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Create a HouseHold Budget – Step by Step

Household budget

It’s inevitable: as your family grows, so do your expenses. More groceries, school supplies, extracurricular activities for the kids, and family trips can add up to a significant chunk of change. Rather than opening another credit card or just crossing your fingers and hoping it all works out, put in the time up front to create a family expenses spreadsheet.

Whether you’re a pen-and-paper kind of person or you’re considering budgeting software, we’ve created a step by step guide to help you get started.

First: why go to all that trouble?

Have you ever wondered how much your family spends per month on groceries? Most people have a sense of their fixed expenses but don’t quite grasp how much they are spending on all the little extras each month. If you realize, for example, that four tickets cost you nearly $150 to take the family to the movies every week, would you willingly put that in your budget – or decide to make two of those outings into home movie nights instead?

Knowledge is power when it comes to a household budget.

How to create a family budget plan

First: decide whether you want to go old-school using a ledger sheet and calculator, or use a spreadsheet or budgeting software. Paper and pencil can seem simpler, but there is more room for errors in calculation. Budgeting with a spreadsheet or software can keep calculations straightforward or, in the case of specific software that can pull data from your bank account, reduce the need for manual input significantly. Less human effort = less room for error.

Then, bring everything to the table. Things like:

  • Fixed bills like car payments, rent or mortgage payments, student loan payments, etc.
  • Regular income sources
  • Discretionary expenses like dining out, gifts, clothing, and travel
  • Payments to reduce debt load (ex., credit cards)

Go through your discretionary expenses over the course of a few months to get a realistic total of how much you typically spend. This is where most people start to squirm.

I spent how much on dining out?!

Now you have all of the information you need to reconcile your income and your expenses. Create categories that encompass your major spending items and use the data you collected to identify target budgets for each one.

With a complete picture of your spending habits, you are now in the driver’s seat to manage your finances intelligently. As a family, continue to track your expenditures and your income to make small shifts along the way. If your family is growing, adjust your budget to accommodate the shift in anticipated expenses to prevent unpleasant financial surprises.

Watch for these pitfalls

  • Don’t leave out any spending. The purpose of creating a household budget spreadsheet is to fully understand your income and expenditures. That means nothing gets left off, even if it is a one-time expense that you don’t anticipate happening again.
  • Aim to stay within your established budgets- or change them. If you find yourself regularly exceeding one of your budget categories, that’s a sign you need to reallocate your spending money.
  • Pay down debt. One of the easiest ways to reduce expenses is to eliminate debt. Build payments into your budget that exceed the monthly minimum payment on your credit cards, or work with an organization like National Foundation for Credit Counseling to change payment due dates or even consolidate. Just beware of companies that charge a fee and make unrealistic promises.   

Now that you know how to create a budget for a family of four (or more!), it’s time to get saving – and decide how you’re going to spend all that extra cash – like moving to a bigger house?