Living in a New Home and Within Your Means

When setting up a household budget, you have to think about big-ticket items, such as how much you should spend on rent or mortgage payments, how much to budget for utilities, and what it will cost to buy homeowners or renters insurance to protect yourself in case of catastrophe.

But other expenses, such as what you spend on an average Saturday night out or on cable bills, are important pieces of a household budget as well. And with the high cost of food and fuel, you might need to pare back your household entertainment expenses if your heating bill is skyrocketing.

It may be time-consuming to calculate what your household expenses will be before you move into a new home. But creating this kind of budget before you move will make your financial life easier.

Here's how to create your own household budget: Start with basic household expenses: housing (rent or mortgage), insurance (homeowners or renters policy premiums), utilities (phone, electric, gas, cable, Internet service, wireless, etc.), food, entertainment, clothing, home furnishings (painting, carpeting, furniture, etc.), transportation, savings, donations, medical, household cleaning and maintenance, and school supplies, day care and other children's expenses.

If you own your home or will be buying one, be sure to include costs for maintenance and upkeep, real estate taxes, and homeowner association dues or monthly maintenance costs.

A big clue to what you will spend in the future can be found in what you're spending right now. If you don't already track your household expenses, you should buy a small notebook and start writing down every cent you spend. A trick I still employ is to wrap a sheet of paper around the dollar bills in my wallet (a piece of sticky notepaper works, too). Then, any time I take dollars from my wallet, I write down how much I spent in cash.

You probably pay a lot of your household expenses with your checkbook, so run through the checks you have written or sent online, and jot them down in your notebook. If you have a pocket or purse full of receipts, be sure to add those as well. Go online to check your credit card accounts, and write down all purchases you have made in the past few months.

If you track your expenses with money-management software, such as Quicken or Microsoft Money, you will be able to get your hands on these numbers quickly. If not, consider using free online services to track your household expenses, such as Quicken Online or Mint.com. You can upload your credit card charges and bank information to your online accounts, which should update automatically. You can then check this information from anywhere you have an Internet connection.

Once you know what you're currently paying, you should analyze whether you're living above, below or at your means. Then, try to calculate what your basic expenses will be in your new home.

Will your new mortgage or rent payment be higher than what you're paying now? What if you factor in taxes and insurance? Will these higher payments be affordable, or will you straining your budget?

Don't underestimate the extra one-time costs associated with your move. You may have to hire movers or rent your own moving truck. You will need to clean your new home and perhaps buy draperies, appliances or light fixtures. While these one-time expenses shouldn't sink your ongoing household budget, they can drain your cash reserves, so be sure to plan for them when you're saving up for your move.

When it comes to setting up a household budget that works, you've got to be realistic and conservative. You should be realistic about what things actually cost, so if you don't know, take the time to find out how much your property taxes will be, for example. For numbers that can't be known, you should estimate expenses conservatively. So instead of guessing that your energy bill will be $200 per month, set your budget number at $300 or even $400 per month. The worst thing that will happen is you'll wind up with some extra cash at the end of the month.