Get on with being a family, rather than spending too much time worrying about your finances.
Working out how much money you need for everyday essentials like food, housing, utilities like gas, electricity, and so on can help you make sure you and your family have enough for unexpected expenses and emergencies. A household budget is also a way to ensure you’re aligning your spending with your family's values and long-term goals and can also help you avoid debt.
Different families handle budgeting and money management in different ways. But the general goal of a family budget is a yearly, monthly, or weekly picture of what you need to spend and what you have left over.
Evaluate Your Income
While it may sound crazy, it’s quite common for people not to know exactly how much income is coming their way monthly. Gathering all of your income will provide an idea of how much money is coming in and will give you a clearer awareness of your wealth. When identifying your monthly income, remember that your budget should be based on your after-tax net income, meaning the amount of money coming in after deductions. To calculate this, you need to subtract your deductions: taxes, Social Security, and health insurance.
Create A List Of Monthly Expenses
Once you have calculated your after-tax income, the next step is to create a list of your monthly expenses based on that same paperwork. The best way to identify your monthly expenses is to list and total up all your expenses. Start by prioritizing your expenses by fixed essential expenses (such as mortgage/rent and property taxes) and variable essential expenses (groceries, gas, utilities), followed by nonessential expenses (eating out, entertainment, hobbies). Here are some of the fixed and variable expenses you might want to include in your family’s budget:
Assess Needs Vs. Wants
The next step in writing a budget for a family is to draw some hard lines between what the family needs and what it merely wants. This isn't as easy as it might seem, and each family will have to decide this on its own. Use this calculator to see how much you should be spending on needs, wants, and savings or debts if you follow the 50-30-20 rule recommendation.
Set Financial Goals
You don’t need to set aside a huge sum of money all at once. Saving is easiest when you plan for it, then take small steps towards your goal. These resources can help you establish your budget and determine your needs:
Use the CFPB’s planning tool to think about major life events and set savings goals for large purchases, such as buying a car and paying for college.
You might want to contact a financial advisor to work towards these goals specifically and plan a way forward.
Involve the Children
Many parents worry that starting a budget will upset their children and family peace. If your kids aren't used to hearing "no," it will certainly be an adjustment for them to suddenly learn that money is tight. But instead of letting the budget be a burden on your family relationship, use this as an opportunity to teach them about financial discipline, something the whole family can learn and work at together.
Take this short course to learn more about: identifying the appropriate family members to include, strategies to make conversations productive and how to develop an action plan to create positive financial behaviors.
After your first month sit down and see how the family did.
Don't be too hard on yourself if you fail to live up to your budget goals at first. You might need to re-evaluate your budget if you made it unrealistically strict, or you might not have realized how much you were spending in a particular category. Once you do get used to your budget, don't assume you'll always stick to it, check again every month or so to make sure.
Revisit your budget to reevaluate your situation.
Perhaps you'll find that a new baby is on the way, or a family member is diagnosed with a medical condition that will require expensive treatments. Or, as time goes on, your priorities could simply change. Each major change in your situation or priorities will require looking at your budget in a new light and making adjustments.
Additional Learning Resources
Emergency Savings Learn how to build a savings account dedicated to dealing with emergencies.
Create A Budget Try these tips to ensure you’re staying on top of your financial goals.
Healthy Financial Habits Explore habits that can put you and your family on a path to success.
Basics of Budgeting Review the basics of budgeting and how to benchmark your progress.
Tug of War Financial Goals Handle the challenge of competing financial goals with this worksheet.
Assessing Your Health Take your financial temperature to make sure you are financially healthy.
The Benefits of Financial Planning
Financial planning pulls together all your finances and organizes them to help make management easy and effective. Visit our Financial Planning Center for resources that'll help you better prepare for your goals and dreams.
The content on this page provides general consumer information. It is not legal advice or regulatory guidance. We do not endorse or guarantee the accuracy of third-party information.