OK,ok,I know what you're thinking.
You're thinking I'm going to fill your head with all kinds of numbers,and information about savings and spending,and how to pay down debt.....
For starters in order for any household budget to be a smashing success,everyone who lives under that same roof must be 100% on board with the plan,the goal or goals and have a clear idea of how you are going to reach those goals.
You will need to have an accurate record of all income coming into the house,and all money going out,be it for bills,food,entertainment,etc,everything that you pay for.
Start with a family meeting,allow everyone to discuss openly what your goals are,be it a vacation or paying off the mortgage early.Have everyone brainstorm ideas for how to reach those goals,and write them all down,silly or not.
Second,there needs to be an agreement about which goal or goals you are going to work toward first.Put those in order on a list.
Third,there needs to be a clear and set plan of action,how are you going to get to goal number 1 ? 2? and so on....
My husband and I have been talking about this a lot this week,as we have three main goals,a newer,more reliable vehicle,a real,actual away from home vacation,and paying off the mortgage early.
Well,number 1 could be easy enough,just trade in the old worn out one for a newer one right?Wrong....ONLY because currently our debt to income ratio is too high.According to who ever crunches the numbers for financing,they don't think we can afford to buy a car,although we've crunched our own numbers and can see otherwise,if the bank says no,you're pretty much screwed.SO new plan,save up enough to pay cash for the vehicle we want....harder than just getting financing and picking out what you want,but it'll work for us,didn't REALLY want another car payment anyway,we haven't had one for nearly 5 years now.
As for the vacation,that will come after we get another car,and we'll do it the same way,save up so we can pay cash.It may take a lot longer than I would like,but in the end,it will be worth it.
When it comes to paying off the mortgage early,there are a number of ways to work toward that goal.One being the yearly income tax check,simply apply it to the mortgage.There is also the occasional refund from the mortgage company when your escro account balance gets too high,you can simply tell them to apply it to the principal on your loan.We are also going to be slowly increasing the amount we pay each month,as we get the other goals reached.
So,there we have a very brief lesson on budgeting and planning.