Personal Home Budgeting

With times tough and getting tougher, household budgeting is more and more important. Each year thousands more families and individuals are finding themselves unable to make ends meet, or at least finding themselves without cash when they need it. In many cases the gap between income and expenditure is genuinely impossible to close, but in many others the problem is simply a failure to budget and plan effectively.

Financial woes as a result of failure to budget properly hit families at every income level from underprivileged families living hand-to-mouth to families on very healthy incomes, often a double income, who are – and this is the surprise – also living hand-to-mouth.

It’s a sad fact that many people on what could be comfortable incomes who, in their professional lives, are responsible for keeping companies large and small solvent, may not apply the same discipline to their personal household budgets.

There’s nothing essentially difficult about preparing household budget. There are three steps involved: first is to add up how much is coming in each month; second is to add up the fixed and essential costs occurred in the same period, and; third is to subtract the second from the first and allocate the remainder to inessential costs.

Of course there are any number of variations in exactly how that will be done. If expensive food and wines and lavish entertaining are part of the essential, perhaps it’s time to define just what that word means to you. Other costs such as insurance and savings which could properly be regarded as essential may have to go by the board. But essentially it’s not difficult to reach agreement, either with yourself or your domestic partners on how the available income should be allocated.

Drawing up a budget is the easy part. The phase where so many people come unstuck is sticking to it. We all know the situation: you’ve spent all of this week’s disposable income on buying books when you suddenly discover your favourite band is playing tonight at a very expensive venue. So you borrow £100 from next week’s surplus cash. The problem is that next week a friend arrives unexpectedly to stay for a few days and you just have to entertain them. By the end of the month, there’s no money to pay the phone bill, so you put it on the plastic and that’s where the trouble begins.

We don’t see it as a twenty-first century concept, but what’s needed here is discipline. If you have only, say, £80 to spend on inessentials this week, then once you’ve spent it you must regard yourself as, to all intents and purposes, broke. Stay home, don’t spend, and wait for next week. But then again if all of us, including the government, were able to do that, life would be very different every month.