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Money is not the only pre-requisite for running a household successfully. What is needed for smoothly managing household finance is effective budgeting.

How to create a budget?

It is best to create a monthly budget based on your monthly income and expenditures. This means you not only take into account the major expenditures but also the money you spend dining out or shopping and the amount of money you need to save monthly.

If your pay is not fixed and depends on your performance, such as the income of a salesperson, you need to calculate an average for the last six months. If the income fluctuates, it is better to create a budget for the worst scenario so that you can cope well if things go downhill.


Identifying all your expenses is the key to creating a good budget. Significant expenses are the easiest to track since they are fixed and money needs to be spent on them regularly. Examples of such costs are house rent, school fees, debts, and insurance. Next, you need to estimate how much you spend on utilities like electricity, gas, and water. Also, include the money you spend on internet and telephone. The best way to do this is to look at receipts of the last six months and take an average. A rough average of transportation costs is also necessary to include since they tend to fluctuate. It is also imperative to include unexpected expenses like repairs and medical or travel expenses so that you do not panic in times of uncertainty. Lastly, have a rough idea about your smaller expenses like shopping and going to the movies. Tracking them makes it possible to know how much you are actually spending and cut back on them (if needed) so that you are able to save more.

Savings, debts and emergency fund

If you plan to save, it is important to decide the amount after subtracting the money spent on the expenses mentioned above. It is crucial to save if you are dealing with debts like student loans and mortgages. Debts are distressing and require you to plan ahead. Check how much you will have to pay every month and save accordingly. However, do not be too frugal and save the exact amount as you can always save more in the months when you get a bonus or a pay raise.

Life is full of unexpected turns and twists, so it is wise to have an emergency fund to fall back on in case you lose your job or there is any medical emergency. However, you need to prioritize depending on your situation. If you are in debt, it is important to first pay that off or save for it instead of investing in other things or contributing too much to the emergency fund.


It is important to save money, but just saving it will not help much. If you want to see your money multiply, it is wise to invest. You can invest it in shares, real estate, business or stock exchange, provided that you are cognizant of every aspect.

Once you have all your expenditures laid out and are clear on how much you want to save, you can set realistic limits for spending and promise yourself to adhere to it to yield the benefits of budgeting.