By Samuel Rosenberg from Caribbean360

NEW YORK, United States, Monday August 25, 2014 – When you are challenged with difficult problems in life, you can either face up to them or walk away and hope someone else completes the task for you. Sometimes, failing to complete the task will cause you further difficulties, but if you do not set up and maintain a household budget, you might end up in financial difficulties that might cost you significantly in the long run.

Unless you understand where your money is being spent, you will not comprehend what you can do about it to change your lifestyle. Completing and maintaining your household budget will help you plan for the future, because in the absence of proper planning you will be unable to receive financing to purchase a home, upgrade your vehicle, send your children to university or pay for their wedding.

To achieve long-term success, you will need to create a budget to manage your income and expenses and all of your finances.

Where you are living with other people, either as a student sharing accommodation or as a family with children, your household budget has to take into account everyone and all of their complicated income and expense requirements.

Fortunately, international brands like Microsoft and Apple along with a high number of other software companies, can offer you software which helps you complete all of your budgeting arrangements, with ease. For those that live their life on a mobile phone or tablet computer, there is an app available to help you with your budgeting. The right online tool or even a free template download to your Excel spreadsheet can provide you with all of your planning materials.

When you are considering your household budget, you should be aware that some people in your family unit may be out of work from time to time and you need to organise sufficient cash flow so that all of your expenses can still be met, even when one person is unemployed.

There are two types of expenses attached to your household budget and understanding the differences will help your planning. Fixed expenses will not change from month-to-month so you will be paying the same amount on your mortgage, for your television viewing and for loan repayments in each period.

Variable expenses are exactly as they would suggest where the amounts can change greatly from month-to-month. These will include the amount you spend on the essentials like your utility bills and food and most important to you, your mobile phone bill. The amount you spend on clothing is also a variable expense as there may be some months when you do not need any new clothes or have the spare cash to buy any, whereas when you receive a bonus from work that might be the time to top up your wardrobe.

There should be an element of savings in your household budget so that you don’t fall into the trap of spending all of your income after your expenses have been paid on entertainment and meals out so that you begin each month with a nil balance.

Where you specifically mark an amount of money, which might be a set number of dollars or perhaps, 10% of your income after expenses, you will be building up a lump sum of money which can be used for emergencies or planned expenses in the future. This may mean the difference between purchasing a cheap car which will let you down, or a more expensive car which is more likely to be covered in a warranty.

Once you have set and maintained your first household budget, you will be in charge of your money and not the other way around.

IMAGE: samuel-rosenber The writer is the founder and CEO of Axcel Finance Ltd., the leading regional microfinance institution. Share your thoughts and email your questions to [email protected]

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