How To Create A Family Budget: The Ultimate Guide

When it comes to managing your family’s finances, knowing how to make a family budget is crucial.

Without a budget, you’re prone to fall into the trap of overspending, getting into debt, and ultimately living paycheck to paycheck.

None of these things will lead you to the financial freedom that you deserve and desire. 

The only way to avoid these financial pitfalls is to get on a family budget that works for you and that you can stick to.

In this post, I’ll walk you through how to create a family budget for your family step-by-step.

We’ll explore:

  • What a family budget is
  • Why you should budget as a family
  • How to create a budget
  • Ways to stick to your family budget

…and more! So let’s get started.

What is a family budget?

A family budget is simply a financial plan for your household income. It’s how you determine where money will be spent so that expenses are not only paid but so that you reach your financial goals.

Why should you budget as a family?

Ultimately, having a family budget puts you in control of your finances. When you budget, you plan where your money is going so that you’re able to spend it more wisely.

More importantly, having a budget allows you to plan for the life that you truly want.

1. To keep everyone on the same page & can reduce arguments about money

Though it may not come as a shock, arguments about money is one of the leading causes of stress in relationships. Ultimately, these money disagreements can end in divorce

Although there are many things that can contribute to financial disagreements in relationships, a budget can help you get on the same page when it comes to how you manage your money.

Having a shared budget puts (and keeps) you on the same page as your spouse when it comes to your financial priorities and spending.

2. It helps reach your financial goals

Ultimately, your budget is a reflection of your financial goals.

For example, if your goal is to pay off debt, then you’ll allocate money in your budget for debt payoff.

At the end of the day, a budget is simply a plan for your money. It’s a plan to help you navigate life and to reach your goals. 

Having a family budget allows you to see how much money you can put toward these goals and create a timeline to achieve them.

3. To help you plan for the life you want

Ultimately, budgeting helps you plan for the life that you want. 

Without money, you may not be able to do many of the things that you may desire to do. So making sure your finances align with your life goals is important.

If you want to travel, you can budget for it. If you want to buy a house, you can budget for it. If you want to have your dream vacation, you can budget for it. 

A budget is not only at the center of your financial goals but also your life goals. That’s why having one can help you achieve them.

4. It gives you control of your finances and financial freedom

One of the intrinsic benefits of budgeting is that you have control over your finances. 

When you budget, you are telling your money where it needs to go. You have complete control over how your money is spent and what you put it toward.

Contrarily, when you don’t have a plan for your money it can control you. This means that you can end up spending above your means and even get into debt. 

This takes away your financial freedom and your money now controls your life. So if you want financial freedom, it begins with budgeting your money.

5. To teach your kids about money

Teaching your kids how to manage money is one of the most important life skills that they can have.

Despite it being vital to our existence, money isn’t something that’s taught in most schools. So, it’s important that we teach our kids about money at home.

Including them in discussions about money and allowing them to contribute to the family’s financial success will give them the tools to be good stewards of their own finances as adults.

How to Create a Family Budget

So now that you know why it’s important to create a family budget, it’s time to actually make one. I encourage you to bookmark this post so that you can reference it later.

family budget

Let’s get started.

1. Start by creating financial goals

Before you even create your budget, you need to determine what your family’s financial goals are.

This is simply a list of the things that you want to accomplish with your money within the next few months or even years.

Your family’s financial goals will be the guiding light for how you manage your money. They’ll be what you work toward as a family, so it’s important that everyone contributes.

If you’re not sure what financial goals to set, here are a few to consider:

  • Pay off debt and become debt-free
  • Save money for your kids’ college tuition
  • Pay off your mortgage
  • Put money aside for a vacation 
  • Save to pay cash for a car

These are just a few ideas to get your brain going; however, we have an in-depth article on money goals that I suggest reading to get some more ideas and tips.

You may also want to create goals outside of finances but will need money to accomplish them. In that case, I recommend reading our post on other family goals that you can work toward this year.

You’ll want to work together to create a list of goals for your family that everyone will be working toward.

2. Choose your budgeting method

There is no one way to budget. The budgeting method that you choose will be just as unique as your family goals.

With that being said, there are a few budget methods that I’ll suggest that you choose from.

By no means are you limited to these methods, but I’ve found that they are a good guide for creating a family budget that works.

I’ll give a high-level overview of these budgeting methods in this post; however, if you want to get a more in-depth explanation of each one, I suggest reading our post on budget percentages.

Zero-based budgeting method

The term “zero-based” is derived from the fact that when you subtract all of your expenses and allocations from your income in your budget, the difference should be zero.

Ultimately, the goal is to designate how each dollar of your income will be used.

For example, if your income is $5,000 per month, you will need to identify how that $5,000 will be used—down to the last penny.

This doesn’t mean that every penny of your income has to be spent. Some of the money can be allocated toward saving, investing, or paying down debt.

Tthe idea is that every dollar has an assignment.

Don’t worry, we have a whole article dedicated to learning how to set up a zero-based budget that you can read.

The 50/20/30 budget method

This budgeting method is an easy rule-of-thumb way to allocate your spending. 

You allocate 50% of your income to needs, 20% to savings, and 30% to wants.

So, let’s go back to the $5,000 per month income example. In this case, you would allocate your income in the following way:

  • Needs – $2,500
  • Savings – $1,000
  • Wants – $1,500

Contrary to the zero-based budgeting method, the 50/20/30 budgeting method gives guidance on what you should spend, although it certainly does not mean that you have to spend that exact amount.

Household Expense Percentages

Another way to budget is by assigning percentages to each of your household expense categories.

As you may expect, there are many different suggestions on what these percentages should be. Below is his rule of thumb based on financial expert, Dave Ramsey, recommendations.

  • Giving – 10%
  • Saving – 10%
  • Food – 10-15%
  • Utilities – 5-15%
  • Housing – 25%
  • Transportation – 10%
  • Health – 5-10%
  • Insurance – 10-25%
  • Recreation – 5-10%
  • Personal Spending – 5-10%
  • Miscellaneous – 5-10%

Ultimately, choose the budget method that you feel will work the easiest for your family.

3. Determine how often you’ll update your budget

Another thing that you’ll also need to decide is how often you’ll update your budget.

You can choose to budget weekly, monthly, or to budget by paycheck.

Budgeting by paycheck simply means that you’ll update your budget for each upcoming paycheck to plan how that income will be spent.

You can read more on this method in our article on how to create a paycheck budget.

Once you determine the frequency, also set up a dedicated time to have a family meeting to make updates and review your budget.

4. Decide how you’ll track your budget

Now that you know which budgeting method you’ll be using, you’ll want to decide how you’ll actually track your budget.

Since this is a family budget, it’s important that you choose a method that everyone will be able to see and contribute to.

There are a few options when it comes to how you track your budget. You can use a budgeting spreadsheet, a budgeting app, or a budget printable with good old-fashioned pen and paper.

A Budget spreadsheet

The advantage of using a budget spreadsheet is that they’re easy to fill in and the calculations can be done for you. Not only that but a spreadsheet can be shared, which makes budgeting as a family easier.

You can choose to create your own simple budget spreadsheet in Excel. Or, if you’re not tech-savvy, you can grab our pre-made zero-based budgeting template to use in Google Sheets.

Budgeting Apps

Using a budgeting app is also another great option for family budgeting. Everyone can have access from a mobile phone or computer.

However, the downside is that apps aren’t 100% customizable to your budget needs. So you’ll be working around whatever budgeting method that app is designed for.

You can try a free budgeting app like Mint or Qube. There are also paid options that you can find from a simple Google or app store search.

Budget Printables

The less collaborative option is to use a budget printable. These will require you to do your updates and calculations by hand.

The benefit is that it’ll force you and your family to sit down and discuss the budget. While this may be more cumbersome, it may be what you need to stay on the same page.

The good news is that we have a free budget printable that you can download. You can also read our post on some other family budget template examples that you can print.

5. Evaluate your income

Once you have your actual budget template, the next step is to start filling it in.

To begin, you’ll need to evaluate your income.

Your income is every dollar that is coming into your household. Even if you choose to only live on a single income, it’s important to have a plan for where all the money is going.

The income that you’ll need to take into account includes:

  • Salary/Wages
  • Bonus Income
  • Passive Income
  • Alimony/Child Support
  • Dividend Income
  • Rental Income
  • Interest earned
  • Miscellaneous Income (Gifts, refunds, etc.)

6. Calculate your expenses

Now that you know how much is coming into your household, it’s time to look at what’s going out.

A great exercise to see how much you spend in each of your budget categories is to download your past 3 months’ bank statements.

From there, you can categorize your expenses to get an average of what you’re spending each month.

If you’re using an app like Mint, it will be able to do this automatically if you connect your bank accounts.

Based on the information that you gather, you can begin filling in your budget. You’ll total up the expenses in your budget categories and add them to your budget.

What happens if the expenses are more than the income you calculated?

This is the case for many families–hence the phrase living above your means.

But, now that you’re aware, it’s time to move on to the next step…

black couple budgeting

7. Identify expenses that you can reduce or eliminate

You’ve gotten pretty far in the budget process. So far, you’ve:

  • Listed your income
  • Calculated your expected expenses for the month or pay period
  • Compared your income to your expenses

If you found that your expenses exceed your income for that budgeting period, you’ll need to reduce or eliminate some expenses.

Small changes like cutting back on eating out or canceling unused subscriptions and memberships can go a long way in getting within your budget.

Doing these things are just a start in learning how to live below your means. I suggest reading our article on how you can start living below your means and our post on very practical frugal tips that you can use to save money.

8. Track your spending

With your budget all set, it’s time to start tracking your spending. The goal is to make sure your spending stays within the plan that you created with your budget.

This can be something that you record every evening so that you stay on top of your spending. Or, if you use a budgeting app, it’s something that can be done automatically.

Determine what your cadence will be for tracking your expenses and reviewing your budget. You’ll want this to be more frequent than not to stay on top of any issues or changes that may arise.

9. Adjust your budget as necessary

A budget is a living document. This means that as life changes, your budget should also. Your family budget should be a rigid document.

The whole goal is for it to be a plan that allows you to reach your financial goals. And, as with most plans, they change.

Having a family budget meeting will be important to discuss any changes to make. So put a recurring date and time on the calendar to discuss any adjustments that need to make.

How to stick to your family budget

Ultimately, managing a family budget comes down to one thing: communication.

It’s communication with your spouse about your financial goals, spending, and any necessary deviations from the plan. 

To facilitate that discussion, I recommend having a weekly family budget meeting to review the spending plan for that budget period. It is also the time to discuss if you need additional funds for any special occasions and events.

Some other ways to ensure that you stick to your family budget include:

1. Revisit your family goals & make them visible

Remember that the ultimate goal of your family budget is to help you accomplish your family’s goals. Budgeting can seem difficult, but remind everyone of what you’re trying to accomplish. Keep your goals visible in a high-traffic area, like the refrigerator door.

2. Get everyone’s input

A great way to get buy-in from your family is by including them in the plan. When you include all family members, they’ll buy into the goal and the work necessary to achieve it. So, make sure everyone is contributing when creating your goals and planning the budget.

3. Plan for the unexpected

Life happens, so plan for it. An important part of sticking to your budget will be to put money aside for emergencies and got cover unexpected expenses. I recommend reading our article on how to start an emergency to get details on what expenses to save for.

4. Put boundaries in place for spending

Creating boundaries around spending is a great idea for staying within budget. Perhaps you set a limit on how much you or your spouse can spend without having a discussion. Or, maybe it’s leveraging the cash envelope system so that you can only spend the cash that you have.

Family Budget FAQs

What our family budget meeting should include

Some things to discuss in your budget meeting can include:

  • How well you did to last month’s (or pay period’s) spending plan
  • Expenses that you need to account for in the coming pay period or month
  • How you are trending toward your financial goals (ex. Paying off debt, saving for a vacation, etc.)

How do you include your kids in your family finances?

Make finances fun for your kids! Allow them to color printables that track your financial goals. Even make taking trips to the ATM or bank a fun field trip.

Remember, your budget meeting is a great opportunity to include your children in the discussion about money. Use it to teach them about budgeting but in a fun way.

How do you talk to your spouse or partner about money?

Money can be a taboo topic depending on how you grew up. Nonetheless, it’s still an important topic to discuss in a marriage or partnership.

One way to ease into the conversation about money is to discuss your family goals and what financial steps need to be taken to reach them. You’ll likely have different opinions about money but always lead with understanding, grace, and love.

Final Thoughts on Making a Family Budget

Having a budget is paramount to your financial success. You should always have a plan for your money and the way to do that is through budgeting.

Don’t be intimidated by it.

Creating a family budget really isn’t as hard as you think.

Find a budgeting method that works for your family, stick to it, and you’ll find financial success!

Fo Alexander

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