How to Design a Household Budget

Designing a household budget may lead to an animated conversation about the future.

Designing a household budget may lead to an animated conversation about the future.

Opposites attract, and spenders and savers tend to find each other. Chances are, your significant other is the…other. Cohabitation requires each to adjust to find a happy middle. Designing a household budget is a good way to set expectations for how much can be spent and how much will be saved. Often, the process results in animated conversations about future hopes and dreams.

Items you will need

  • Calculator or spreadsheet software
  • Bank and credit card statements for the last twelve months

List and categorize your expenses. Household expense categories typically contain rent or mortgage, utilities, cell phones plans, groceries, entertainment, auto, and medical. Other categories may include clothing, personal grooming, and childcare. Using your bank and credit card statements, add up these expenses and find a monthly average. Be cognizant of expenses that are higher in certain months and adjust accordingly.

Determine which expenses are variable and which are fixed. Fixed expenses are those that will be paid each month. While they may be eliminated or renegotiated, doing so would require a fair amount of effort. Variable expenses are those that could be reduced with little effort. Entertainment, groceries, and gifts are examples. Some expenses may not fit neatly into a fixed or variable category. If you’re not sure, imagine your life if you eliminate or reduce the expense. If it is not reasonable to reduce, it is a fixed expense.

Decide (if you haven’t already) whether you will combine your finances or keep them separate. If you decide to keep them separate, now is the time to negotiate which shared expenses you will take and which your significant other will take. You should also decide if you’ll go halfsies or prorate the expenses based on your respective incomes. If one partner makes a variable income while the other makes a steady salary, it might make sense for the salaried to pay the fixed expenses. Others prefer to split the fixed and variable expenses so each has the opportunity to maintain some control over spending.

Meet briefly once per week to balance the checkbook and discuss last week’s transactions. This meeting need only take five to fifteen minutes. Check to see if you’re on track and make adjustments in spending, if necessary. Once per month, meet for a little longer to compare your budgeted versus actual figures. Make further adjustments if needed, and determine if your budget is realistic. These meetings often grow into longer discussions about what you both want for the future, and the financial steps you’ll need to take to get there.


About the Author

Sara Huter is a professor of economics. Her background also includes risk management in the banking and energy industries with expertise in credit scores. Huter received an M.B.A. in finance from Texas A&M University and a B.S. in information systems from Kansas State University. She has been writing for over five years with work at, and

Photo Credits

  • Monkey Business Images Ltd/Valueline/Getty Images