How to Create a Family Budget

Creating a household means a blending of funds. A family budget differs from the budget of a single person in several ways. One, your income is presumably a bit higher is both parties are working. Two, you now are attempting to balance the needs and wants of at least two people, possibly more, which will require more planning and conversation.

The sooner you create a family budget, the better. That’s not say it’s ever too late to plan, however. Any time is a good time to make a budget.

 A budget isn’t punitive, it’s simply a spending plan. And if you are bringing adults together as a family, finances are a major component. So long as you’re discussing sharing the bills, you might as well discuss your priorities as a family and make a plan.  

Be sure everyone is on board

Most family plans involve two adults pooling income in some way. Your family budget might also include older children or other adults who are working and contributing toward the family bills, so it’s important to bring all the stakeholders together to make decisions. 

The most important decision is to have a budget at all. Everyone has different ideas about money and how and when to spend it. A conversation should start with the opinions of everyone on budgeting to be sure you’re on the same page. A good way to align money values is to decide what you are budgeting for. Some common reasons to establish a budget might be:

• To pay down debt or work to be completely debt-free
• To save for retirement
• To saving for other big goals like college funds or purchasing a home
• To prioritize spending in certain areas, like travel or entertainment

Be sure everyone has agreed to make a budget. Forcing a budget on someone can make them resistant, and couples who fight about money are 30 percent more likely to wind up divorced. 

Make your list of priorities before crunching the numbers

Begin your work by discussing financial priorities. What is most important to each person in the household? What are your joint goals? Your individual goals? It’s important to discuss your goals and priorities before you start tallying up spending. 

Once you start looking at specific dollar amounts, emotions can run high. Creating a plan using only ideas and values help solidify your thinking, making it easier to see later where you spending does not align with your values. What is most important to you as a family? Some areas to consider:

• Retirement
• Emergency savings
• College funds for children
• Paying down debt or loans
• Saving for travel, furniture, appliances, or new homes
• Entertainment spending
• Grooming, fashion, and clothing
• House and vehicle spending

Determine your joint income

Budgeting isn’t just about how much you’re spending. It’s also about how much you’re bringing to the table as income.  Up to half of marital troubles come from money arguments, and determining joint income can be a big one. 

Don’t assume that both of you are going to deposit your entire paycheck every month into a joint banking account without discussing it first. Try to leave emotions out of the conversation while you work the math. There are several schools of thoughts on combining income that might be a good fit for your household.

• Some households deposit their full paychecks into a joint account and pay all bills together.
• Other households make a budget of shared expenses and then deposit half of the total amount into a joint account while maintaining separate accounts for discretionary spending.
• Still other households deposit a portion or percentage of their paycheck into a joint account, perhaps 80%, each keeping 20% of what they earn as their discretionary spending.

There are several factors that will determine the right plan for your household, of course. Some of these factors include:

• If both adults are earning similar wages
• If one adult is providing the bulk of the income in the household
• If the household is a blended family with different financial responsibilities
• If the adults are both just starting out financially or if they have years of savings and financial experience
• If both adults are comfortable with calculating and monitoring the finances

Match your budget with your priorities

Once you’ve established your family income, it’s time to see how much you’re spending. This can look a little different depending on how you determine you want to combine your income. 

If you’re simply splitting the joint bills and savings, there is no need to focus on how each partner in the household is spending their discretionary funds.

If the household is splitting every bill and combining their total income, the focus will be slightly different as you parse through the credit card and bank statements. 

Look at the amount you’re bringing to the table every month and then look at your priorities. Match the amounts accordingly.  Know, however, that some may be out of balance initially. 

Your housing, for example, will be a set amount based on rent or mortgage. If you find that you’re spending more on housing than you’d like as a family, you might consider downsizing when your lease is up or selling in an expensive area and moving somewhere more affordable. 

Automate and streamline your budget when you can

The more automation you use in your budget, the easier it will be for the household to maintain it. If you have three different savings goals, set up three separate savings accounts for each goal. (Use a bank that allows multiple accounts without extra fees, of course), and then set up an automatic transfer every month to send the amount you’ve determined right into the account.

Apps and software make it easy to track spending across multiple categories, which help both partners see where the spending is happening and if any categories need adjusting.

Check back frequently

Every month, check in on the numbers. How is the savings coming along? Is everyone still happy with the spending? A family budget is a spending plan, and every plan needs adjusting from time to time. 

Setting up a family budget isn’t a one-and-done plan. It will need tweaking and adjusting over time and as priorities and incomes change. The best family budgets are the ones that are comfortable for all family members.