The Realities of Household Financing

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This is a very broad topic of very high importance. Most of you have thought about your personal financial responsibilities in theory, but in reality, the American stats regarding savings show that 58% do not have a retirement plan and an increased credit card debt withstanding at $ 15,204. With these alarming facts, a realistic budget planning of the household expenses is very important.

The good profits of business markets are subject largely on its active usage by the households. To study household financing is perplexing.  Household behavior cannot be measured precisely because the constrictions faced by households are not apprehended by textbooks, as well as fixed prices, uninsurable earning hazards, borrowing constrictions, and are not neutral agreements in comparison to inflation.

Many households are practically active financiers, but a marginal create major blunders. This minority appears to be poorer and less educated than the majority of more successful investors. Studies show households don’t make qualified decisions rather they prioritize their own restrictions. This has been discussed in five subheadings for easier understanding:

Making a Budget

With budgeting, debts can be eliminated from your life.  You can control your financial future and enjoy a more relaxing and happier life. For budgeting, follow the following steps:

1. Tracking your expenses:

Keep a record of all expenses of each month by saving all receipts and credit card statements. At the month end, note how much money you have left.

2. Enlist purchases:

Make a list of all purchases and expenses in a month.

3. Write your budget down:

Now keeping in perspective your previous monthly expenses, make a budget in which you will distribute earnings to each expense. 10 – 15 % of your income should be allocated for savings per month as per recommendations of any financial adviser you’ll talk to.

4. Be realistic and honest:

Adopt a realistic approach while making the budget. Allocate realistic numbers to each expense and savings. Don’t put down a figure which is not possible for you.

5. Keep track of your budget:

Monthly expenses vary a lot and so does a budget. By keeping track of your expenses and your budget, you can have an idea as to where you are wasting your money. This money could be utilized for more meaningful needs. Plan for unforeseen expenses also in your budget such as unforeseen medical fees, accidents, surprise expenses, etc.

6. Spend your money wisely:

Avoid buying an item which you will use for a short time, rather rent out or borrow it. If you need to use it for a longer period of time, make a cost analysis of rent and purchasing first, then make the final decision.

Buying a house can be a monumental expense for many. The best practice is to pay a larger amount on your down payment, make 26 down payments instead 12 if you can afford it without compromising other budgeted items. This will lessen your interest payments.

Minimize credit card utilization. This will save significant money which otherwise you are wasting on interest fees of credit cards. If you are spending more than your credit card limit, you are dragging yourself into debt and more interest fees.

Spend according to your current earnings, not what you are expected to earn in future. This will save you from going far down the debt tunnel.

7. Be smart with your investments:

Make small investments in small businesses. Invest in retirement plans. Invest wisely in stock markets. Invest for a longer time and for more than one stock to gain maximum and have minimum loss. Take a different kind of insurance plan to deal with unexpected emergencies.

8. Build your savings:

Start saving as early as possible. Start saving for a rainy day or emergency fund. This will enable you to deal with emergencies without borrowing money and incurring interest. Save for at least 3-6 months’ expenses.

Eliminate debt from your life as soon as you become financially established by beginning to pay off your mortgage and other major loans.

Begin saving for retirement. Make it a priority.


By adopting a few small and consistent alterations, you can take control of your household finances and can easily resolve household financial problems.

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