How do I Calculate Household Expenditures?

Calculating household expenditures is a task that is key to keeping the budget balanced and the household on an even keel financially. In order to properly determine the expenses related to the ongoing operation of the household, it is necessary to create a realistic budget that is based on facts rather than impressions or desires. While some expenditures are fixed, meaning they do not change from one month to the next, others are floating or variable, requiring some careful calculation if the proper amount of available income is to be allocated to each budget line item.

A good place to begin determining household expenditures is to make a simple list of every ongoing expense that the household experiences. Several different types of expenditures will be included in just about any household budget, including food, utilities, clothing allowances, and a rent or mortgage payment. In addition, most households will also allocate some funds for other line items like insurance, car loan payments, credit card payments, and a wide range of other expenses. Make sure every type of expenditures, even the minor ones, are accounted for in this list.

Grouping household expenditures will also help to structure the household budget plan and make it easier to manage. For example, the food grouping may include both groceries and meals out, making it possible to allocate a specific amount of funds for each. In like manner, the insurance grouping may include line items for health insurance, car insurance, and dental coverage. With a credit card grouping, list each account separately so it is possible to set a specific amount to pay on each one monthly.

With the basic shell of the budget in place, you can then begin to allocate funds to each of the household expenditures. Begin with obligations that have a fixed amount that must be paid each month. This would include the rent or mortgage payment, premiums to insurance companies, and any loans that are currently held. After allocating sufficient funds to the fixed expenditures, move on to the variable expenses and calculate how much you think is needed to adequately cover that total monthly expense.

Calculating expenditures on the variable expenses typically requires prioritizing the remaining line items, then determining how much would be needed per week to cover those expenses. From there, multiply those amounts by four in order to accommodate the entire. This often requires using historical data to get a realistic idea of how much you normally spend on a given line item, or doing some spot checking on prices to develop an idea of how much to allocate.

For example, the food budget can be calculated by going over grocery receipts for the last few weeks, totaling the amount, then dividing by the number of weeks involved. That provides an average per week that can then be multiplied by four for a monthly tally. A similar approach can be used to calculate household expenditures such as meals out, entertainment, and even clothing.

Keep in mind that the total amount of your budget must be in line with the amount of income generated by the household each month. If you find that the total expenditures in the budget exceed your income, go back and adjust the floating or variable expenses until the total income is slightly higher than the total expenditures. This will provide a small window of surplus in the budget that can be put into savings and called upon if and when an emergency should arise.