally, people will spend around 5 to 10% of their monthly income on their food shopping. Living by the motto “spend smart, eat smart” is the best way of guaranteeing that you get a healthy three meals a day. With careful planning, a family should be able to live on £17 per week per person, which is based on the recommended intake of calories (2,500 for men and 2,000 for women).
People living on tighter budgets will save additional money by making freshly cooked meals at home, as they won’t have to pay the 20% VAT on prices at fast-food takeaways or restaurants – not to mention naturally establishing a much healthier diet for the whole family in the process.
[See: How To Save Money On Food]
Family and household budgeting is never going to be smooth sailing and most people will encounter great difficulties when managing their money on a tight income. Best practices dictate to always be prepared for the unexpected, such as a broken down car or an increase in energy prices. By putting something away for the unknown expenses, as well as the known, you can always re-allocate your income and relieve the strain when it really counts.