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How to Create a Family Budget

If you’re ready to get your family’s money managed once and for all, we’ve got good news—we know exactly where to start.

Budget.

It’s a simple word, but it doesn’t always seem simple to put into practice—especially when you’ve got kids. You’re busy, your money’s tight, and money talks are sometimes super awkward.

But you can create a family budget, no matter your time, income or emotional reservations. We’re here to answer some questions and give you our best tips and tricks to do just that.

What Is a Family Budget?
Why Should You Have a Family Budget?
How to Set Up Your Family Budget in 3 Steps
Tips for Creating a Family Budget That Works (for Everyone)

What Is a Family Budget?

Before we show you how to budget, let’s define the term. A budget is just a plan for your money—everything that comes in (income) and goes out (expenses).

A family budget is when you make that plan for your whole household. And the best family budgets include everyone in the family (at least to some degree).

Why Should You Have a Family Budget?

Budgeting as a family has many perks. Here are three of our favorites: 1) You’ll stop wondering where your money went and start telling it where to go. 2) You can start getting everyone on the same page about money. 3) You’ll show that money isn’t a taboo topic as you open up lines of communication.

How to Set Up Your Family Budget in 3 Steps

Budget Step 1: List your income.

The first step here is listing your income—aka any money you plan to get during that month.

Money

Start budgeting with EveryDollar today!

Write down each normal paycheck for you and your spouse—and don’t forget any extra money coming your way through a side hustle, garage sale, freelance work, or anything like that.

If you’ve got an irregular income, put the lowest estimate of what you normally make in this spot. (You can adjust later in the month if you make more.)

Budget Step 2: List your expenses.

Now that you’ve planned for the money coming in, you can plan for the money going out. It’s time to list your expenses! (Pro tip: Open up your online bank account or look at your bank statement to help you estimate your expenses.)

Start by covering your Four Walls—aka food, utilities, shelter and transportation.

Some of these are called fixed expenses, meaning they stay the same every month (like your mortgage or rent). Others change up, like groceries.

And hey, that grocery budget line is pretty hard to guess at first. Just make a really good estimate, and you’ll learn what you actually need here in the month ahead.

Next, list all other monthly expenses. We’re talking about insurance, debt, savings, entertainment and any personal spending. Start with fixed expenses. Then use your online bank account or those bank statements to estimate planned amounts for everything else based on your spending in the past months.

Budget Step 3: Subtract your income from your expenses.

When you subtract your income from your expenses, it should equal zero. That doesn’t mean your bank account is at zero: It means every bit of your income has a job. (This is called a zero-based budget.)

If you have money left over after you’ve subtracted all your expenses, be sure to put it in the budget too! Otherwise, you’ll end up mindlessly spending it on coffees and those one-click deals of the day. Really. Put anything “extra” toward your current money goal, like saving or paying off debt.

What if you end up with a negative number? You might be thinking, Yikes! But it’s really okay! You just need to cut expenses until your income minus your expenses equals zero. Hint: Start with those restaurant and entertainment lines. (Yes, we went there.) Because hey—you can’t spend more than you make. You got this!

Remember, you work hard for your money. It should work hard for you. Every. Single. Dollar.

Tips for Creating a Family Budget That Works (for Everyone)

1. Select a budgeting method.

You need to pick a budgeting method. Whether it’s a spreadsheet, pencil and paper, or an app . . . pick a way to log your income, expenses and spending. Every. Single. Month.

Whatever method you pick needs to meet a few requirements. It should be:

  • Easy for both spouses to access
  • Simple to create new monthly budgets
  • Convenient to track spending throughout the month

May we suggest our favorite budgeting tool, EveryDollar? It meets all those requirements . . . and then some.

With EveryDollar, you can budget on your desktop or in the app. That means both spouses can log in to the same budget on their separate phones, checking in to see how much is left in a particular budget line or tracking their spending on the go. This creates accountability—which is key in a successful family budget.

Oh, and making new monthly budgets takes just a couple minutes. An EveryDollar budget is a time and communication saver.

Make a new budget in EveryDollar

2. Talk about where you are right now.

You can figure out just how much you want to share with your kids based on their age and your comfort level. Maybe you don’t want to spell out how much money you make or the exact amount of every bill. But do have an honest family conversation about how things are with finances in your household. Right now.

After that, you can talk about where you’re going and how to get there—as a team. Keep these lines of communication open and make talking about money feel normal. It might be a bit uncomfortable at first, but you’ll get the hang of it!

3. Discuss the difference in wants and needs.

For any family budget to succeed, you need to explain to children (and maybe remind yourself?) the difference between wants and needs—and how important it is to meet needs first. This means you’re budgeting for those Four Walls (which we mentioned earlier) before family memberships to the local wax museum.

4. Communicate with your kids to prioritize spending that connects to them.

You probably don’t have enough money in the budget for your kids to be involved in everything they’re interested in. And that’s okay.

When it comes to extracurriculars, clubs, sports, lessons and the like—talk to your kids about how these all cost money. One thing per kid per season is plenty for their time and your budget. Work together to figure out what that one thing should be.

And when you put it all in the budget, be sure to include a family fun budget line (if you’ve got money to cover it).

Sample September budget

5. Create money goals together.

Start making money goals together. These goals can connect to paying off debt or saving money (as in saving up for emergencies, a big purchase, or a fun family experience).

Talk through how everyone can be involved in making these goals come true. Ways to do that are coming in hot with this next tip.

6. Track your goal progress.

Let’s say you’re saving up for a family vacation. Set a savings target for this money goal—and track your progress as a family.

If you’re using EveryDollar, you can set up a sinking fund for your goal and watch it fill up along the way.

Want to get to the goal faster? Have a family planning meeting to brainstorm ways to make it happen. Decide to tighten or cut spending by going without some extras for a couple months. Take on side jobs (some you can even do from home). Even the kids can do a bake sale or mow some lawns to help the family goals happen sooner.

Including the kids here shows them how finances work—and how what they do impacts the family in multiple ways. Life lessons all around.

Sinking fund balance

7. Have monthly budget meetings.

Monthly budget meetings are one of the best ways to keep those open lines of communication about money going throughout the year. Here’s what you should think about before and during those meetings.

Each month comes with the standard stuff you spend money on—as well as month-specific expenses. Plan family budget meetings to talk about those changing expenses for sure. Also, go over where you struggled last month, celebrate your budgeting victories, and check in on your goals.

Make sure the meetings don’t run too long. You don’t want budgets to appear boring—because they aren’t! And it’s always in your best interest to have snacks. Always.

8. Make paying off debt a priority.

$14.64 trillion. That’s the total household debt in America as of the start of 2021.1 No. Joke.

Debt is constantly knocking on our front doors like a sneaky salesman with tempting “rewards” and the promise of instant gratification. But really, all debt does is hold your income hostage to pay for your past.

Well, it’s time to slam the door in debt’s lying face. No more being a part of that $14.64 trillion statistic.

The best way to get out of debt is to get everyone in the house on board—make paying off debt a priority. Talk it up. Get hyped. Create a playlist and have a dance party every time you make more than a minimum payment. Learn about the debt snowball method, and use it to take back your income. All. Of. It.

You’ve got to stay motivated through budgeting and paying off your debt. You’ve got to find ways to celebrate the victories (big and small). And you’ve got to do it together—as a team!

9. Track your spending throughout the month.

We mentioned how tracking your spending throughout the month creates communication and accountability with your spouse. But guess what. It also makes you accountable to yourself.

Yup. Sometimes you’re the exact person who needs to look at that restaurant budget line and see it’s just too low to hit up the Fry Guys food truck for lunch with your coworkers.

But tracking spending shouldn’t get the reputation of being a killjoy. Yes, it’s being responsible. But people who are responsible with their money are people who take control of their money—instead of the other way around. People who are responsible with their money don’t wonder where it all went at the end of the month. It’s totally worth it!

If you don’t want your money owning your family and holding you back from your goals, then watch your spending. Track your expenses.

September transactions

Also, look how easy it is to track transactions with the premium version of EveryDollar (available only in Ramsey+). You can connect your budget to your bank so transactions stream right in. Grabbed a sweet treat at Donut Hut? Drag and drop the purchase to the right budget line. It’s the best life for busy budgeters.

10. Adjust your budget when needed.

Braces, bow ties and budgets. What do these three B-words have in common? They all need adjusting.

Yes, you’re supposed to adjust your budget during the month. As you’re tracking those transactions and a budget line is getting close to maxing out, you have two options. One: Just say no. Two: Move things around.

The first option is always your answer for the extras in life. When your personal spending line is gone, it’s gone. When the restaurant budget line is spent, it’s spent.

It's an EveryDollar budget

But let’s say your electricity bill was higher than you planned. You can’t call the electric company to explain your budget line and ask them to take back some of the lights you left on last month. Nope. You pay the bill. And you find that money by adjusting a different budget line.

A budget isn’t a slow cooker. You can’t set it and forget it. You’ve got to get in there and make adjustments so your budget works for you and your family.

11. Have the kids work on commission.

Lots of us got an allowance growing up. But having your kids work for a commission instead of handing them money for nothing teaches them how the world of work runs. They do chores—they get paid. They save their money—they pay for things.

Start kids out on commission-based earning so they learn the value of money, hard work, and how those two things are directly connected.

12. Don’t be afraid to talk about money.

If this all seems awkward at first, that’s normal. Turns out only 28% of parents are talking to their kids about money.2  That’s not good enough!

Push past the awkwardness that might be holding you back. Budgeting together and teaching your kids how to make and spend money wisely—these are two of the best financial foundations you can create for your kids to help them win with money later in life.

You know what they say: The family that budgets together, grows together. (Okay, maybe we’re the only ones who say that. But it’s true.)

Hey, we’ve said it before, and we’ll say it again. We love budgets. We made EveryDollar because we want you to love budgets too—or at least realize they aren’t hard or bad or a ton of work.

Get started with EveryDollar today, as a family. And bring snacks. 

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.

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Answer a few questions, and we'll create a plan tailored just for you. It only takes three minutes!
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