How to Make a Family Budget

Three Methods:Planning to Create the BudgetCalculating the BudgetAnalyzing and Responding to the Budget

Whether you're saving to buy a house, go on vacation, or you're just saving for a rainy day, it's important to have a family budget. After setting your financial goals, you should calculate how much you're earning and how much you're spending. If you spend more than you earn, you'll need to consider ways to cut your expenses, starting with your discretionary spending.

Method 1
Planning to Create the Budget

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    Consult with your family. Talking candidly with your children about financial planning demonstrates to them the importance of carefully managing money.[1] Tailor your explanations about the purpose (and, later, the results) of the budget to your child’s age and level of understanding.
    • For instance, children that are aged 10-14 might receive an allowance. You can explain that just as they have a limited allowance each week, the family as a whole also has limited funds.
    • Older teens who might have jobs can feel good about how their growing financial independence has left more money for you to pay off loans and prepare funds for college, vacations, and other uses.
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    Set a goal.[2] Think about how much money you want to save and what you are saving for. Perhaps you’re saving for multiple reasons like vacation, college, and a new car for your child. Ask everyone in your family what should be done with excess money.
    • It's easier for everyone to adhere to the family budget if you all have clear goals and a stake in keeping the budget out of the red.
    • Check your savings account before setting a budget. Think about how much you have and how much you want to be saving each month.
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    Decide how to track your budget.[3] You can track your budget electronically with a spreadsheet or financial software, or manually, with pen and paper. Using a spreadsheet effectively does require a bit of a learning curve, but once you know how to use it, tracking your finances becomes easier. Pen and paper, on the other hand, are free. Invest in a calculator if you intend to calculate your budget by hand.
    • To make a spreadsheet, familiarize yourself with a standard spreadsheet program like Microsoft Excel. Excel provides spreadsheet templates for family budgeting that could be useful when you’re calculating your family budget.
    • There are also several robust apps available for PC and phones. Mint, You Need A Budget, and Goodbudget are just some of the handy digital tools you can use to manage your money better.[4]
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    Decide how often to calculate your budget.[5] You could calculate and analyze your budget every week, every month, or every other month. It all depends on you and your family’s level of interest in the family budget. Whatever schedule you decide, stick to it to ensure you have a budget available at regular intervals. Make doing the family budget part of your end-of-week or end-of-month ritual.
    • The budgetary period is the term that refers to how often the budget is calculated.
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    Collect the necessary information.[6] To calculate your budget, you’ll need to know how much your family earned and how much you spent. Don’t estimate; use documentation -- credit card bills, utility bills, pay stubs, and receipts -- to tabulate the budget. If your data is wrong, your budget will be too.
    • Other expenses might include rent payments, gas, groceries, and dining out.
    • Encourage your family to keep all bills and other relevant documentation. You and your family should deposit these documents in a folder located in a central location such as the living room. That way, when people spend money and get a receipt, they will not misplace it.

Method 2
Calculating the Budget

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    Figure out how much money you have. Take into account how much you and your spouse bring home each month. Use the after-tax amount. If your child is earning income, too, incorporate their earnings into your budget as well. You could make one column of your ledger or spreadsheet representing all the income your family brought in during the budgetary period, or create two or more separate columns, each representing the income an individual in your household brought in.[7]
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    Track all of your fixed spending.[8] Fixed spending is the money you spend each month on essentials -- rent, utility bills, groceries, and home loans. This is the money you will definitely spend, no matter what month you’re calculating the budget for.
    • It’s best if you create several columns for the different types of fixed spending you regularly do. For instance, each month, you might insert a new value into the budget column for rent, another value for electric and gas, then another for groceries.
    • Place your expenditures next to the income in a separate column on either the spreadsheet or your ledger.
    • Involve your children in each step of the calculations. Tracking fixed spending with your family helps them better understand basic math, as well as the difference between needs (fixed expenses) and wants (discretionary funds).
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    Calculate your discretionary spending.[9] Discretionary spending (for instance, eating out or going to see a film) adds up faster than you’d imagine. You could break the discretionary spending column of your budget ledger or spreadsheet down further. For instance, you might list separate values for coffee, dining out, video game rentals, and so on.
    • Talk to your family about how you can set a limit on your family’s discretionary spending. Children, especially, will enjoy finding creative ways to save money.
    • It is important to separate your fixed (necessary) spending from your discretionary spending. If you later realize that your expenses exceed your income, your discretionary spending should be the first thing to eliminate.
    • Transfer excess discretionary money into several separate funds for things you and your family can do together like going to the movies, seeing a baseball game, and ordering pizza on Fridays. Put the money in clear glass jars so your kids can watch the amount increase in a visible way.[10] Once each week, take the money out with your kids and count it with them. Ask them if your family has saved enough to use the cash for the activity it is intended for.

Method 3
Analyzing and Responding to the Budget

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    Think about how to adjust your spending.[11] If your income exceeds your expenses, you are saving money. You could use the information contained within the budget to reduce your unnecessary spending by, for instance, eating out less and putting more money into a savings account that helps you meet your goal for financial health. If your expenses surpass your income, you have no choice but to adjust your spending habits or you will soon be out of money.
    • The easiest solution to getting your family budget out of the red is to cut back on discretionary spending.[12] Instead of eating out every weekend, for instance, eat out just once a month (or not at all).
    • If your child gets an allowance and your discretionary spending is too high, reducing their allowance to a more reasonable amount is a good idea. A standard allowance converts the child's age to a dollar amount. A ten-year old, in other words, should then get $10 each week.Ref></ref>
    • When your child asks why their allowance is reduced, remind them of the results of the family budget. Say, “We are all going to cut back on our spending a bit so we can have money for things we really need.”
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    Pay off your debt.[13] If, after consulting your family budget, loans are imposing too heavy a burden on your finances, you should concentrate on getting them paid off. The longer you take to repay a loan, the more interest will accrue. Plus, depending on the kind of loan you have, you could be threatened by a change in the interest rate at any time.
    • Refinancing is the process whereby you negotiate with the bank or issuer of the loan for a lower interest rate and a longer repayment period. While this can ease your financial obligations now, you will typically end up paying more in the long run.[14]
    • Contact the National Foundation for Credit Counseling ( if you have serious debt that you need help with.
    • Do not pay for services that promise to reduce your debt.
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    Build a buffer.[15] A buffer is a financial safety net, an accumulation of excess funds for emergencies like unemployment or healthcare costs. Your family budget will likely reveal that you’re spending more money than you thought you were. In order to protect you and your family against any unforeseen expenses, you should work on building a buffer that will cover at least six months of living expenses. Now that you know exactly what you spend each month, you can multiply your average monthly expenditures by six to figure out how much you’ll need to save to create an adequate buffer.
    • Explain the buffer to your kids. Say, “Do you think it’s important to save money?” If they say yes, ask why. If they say no, explain that when emergencies occur, it is smart to have the money on hand so you can solve them quickly.
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    Pay in cash.[16] When you buy things with cash, you become more conscious of how much or how little money you have. Paying with a credit card, by contrast, makes your expenditures essentially invisible. If you wish to increase your monthly savings, use cash.
    • You could create expense limits for yourself and your family by filling envelopes labeled for specific purposes with cash at the beginning of each month. For instance, you might put $100 in an envelope labeled “gas” if your family spends about $100 each month on gas. That way, your family has a goal on how much should be spent on gas each month. Encourage your family to find alternatives to driving like taking public transit or riding their bikes.
    • Your family should use cash too. Don't pay your kids' allowances with gift cards or gift certificates. Birthday money should be given as cash as well.
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    Explore new ways to save. Get a subscription streaming service instead of paying for cable. Use coupons from Groupon and Living Social to find deals in your area on restaurants, fitness clubs and salons. Make it a game for your kids to add up how much you’ll save at the grocery store when using coupons. Figuring out how to save more money will ensure that you can easily live by the family budget that you made.


  • Always keep at least $1,000 in your savings account just for emergencies.
  • Open a savings account if you don't already have one.


  • Don't get discouraged when you're making your family budget if you feel like you don't have enough money. With sound management, you can grow your wealth.

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Categories: Budgeting