How to Build a Family Budget

Published on September 11, 2020 by Daniel Azzoli

a family holding each other's wrists

A lot of us already know how important it is to track your finances and keep close tabs on your spending habits. Without paying attention to your finances, it may be easier to slip into debt, spend more money than you need to, and you may have a harder time building your savings. But keeping a budget can become even more important when you’ve got a household to support. People are relying on you to keep a roof over their heads and food on the table, so it’s your responsibility to make sure you’re taking your finances seriously.

So, how do you do this? It starts by building a family budget. Maybe you’ve already been keeping track of your spending and feel like there’s not much more you can be doing, but the truth is, budgeting for a family is more involved than simply tracking your expenses.

In this article, we’re going to go over what’s involved with creating and maintaining a family budget and walk you through some of the most important steps to get you started.

1. Communicate with Your Partner

If you and your partner are the ones supporting your household, the first thing you need to do is to make sure you two are on the same page. Before diving into the specifics about the ideal family budget, going over a family budget template, or reviewing the numbers, you and your partner (as well as anyone else in the household who should be involved in big financial decisions) need to have an honest talk about the individual and collective financial goals of the household.

One thing to squash immediately is any guilt that’s being thrown from either side about the other’s goals or spending habits. Different people may have slightly different personal priorities, and those differences need to be respected. One person might prefer to save all their money, while another may have a few things they like to indulge in on occasion. The key is to be understanding and compromise –  as long as no one is falling into bad financial habits.

2. Set Concrete Goals

If you want to give your family budget a chance to accomplish what it’s meant to, you’re going to need to set concrete goals and make sure your personal priorities align with those of your family. This is why it’s so important to talk these things over with your partner.

typewriter with 'goals' written on the paper

Do you both want to retire by a certain age? Are there specific family vacations you want to be saving for? What extra-curriculars do you want your kids to be involved in, and how much do they cost? Once you’ve sat down and set the goals you want to work towards, you can start to work out whether these goals are realistic and achievable. If they are, you can start to make the decisions that will shape your family budget.

3. Start Tracking Your Expenses and Income

Before you start deciding where your money should be going, you’ll need to get a better sense of your financial standing. Start by going over your bank statements and review all of your expenses over the last two months. This may give you some valuable insights into where your money is going and whether some of it could be put to better use. Finding some of your financial blind spots can help you to start the process of implementing better spending habits.

This might sound like an arduous process, but it doesn’t have to be. By taking a look at your bank accounts online, you can quickly see most of your incoming and outgoing money in one place, assuming this money has gone through your bank at some point. You can also leverage financial apps like Mint which can help you budget and track your finances.

Assess Your Financial Standing

As you go through the process of tracking your expenses, start to separate them into discrete categories to help you stay organized and give you more insight into where your money is going. These could be things like housing costs, food, entertainment, and debt. Try not to fall into the trap of getting overly detailed during this part of the process. At this point, all you’re looking for is broad categories to get your family budget started. There’s no need to spend an excessive amount of time here and risk the possibility of giving up before you’ve really started.

person reviewing their family budget on their tablet

Once you’ve separated your expenses into different categories and know how much money is going into each of them, separate them once more into fixed and variable expenses. Your fixed expenses are things that will be relatively simple to account for in your family budget, whereas your variable expenses may change from month to month or even week to week. It may also be a good idea to identify the expenses that are discretionary, meaning the ones that aren’t essential.

4. Look to Cut Spending

If you’re finding that money is tight, you’re having trouble paying your bills, your debt payments are getting a little too high, or you want to start saving more money, you may want to start looking for ways to cut back on your spending.

For example, maybe you normally go out for dinner a few times a week. This can be a significant drain on your budget. So, making a point to go to the grocery store, planning out your meals, looking for sales, and buying things in bulk can all be great ways to cut back on your food budget and save some money. You could also consider doing things like:

  • Cutting back on subscription services
  • Taking public transportation instead of driving
  • Switching to a less expensive phone plan

If you want to know more about how to cut expenses on a family budget, here are some budngeting tips for beginners that may give you some ideas.

Keep in mind that every family budget will look different, and there are plenty of variables that’ll make your household’s budget unique. Having five children in the house will likely be more expensive than having just one, just like having one income supporting the household versus two may be more challenging. However, certain fixed expenses like mortgage or rent payments may not be affected by these things.

There are also some important variables to consider that may be hard to measure or account for in a family budget. When you and your partner are supporting a bigger family, not only may it be a bigger drain on your finances, it may also be a bigger drain on your energy. And when you start to run out of steam, you may be more susceptible to spending more money in certain areas than you probably should. This could mean things like ordering in for dinner instead of making dinner yourself, or hiring a cleaner instead of doing it on your own. There’s no shame in doing these things if you can afford them, but you’ll need to determine whether your time is more valuable than the money you’d be spending on these types of tasks.

5. Contribute Towards Your Savings

Once all of your essential expenses are accounted for at the end of the month, the next thing you may want to contribute towards is your savings. When it comes to savings, building your emergency fund is a great place to start. This money is meant to be there to help you handle emergency expenses that come out of nowhere. Take a look here to learn more about how to build an emergency savings fund.

person in blue dress holding a piggybank

Next, you may want to start contributing towards your retirement fund. See if your workplace will match your 401(k) contributions and try to make these contributions regularly if you can. In a sense, getting your contributions matched from your workplace is like getting money for free, so you don’t want to miss out!

6. Pay Off Your Debt

A big component of your family budget will be whatever outstanding debt payments you need to make. These could be for things like your credit cards, installment loans, or lines of credit. While we’ve already touched on the importance of contributing regularly towards your savings, it’s also vital to keep up with your debt payments. Otherwise, you risk running up interest costs, defaulting on your loans, and potentially losing assets you’ve put up as collateral. The key is to find a balance between the two, and do your best to save money and pay off your debt. 

Review Your Family Budget Regularly

We know that the prospect of putting together a budget for your entire household can be daunting, but if you want to move towards a positive financial future, it’s an important step to take.

And remember, it’s great to put together a family budget, but the work doesn’t stop there. Circumstances change, and these shift in variables are going to have to be accounted for in how you manage your money. Make sure you review your budget on a regular basis, consult it when you’re making a big purchase or financial decision, and use it as a roadmap to help you live within your means.

Make sure to meet with your partner at least monthly and go over your finances. With time, patience, effort, and good communication, you may be able to work towards a healthy financial future for you and your family!

Disclaimer: This article provides general information only and does not constitute financial, legal or other professional advice. For full details, see CreditFresh’s Terms of Use.