How to create a family budget
- May 8, 2023
- 3 min read
What we'll cover
What a family budget is
What to consider when making a budget
How to create and stick to a family budget
From groceries to vacations to kids’ extracurricular activities, your family has a lot of financial priorities to balance. To keep it all running smoothly, a family budget is a must. Find out why you need a money management roadmap for your crew and how to make one that fits your needs.
What is a family budget?
A family budget is a money management plan for your whole household. It helps you organize and track all your income and expenses for everyone in your family so you can reach your shared current and long-term financial goals.
Why should you have a family budget?
Your brood likely has many goals. Maybe you’re saving up for a down payment on a home or planning on a summer vacation . In addition to these big dreams, you have a lot of day-to-day expenses to manage, like groceries, utilities and entertainment — not to mention one-off costs like tips for the tooth fairy, shoes for the school dance or science fair supplies. A family budget helps you balance your spending and saving to fund all your family’s wants and needs.
How to create a family budget
A budget is all about balance. First, roughly estimate all your ingoing and outgoing money. Then, get a more detailed picture. Follow these steps to make an effective budget.
Calculate your income
Use your bank statements, pay stubs and tax returns to figure out how much money you have coming into your household every month. Be sure to factor in components like investment income, alimony or child support and any side hustle income you may generate.
List your monthly expenses
Next, add up your expenses, including all monthly bills shared by the family, debts (credit card bill, student loans, mortgage, etc.) and ongoing costs like household supplies, childcare and gas.
Pick a budgeting method
You have no shortage of options when it comes to the budgeting style you choose. Explore different budget types to find one that fits your needs and preferences. Some popular choices include the 50/30/20 method , the envelope method and the line-item method. You can even mix and match styles for a custom approach that meets your goals.
Once you have a clear picture of where your finances stand, it’s time to set benchmarks you want to achieve. You can have multiple family financial goals — from getting out of debt to buying a house to sending your kids to summer camp and more.
You and your spouse should decide as a couple what you want to put your money toward and in what order. When you get married, it’s important to talk about the big topics and how they’ll impact your finances. For example, will you have children and how many? Do you want pets? What are your retirement plans?
Consider these important issues when formulating a money management plan. Understanding your priorities and setting clear financial goals will motivate you to stick to a family budget now and as your lives and circumstances evolve.
Track your spending
Once you put your budget in action, you’ll want to check in and see how you’re doing. Smart tools like buckets and boosters in Ally Bank's Interest Checking Account and Savings Account can help you organize and keep tabs on your spending and saving. Keep a close eye on all your bank accounts, credit cards and cash spending to see how well you’re following your budget. It may take a couple of months of tracking your spending and making budget tweaks to get your plan in a realistic spot that you can stick to.
Review your budget monthly
About every 30 days, take stock of your budget and how it’s working. Your family’s money management plan doesn’t have to be set in stone. Your life and needs will change, which means your budget will as well. A new baby, moving and a job change are just a few examples of shifts that may require tweaks to your plan. Don’t be afraid to pivot when necessary. Communication is key, so check in with your spouse to make sure you’re both on the same page as time goes on.
Optimize your family’s finances with a budget
Family life is full of joy and challenges. Setting your crew up for financial success with a family budget will make money management that much easier. Create and implement a budget plan that helps you achieve your happily ever after.
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