Thursday, February 7, 2013

Household Accounts

So how is a housewife supposed to manage her budget? A simple and effective way to keep track of and eventually reduce your expenses is to keep the household accounts. I'll give a suggestion on how to do it using the example of the grocery money.

Let's say that a housewife Mrs A. gets 120 euros from her husband every week for her grocery shopping. She will write down in her ledger: Week 1 of the year 2013 - 120 euros.  She then proceeds to divide the money into 6 categories.

Meat and Fish                                                                                              20 euros
Vegetables and Fruit                                                                                    20euros
Milk, butter, milk products + butter substitutes                                              20euros
MIscellaneous articles such as cookies, jam, veg. oil and fast food                 20euros
Grain products such as bread, pasta, rice                                                      20euros
Non-perishables such as toilet paper, soap or pet food                                  20 euros

Every time Mrs A. goes to the store, she will save the receipt and later write down in her ledger the amount of money spent in each category, subtracting it from the whole, like this:

Meat and Fish
-       5.00 (steak)
       15.00  etc etc.

By the end of the week, Mrs A. will look how much money was left in every category, add it together and compare with the actual amount of money in her wallet. Ideally, it must be the same.

So, let's suggest that Mrs A. has saved 10 euros during the first week of 2013. Next week, she will add this amount to the last category, Non-perishables, and will thus get 30 euros instead of 20, which will enable her to buy a pair of lace stockings or to take her child to MacDonalds, or to lunch out with a girlfriend.

I gave an example of a weekly budget because it's easier to explain, but if you want to maximise your profits from various sales, it's better to have a two- or three-weekly budget. Since you will have more money on your hands, you'll be able to stockpile on things which go on sale, such as meat or diapers or toothpaste.

It may be so, that in the country where you live, bread is cheap while vegetables and meat are expensive, so that it will make sense to halve the amount used for bread and to add a part of it to each category, getting something like this:

Meat and Fish                                                                                                         25euros
Vegetables and Fruit                                                                                                25euros
Grain products and Bread                                                                                         10euros

You can divide your grocery money into different categories if by some reason you don't like the ones above. The main secret is once you have worked out your budget, you must stick to it and not exceed the limit. It's easier to achieve if you always pay cash, like I do. Budgeting takes some work, but it's absolutely worth it, and it also enables you to compare prices of the same products in different stores. A penny saved is a penny earned.

I hope this was helpful.

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