How to Develop an Effective Family Budget for a Month

Have you ever wondered why your finances get depleted before the end of the month? You are forced to take loans to offset most of your financial needs. If you are experiencing this problem, then you have a problem with tracking your family expenses. Because family issues keep changing, for example, a family member like a child may be added, making the family structure to change. Therefore, you must know how to track these changes and manage your bills well. The answer to managing your family finances well, therefore, is coming up with an effective budget. However, it is always a problem for couples to develop an effective family budget because they do not know what it takes. Therefore, this is a guide on how to develop an effective family budget that will satisfy your monthly needs.

If you want to develop an effective family budget, you must know the four important factors to consider. These things are Fixed expenses, Variable expenses, Family debt, and Family Goals. We are going to dive deep and tell you how these factors affect your family budget.

Family Budget and Why you Should Have One

Before going into details, it is important to make it clear what a family budget is and what it entails. Furthermore, you must understand why you should have a family budget. Therefore, a family budget a plan that lets you know how your income is being used among the different family expenses. Some of the common family expenses are food, rent payment, car payment, mortgage payment, and clothing. Therefore, a family budget is generated based on the income and it ensures that you spend less compared to what you earn.

There is something you must understand here, there is a difference between a family budget, an individual budget, and a couple budget. The main difference here is that family budgets are always complex. Compared to either individual or couple budgets, family budgets cater for more needs and, in most cases, many people. Both fixed and variable expenses such as buying diapers, payment of school fess, medical expenses, and catering for food. Most of these expenses cannot be predicted, therefore, they make this budget more complex. When talking about an individual budget, a person will only be concerned about the things that affect him or her. For example, if you are a man, your monthly budget will have things like haircut, clothing and payment of credit. On the other hand, women will be concerned about their salon, makeups and clothing.

When it comes to family budgeting, people find it hard to create an effective budget because they don’t know hoe to balance between income and the family. In this case, a family can be well understood based on its age. For instance, a family that has been in existence for like ten years will have to cater for school fees and huge expenses on food as teenage children have high appetite. However, a young family that is just starting will have a low budget as most of their expenses will go on buying things like diapers or paying for daycare services.

The main reason for having a family budget is to balance your finances for the entire month. The issue of depleting your finances before the month ends can only be solved by have an effective family budget that satisfies all the monthly needs. In this budget, all the people depending on your income will be accounted for. For example, if you are the man and bread winner of your family, you will know that you have your wife and kids looking up to you. Additionally, you will account for other non-family members like cousins, your parents, and other relatives who in one way or the other depend on you. In this case, your family budget will help you to achieve the following:

  1. You will be prepared for emergencies because your budget will have a saving plan. Therefore, in case your family member becomes sick, you will have ready money to cater for their medication.
  2. You will have knowledge of how much you spend on all the essential needs in the family. With the knowledge of how much you need to run your family for a whole month, you will avoid unnecessary debts.
  3. When you know how much your family needs, you will spare some amount to save for your future family goals.
  4. In terms of debts, you will e able to plan how to repay it without affecting the survival of the family. In this case, you will have a plan that will guide you on how much will be used to repay your debts and how much will be left to cater for the month’s family expenses.

Therefore, I believe you are now convinced on why you need to have an effective family budget. Let me now elaborate on what you need to consider when developing a family budget.

What to Consider When Creating Your Family Budget

The primary elements of every family budget are food, housing, transportation, childcare, healthcare, taxes, clothing, and entertainment. These are the main elements that make up a family budget and are then grouped into four broader categories as follows:

Fixed Expenses

These are the expenses which cannot be changed easily in the family. In most cases, the situation only changes when the payment is finished. However, fixed expenses have an advantage as they are easy to plan for. You will know they are there and how much they cost. As a result, you will know the exact amount to put aside to cater for them. These expenses include car payment, rent payment, mortgage, insurance premiums, and taxes on real estate.

Fixed expenses are easy to manage as it is easy for you to lower their costs. For example, lets use the case of a gym. If you have subscribed to a gym where you pay $500.00 but you don’t go to the gym daily due to other activities. Why now should be paying for this expenses gym where you don’t go daily and there is a cheaper option? It is better for you to pay a $200 gym membership fee and save on the extra cash to be used in other family matters. Furthermore, in the case of car insurance, you can consider cheap alternatives and also do the same for your medical insurance.  

Variable Expenses

This is the second factor to consider when developing an effective family budget. Variables expenses are those that illustrate your daily spending decisions. The term “variable” is used because the amount you spend on these expenses may vary each month. In most cases, these expenses are considered discretionary but some are necessities. For instance, food is a variable expense that is a necessity in every family. Other variable expenses include buying gas for your car, car repairs and maintenance and some utility bills. A good illustration of variable expenses is electricity. People keep complaining why their monthly electricity bills keep fluctuating. You may spend more on electricity in March than in April.

It is not easy to lower the costs of variable expenses as the move will affect your lifestyle. For instance, you might decide to take lunch or watch a movie. However, this is a difficult decision to make because all these things are important in your life. If you decide to watch a movie at the expense of taking dinner, you will be left hungry. On the other hand, if you decide to take lunch and do away with the movies, you will miss on the fun moments of the movie. Therefore, you need to know how variable expenses affect your family when creating a family budget.


Many people have debts which are bound to be paid within the stipulated time. Debts may range from student loans, credit car balances and other family loans. It is important to pay attention to debt payment to avoid incurring extra fees through interests and penalties for defaulting. Therefore, you need a budget that will help you decide how to pay off those debts in time without affecting family operations.

Poor debt management has led many people into poverty. There are families that took loans may be for construction, to start a business or for other reasons. However, because they defaulted repaying these loans, the principle amount they took accrued a lot of interest. Thus, they had to pay a lot of money compared to what they took. In turn, this affected the family as they had to spend more on loans at the expense of other family expenses. Therefore, you need to develop an effective family budget that will help you pay your loans on time.


You must have future goals for your family. These are the things you need to achieve either in the near future of after some years. Some of the goals might be owning a family car or building a family house if you live in rentals. Family goals are crucial and should be the guiding factor in your budgeting. It is important for you to have goals as they motivate you to work hard and save more. This is the backbone of family success as you will avoid the unnecessary expenses to save for the family’s future goals. These four factors are important and that’s why they have been discussed in this guide on how to develop an effective family budget that will satisfy your monthly needs. Apart from these issues, you should look at other issues that might be specific to you based on your family.

How to Stick to Your Budget

Budget management is an issue of concern. Many people create a budget but sticking to it becomes a challenge. Why should you spend a lot of your time coming up with a household budget which will be useless? However, due to more research in the field of budgeting, experts have devised means by which people can manage their budgets. These methods have made budget management easier. Some of these systems are:

Cash Envelope System

Cash-envelope system is an effective approach that aids in the organization of your cash flow. Furthermore, the method ensures that a family sticks to its budget. As the name suggests, this approach entails listing your expenses, label an envelope with each of these expenses, and fill the envelopes with the cash you have allocated for the particular expense. Then you start spending the cash in each envelope as expected. When an envelope becomes empty, you know you are at the monthly spending limit for a particular expense. The following are the steps involved in making an envelope budget:

  • Determine your monthly income
  • Determine your expenses
  • Compare expenses and income and adjust if necessary.
  • Label your envelopes and fill them with cash.
  • Make you envelope budget system digital.

Zero-Based Budget

Zero-Based Budget will help you ‘zero in’ on where your money goes. Therefore, it helps you to stay focused especially on saving. In short, this is a system that will help you track every penny entering and leaving your bank account. The idea behind the formulation of this system is that your income minus your expenditures equals to zero at the end of every month.

How to Develop an Effective Family Budget that Will Satisfy Your Monthly Needs

Now that you know the basics about budgeting, I know you are now ready to create your own family budget. I am going to take you through every step you need to create a family budget. You should know that it is not difficult. Developing a family budget should not worry you as this is just a guide for your family expenditure. It will ensure that you can account for every penny in your bank account. Most important is that it will keep your family running with all expenses catered for throughout the month. Thus, the following are the steps you should follow to develop an effective family budget:

1. Start by Looking at Your Family’s Income

This is the first step and involves having a clear knowledge on what your family earns in a month. If both the wife and husband are working, you should bring your bank accounts together and look at what the two of you earn. Combine the two to get your reliable monthly income. Apart from only looking at how much you make from your employment, you can also look at other reliable source of income you have as a family. Other business and investment you have as a family and can rely on should also be counted at this point.

What should you do if one of you has irregular income? If this is the case, you should not get worried, What works well in this case is an average monthly earning. To get the most accurate average on this, you should get the summation of the past 6 months’ earnings and divide it by 6. This will give you the most accurate average that can be relied upon in making your household budget.

2. Analyze Your Household Expenses

This is the point you should pay attention to both fixed and variable expenses as they will determine how you handle this exercise. Remember we said earlier that fixed expenses can be managed easily by making their costs small. Therefore, it is important to start by considering these types of expenses first. You will start by looking at things like rent, car payments, insurance premiums, and credit card payments. After this, you should do a comparison and see how much you spent the previous month on variable expenses. In this case, you should look at issues like medication, groceries, diapers and electricity. At this point, you should have understood how the previous month went in terms of spending.

Finally, determine your discretionary spending. This is the spending that although it is not much necessary, it makes life brighter and makes family members happy. For example, going on a road trip or taking your family out to watch a movie. Therefore, this collectively makes your safe-to-spend expenses. At this point, you will have a list of all your monthly spending. Thus, you should list the item with what it costs.

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3. Calculate Your Net Income

You have now reached the point where you need to know the real financial situation of your family. Step 2 above is crucial here because to get your family’s net income, you must know your total monthly expenses. Therefore, from the list of expenses you wrote above, get their total. Take this total and subtract it from your take-home pay total. The result of this calculation reflects your net income.

Net income can be positive or negative. If it is a positive value, then you are on the right track as it means you spend less than what you earn. If this is the case, you have some money to save for your family’s future goals or pay to pay debts.

On the other hand, if you realize that your net income is a negative value, then your family is spending more than it makes. This is where the answer to why your income is depleted before the end of the month comes. To avoid this, some adjustment needs to be done in the manner in which you spend. This, therefore, illustrate why you need the knowledge on how to develop an effective family budget. The family will need to reduce its spending and work on debt payoff strategies to save more family use.

4. List the Financial Goals for Your Family

At this point, you are able to set short-term and long-term goals for your family. This could only be achieved after looking at the family’s income and how much your expenses cost. At the point when you decide to set these goals, you will get a glimpse on how long it will take to achieve the goals based on your income. You will start by asking yourself questions on where you want to be financially in a given period. For instance, you can set your period to be five years or ten years.

An example of a short-term goals can be paying your credit card debt in one year. If you achieve this, you will have extra money to start saving for other expenses. For instance, the amount you used to pay for credit debts can now be channeled into saving or mortgage payment. A long-term goal you can look at is paying college fees for your children in 15 years or save for retirement in 30 years.

When setting these family goals, you should involve all family members including kids. The importance of this is that it enlightens all members to know that there is something to be achieved in a given period. Therefore, some money must be spared for the said goal. As a result, there will be no complaints when there is limited money in the family. It is a factor that will enable the family to stick to its budget.

5. Figure Out Where You can Cut Back

The truth is, if your family overspends, it will be difficult for it to save for the future and also to achieve its set goals. You not be willing to spend on things that drain your life but do not improve the quality of your life. These are the things you should cut off from family spending. Normally, it is hard to figure out this as it needs critical review on your family life and how it can be improved or what can be done to make it good. An example of such expense includes some subscriptions you forgot about like gym and credit cards. These subscriptions keep deducting your money for nothing. When you have an effective family budget, you will be able to cut-off on such expenses and ensure that your family is living within your means.

The best way to start cutting off on unnecessary expenses is to look at your discretionary expenses. If you spend $100 on pizza and eat outs, will it be okay if you spend $50 by preparing a family pizza? Some of the bills you spend in a restaurant can be used for other crucial functions at home. However, this should be agreed upon by the entire family to avoid issues that may disturb the family’s peace. Moreover, as mentioned earlier, you should look at your fixed expenses to determine the ones you can cut on their costs.

6. Decide on a Debt Payoff Plan

Debts are inevitable in modern life. It does not matter whether you have a positive or negative family net income. Families have debts ranging from mortgages to credit card debts. You should not treat debts as a bad thing because people achieve a lot through good debts. However, you should always purpose to payoff what you owe as fast as possible. This keeps you in a good credit score.

Debt repayment is on the guide on how to develop and effective family budge because many people have become bankrupt for not paying off their loans. To create this plan, you should start by sitting down with your partner and figure out the total debt you have. Come up with a list of the type, amount, and interest rate. Determine the best debt payoff plan based on what you owe. Some of the common plans include debt snowball and debt avalanche. At this point, you will determine the amount to go into debt payment which will also be added in your budget as a line-item.

7. Make Use of a Manual or Digital Budgeting Tool

This is the final step on how to develop an effective family budget. Now that you have the family expenses including debt repayment and saving, you should plug this information into a budgeting system like a google sheet template, a notebook, your simple account, or family budgeting software. The reason for doing this is that it makes your budgeting process easy and automatic.

Set a specific date and time every month in which you will be doing this process. Once you’ve set up the framework, all you have to do is track your expenses. Compare the amount that you budgeted with how much your family spent. You can then see whether you’re on target with your spending and whether you can put even more money toward savings or debt.  

Key Take Away

At times, you will realize that your family budget is not on track. In the beginning, you should not worry as there will be some fixing done before getting the main family budget. Therefore, you will keep adjusting you budget by allocating more money to one category over another. This will be done until you get a convenient family budget which then you will have to stick to. With all this knowledge, I hope you will develop an effective family budget that will satisfy your monthly needs. If you found this information relevant, please share with your family and friend on your social media platforms. This will also help them to manage their spending and get out of bad debts.