How Do I Set Up a Family Budget?

Setting up a family budget leads to better personal financial management and the ability to plan for the future.

Setting up a family budget leads to better personal financial management and the ability to plan for the future.

Setting up a family budget is something all families should consider. Sticking to a budget allows you to plan for the future with assurance funds will be there when you need them, not only for emergencies, but for vacations, retirement and college education for your children. While many people cringe at the notion of setting up a budget, the process is really fairly simple once you are organized. And the process allows you to grab hold of your finances instead of letting your finances grab hold of you.

Setting up a Family Budget

Calculate your monthly income. Look to see if there is much variation in your income from month to month. If there is, average your past three months of income and earnings for the purpose of setting up your budget. Use the average amount as the amount you have to spend and save.

Examine your fixed recurring monthly bills. Fixed expenses might include your mortgage, phone, car loans, insurance, groceries, clothing, credit card payments, gym memberships and hair care. Some bills, such as utility bills, may vary quite a bit from winter to spring. For these bills, use the average over three months. Do not forget trips to the ATM. Track what you use the cash for over the course of a month. The key here is to examine where all your income is going. Remember also to include a monthly percentage to account for large bills that may come once or twice a year, such as property taxes, tuition or holiday gifts.

Look at where you can cut back on expenses so you can sock money away into savings. Perhaps it is turning your thermostat down at night to keep your gas and electric bills more reasonable. If you have not already, quit smoking and save a bundle. Most of us spend some amount of money each month on things we do not need. Better to put this money aside for emergencies, an education fund for your children or a family vacation.

Decide on a reasonable budget for each expense and savings category. Involve your family as much as possible. For example, your teenager who participates in team sports may have to pay for uniforms and equipment. Depending on his age, you might want to insist he pay for part of this expense through a part-time job. This is also a way of teaching your children the value of money and responsible financial management.

Set up your budget on a spreadsheet. The 13 columns across the top should be for each month of the year plus an annual total. The rows going down the side of the sheet are for each expense and savings category. Next to each expense and savings category you list, put the amount you are budgeting. Each month fill in the spreadsheet with the exact amount you spent or saved. It is also useful to highlight in red all expenses that were over the budgeted amount, and in green all that were under. This system allows you to see at a glance how well you are doing living on your budget.

Have a family meeting at least every three months to review your family's budget. Talk candidly about expense categories that are consistently over the budgeted amount and savings categories that are consistently under. Develop ways to bring your budget into line.

Another way to involve your family in the budgeting process is to celebrate your success at meeting budgeting goals. Dinner at a nice restaurant or concert tickets for the whole family are a nice reward for good financial management.

Items you will need

  • Pay stubs for you and your spouse for the past three months
  • Documentation of other income sources or earnings for the past three months
  • All monthly bills for the past three months, including fixed bills such as mortgage payments, and fluctuating bills such as credit cards
  • An open savings account
  • A spreadsheet


  • It is easy to set up a budget and then forget about it. Make budgeting and budget review a normal activity that you do not put off in favor of other activities.
  • You can find inexpensive or free budgeting software spreadsheets online as well as tips for sound budgeting practices.


  • Budget for emergencies. This should be a separate category from savings and should be equal to at least three months of income. Do not get caught short if you are suddenly unemployed or disabled.

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About the Author

Lisa Nielsen is a marketing consultant for small businesses and start-ups. As part of her consultancy, she writes advertising copy, newsletters, speeches, website content and marketing collateral for small and medium-sized businesses. She has been writing for more than 20 years. She is also a business strategist, trainer and executive coach. Nielsen holds a Master of Business Administration from the University of Miami.

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