Creating a household budget

Quick insights

If you live alone, you’ll likely only need to budget and track your own expenses. But when you manage the finances of an entire family, things can get a bit more complicated.

Household budgets provide a systematic approach to planning, recording and analyzing spending and expenses and should include everything from monthly bills to long-term savings goals. Creating a budget for your household may serve as a roadmap for your family’s daily expenses and future spending.

In this article, we’ll discuss how to create a household budget that accounts for you and every member of your family.

Common categories in household budgets

Families come in all shapes and sizes—and so do their budgets. However, if you’re planning a household budget, a few common spending categories may include:

Some of those categories are fixed expenses—meaning they are the same amount every month. Fixed expenses can include your mortgage, utilities, subscriptions and insurance.

Your budget will likely need to include variable and discretionary expenses as well. These are spending categories that fluctuate or do not occur monthly. Entertainment, dining out and personal care may fall under this category of expenses.

Budgets that account for recurring expenses, variable expenses, discretionary expenses, savings and debt may be the most useful.

Let’s explore these last two categories a little more in-depth.

Savings

Savings is a line item on many budgets—and for good reason. Having savings—especially an emergency fund—provides flexibility and some breathing room in your finances when the unexpected happens.

Unlike bills that come due every month, there is no demand that you put money towards savings every month. But consistently contributing to a savings account—or multiple savings accounts—is something you may want to plan for in your household budget. In addition to earning money through interest, a savings account may provide motivation and guidance for reaching your financial goals.

Debt

Many people will need to account for debt in their budget as well. Debt will likely be a reoccurring expense every month. Many debts—like student loans and credit cards— will have a minimum monthly payment.

If you have debt, you may want to implement a debt payoff strategy. There are many frameworks to help pay down your debt while still budgeting and saving. The debt snowball and debt avalanche method are two common debt payoff strategies.

Prioritizing expenses in your household budget

There are many ways to make a budget. The budget that works best for your family may depend on your circumstances and financial goals. You may try different types of budget techniques before you find one that works.

Common budgeting frameworks include:

Implementing and maintaining your household budget

To implement a budget, you may want to first get a sense of your family's spending patterns and expenses. When creating a budget, it can be helpful to do the following:

Using a budgeting app may be helpful when it comes to analyzing your spending because these tools provide insight into your expenses and spending habits. Many allow users to set spending limits for each category and can alert you if you exceed your budget.

Budgets are meant to work with you and your goals and may need to be adjusted from time to time. Regular reviews of your spending and expenses can be helpful to keep you on track and help you notice when your budget needs to change.

In summary

Creating a household budget provides a roadmap for spending, saving and paying down debt. Budgets may vary between families, but most include common expenses like housing, transportation, utilities, insurance and groceries.

There are many budgeting frameworks to choose from, but before implementing a budget you may want to start by making a list of your monthly reoccurring expenses, estimating your variable expenses and determining your savings goals. It may also help to do regular check-ins of your budget to account for changes in your finances and goals.