Cutting Your Household Budget

Review your existing budget or one you have recently used to calculate your monthly needs. Tally all expenses. Include mortgage or rent, utilities, insurance, food, car expenses (gas, oil, maintenance), education, clothing, travel, gifting, savings, miscellaneous purchases and whatever other items you have regularly spent money on to date.

Compare your current income to the previous expenses. Subtract the anticipated income amount from the total of the expenses to get a figure that shows where you fall short. For example, in the past you've had $3,000 per month income, and your expenses including $200 for savings totaled exactly $3,000. Your new income is $2,200 per month. When you subtract $3,000 in prior months' expenses from $2,200, you are left with a shortfall of $800.

Invite your spouse or partner and family members to sit with you to discuss how best to trim your household budget. Get their input and ideas. If the cutbacks are due to someone losing a job, which can be devastating to families, talk through your fears, worries and options calmly while also discussing other potential ways to meet your needs. If you are simply choosing to cut back because you want to save more, or you find you've been spending too much on things you don't really need, then share your thoughts and ask for input before finalizing anything.

Create a new budget listing the items that are absolutely required for your general living needs. Costs for shelter and food are priorities. Ideally, make two columns next to each other and list the expenses down the page on the left. The first column next to the list of items will include all prior costs. The second one will give you revisions to meet the new income level.

Work your way down the list of expenses you previously made, taking into consideration where you can trim corners. For example, if you have spent $100 a month on gifting, change the figure to $30 for items to make your own gifts rather than purchase ready-made items. Another area to trim is fuel costs -- look into carpooling, taking the bus, or using one instead of two family cars.

Think through each expense you have commonly had in the past and ask yourself how much you truly need to spend for each budget item. Does your wardrobe need updating every six months, or can you stretch it out to a year? Ask yourself if you really need to go to the movies weekly, or would renting be less costly? Follow through until you've thought out all budget items.

Tally the new figures and keep revising until the income and expenses match. Begin to live with your new decisions as soon as possible. Sometimes, having advance notice of financial changes can help you plan ahead. Some financial advisers suggest always having savings that equate to about three months living expenses, or job-loss insurance. Yet not all families are able to make ends meet, much less have extra for savings. Use your best judgment and research your options.