Managing monthly expenses in an average household can be challenging, especially in today’s economic climate and times of inflation. Many heads of households face financial difficulties despite receiving salaries due to rising everyday costs and unexpected financial pressures.
Let’s learn how to create or manage a budget for a typical household.
- Creating a Budget
Budgeting is the first step in financial planning. Make a list of your monthly income and expected expenses. Separate essential expenses such as rent, utility bills, and groceries from non-essential expenses like entertainment and dining out. Always try to spend slightly less than your income to save for unexpected costs.
- Inflation and Its Impact
Inflation poses a significant challenge for average households. The prices of everyday items, groceries, and utility bills continue to rise, making previously adequate incomes feel insufficient.
- How to Mitigate the Effects of Inflation
- Shop Smart: Prioritize affordable and quality items. Purchase from large stores or wholesalers where you can buy in bulk at lower prices.
- Bulk Buying: Stock up on items when prices are low to use during inflationary periods.
- Homegrown Produce: If possible, grow vegetables and herbs to reduce grocery expenses.
- Saving on Daily Necessities
Saving on groceries and daily items is crucial. Shop at large stores or wholesale markets where bulk items are cheaper. Opt for local or affordable brands instead of expensive ones that still maintain good quality.
- Controlling Utility Bills
Be cautious with electricity, water, and gas use. Fans Turn off flights, and other appliances when not in use. Prevent water wastage and avoid excessive gas consumption; these small habits can lead to significant reductions in monthly bills.
- Limit Entertainment Expenses
Restrict entertainment expenses such as cinema visits, dining out, or unnecessary purchases. If you enjoy spending time outside, budget for such activities just once or twice a month.
- Savings for Unexpected Expenses
Unexpected expenses, like medical emergencies, can arise at any time. Save a small amount each month to manage these situations without financial strain.
- Debt and Payments
If you have loans or credit card payments, include them in your monthly budget. Always strive to pay debts on time to avoid increasing interest burdens.
- Additional Income Sources
Look for ways to increase your income, such as freelance work, part-time jobs, or small businesses. This extra income can help balance your monthly expenses.
- Future Planning
In addition to managing monthly expenses, plan for long-term goals like children’s education, home repairs, or major purchases by allocating a small amount each month.
A Real-Life Example
Ali and his wife Fatima belong to an average household in Lahore. Ali’s monthly income is 60,000 PKR. A few years ago, this income was sufficient for rent, children’s school fees, utility bills, groceries, and other necessities. However, by 2023, inflation had nearly doubled grocery prices.
Ali and Fatima’s biggest challenge was saving for unexpected expenses like medical needs or home repairs. The pressure of inflation made their income feel inadequate. When Fatima decided to cut non-essential expenses and adopt smarter shopping habits, their situation began to improve.
Fatima’s Actions:
- She realized every family member needed to change their daily habits.
- Controlled unnecessary electricity and gas usage.
- Started buying groceries in bulk from a nearby wholesale market.
- Allowed the children to eat out only once a week, resulting in savings by month-end.
- Began growing some vegetables in their backyard, reducing vegetable purchase costs.
Results:
Fatima and Ali gradually began to see improvements in their financial situation. Their monthly savings increased, and they successfully built an emergency fund.
