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Budgeting has received a bad reputation in a wide majority of American households. Many people view budgeting as a big roadblock to spending money on the items they want. They think that by implementing a family budget, they will no longer be able to spend money on that morning coffee.

What?! How will I function without coffee???

No longer will they be able to go out and enjoy that movie with their family. Bummer!

No longer will they be able to go out and have a drink with their friends.

No social life either?!?!

If they create a family budget, they will forever be shackled by that budget and unable to get out of the house or spend money on anything they want. Right? WRONG!

A family budget is so much more than strictly limiting your spending.

If you follow my step-by-step guide to creating a family budget, you’ll be on your way toward financial success and you won’t feel like you can’t spend money on things!

Planning for Unexpected Expenses with a Family Budget

What if I have a family though?

There are always so many unexpected expenses that pop-up!

How on earth do I plan and budget for those expenses??

For Example:

The kids want to play a sport this season.

The sign-ups costs money.

The equipment costs money.

Traveling back-and-forth costs money.

Or maybe it’s prom that is coming up soon for your kids.

The dress or tuxedo costs money.

The flowers and tickets cost money.

Maybe it’s a surprise and you just found out you’ll be having a new baby!

You’ll need diapers, bottles, a crib, a car seat, and a stroller.

What if there are things I need for my new baby that I didn’t plan on?

If you are getting ready to have a new baby, congratulations! To help with budgeting for your new baby, head on over to Babycenter and check out their interactive tool for estimating your first year of baby costs.

Unexpected Expenses

If you have a family like me, you know that unexpected expenses pop up from time to time.

Guess what?!

That’s ok!

You can plan for these unexpected expenses ahead of time if you set up your family budget properly and stick to it!

I’ve got 5 children ranging from ages 5-13, 3 dogs, several chickens, and some ducks too… So I know a thing or two about dealing with unexpected costs when creating a family budget!

If you don’t feel like you’re ready for a full step-by-step guide to budgeting, check out my Beginners Guide to Creating A Budget post for a more simplified guide to budgeting.

What if We Don’t Have A Family Yet?

No worries!!

This guide applies to you as well and you can use the same steps to ensure that you set yourself up for financial success!

You can also check out How to Create a Couple Budget You’ll Both Love for a different perspective!

Creating a Family Budget

Let’s get started and help get you on your way to creating a family budget that fits your needs!

Oh, and let’s make sure you have the tool available to actually stick to that budget and make adjustments where necessary too!

That’s one thing that often gets overlooked, but we’ll get to that in a bit.

Step 1: Decide on a Family Budget System

The first step in creating a budget is to decide what type of budget system you’d like to use.

Here are the basic options that you have to choose from to create, track, manage, and maintain your family budget:

A Family Budget Notebook and Pencil

This is the most simple and basic way to track your budget. Grab a notebook and a pencil and we can get started. If you’d like to use this method, but still want a little bit of guidance, I’d recommend this Mead Expense and Budget Planner.

The advantage of this method is that it’s cheap, simple, and easy.

The downside to this method is that you’ll be manually adding up your income and expenses.

If you’re like me, I want things to be easy, so systems that do the math for me are fantastic!

An Excel Spreadsheet

You can easily download a budget template here. Find one that you like and try it out. Most of the templates are plug and play. Plug in your numbers and the template will calculate your results.

Find a template that works for you and isn’t going to overwhelm you. If you are new to budgeting, I recommend using a simple template to get you started instead of some of the more advanced templates.

The advantage of this method is that you can save your progress and once you have the template setup, you can roll it from one month to the next, so it is easy to get into a routine.

The disadvantage is that you might not have a computer or you aren’t comfortable enough to navigate a spreadsheet.

Family Budget Software

There are a ton of websites out there to keep track of your family budget online and there are also some downloadable budget programs as well.

Mint is one that’s free to use and relatively easy to navigate. If you don’t feel like you can handle tackling your budget on your own, you can also check out this Quicken Budgeting Software. It will make creating and tracking your budget a breeze!

The advantage of using this method is that a lot of the software will allow you to link your various accounts, so it makes tracking your spending easier. A lot of them also have great user interfaces that make budgeting really simple.

The disadvantage is that you need an internet connection and one more login to remember. Certain programs also have a cost associated, but it’s money well spent if it allows you to get your budget in order!

My Family Budget System

My personal recommendation is to go with an excel budget template.

This is the method I use for tracking my budget and it’s easy to keep on top of maintaining your budget once you’ve got everything set up.

But, that’s not for everyone and I highly recommend you try out different systems to figure out what works for you!

Find the method that works best for you and stick with it!

The thing to keep in mind is that you will be creating and maintaining a budget using any of these methods, and that’s what’s really most important! So whichever family budget system will keep you diligent and makes things easiest on you is what will work the best for you!

Step 2: Set Financial Goals

It is very difficult to set and stick to a budget if you don’t have goals.

You need short-term goals, which are the goals that deal with your immediate financial needs.

You also need long-term goals, which are years-long goals that you are striving to reach.

Here are some common examples of short-term financial goals:

Stop Using Credit Cards

Pay Off A Credit Card with a Low Balance

Reduce Monthly Bill Payments (Like the pesky cable bill)

Build an Emergency Fund

Buy a Prom Dress

Get Braces for your Child

These are all things that can be accomplished in a relatively short amount of time, assuming you include them in your budget.

Here are some common examples of long-term financial goals:

Get Out of Debt

Pay for Children’s College Tuition

Purchase a New (Used) Vehicle Side note: I don’t recommend ever purchasing a brand new vehicle. I’ve made that mistake twice and it doesn’t ever make financial sense in my opinion. I also put together this very handy guide that details why I think it’s a great idea to buy used.

Save Enough to Retire by age X (For me this is 55!) Even if you want to retire at a normal age (between 62-67), this should be one of everyone’s long-term goals.



If you are just beginning to take your finances seriously and you do not know how to set financial goals for yourself, check out Setting Up Your Own Financial Goals – How to Tips for Millennials. It’s geared toward Millennials, but it’s an easy ready and has helpful tips for people of all ages! You can also start with sitting down and making a budget, financial pillar #3 from MikedUp!

Once you have your goals in place, you are ready to start tackling the creation of your family budget!

Step 3: Calculate Your Income

This step is pretty straightforward. In order to budget, you need to know how much money you have coming in on a monthly basis. Be sure to include all of the regular income you bring in every month.

Use whichever budget system you decided on earlier and enter your income.

If you’re not sure how to find your monthly income, gather up your paystubs from the past few months, add them up, and figure out your average monthly take-home.

Now that you know how much money you’re bringing in every month, let’s focus on your expenses.

Step 4: Calculate Your Monthly Expenses

Out of all of the steps involved in creating a budget, this one is the most time-consuming, but also the most important piece. The fun part of this step is getting to decide how you will spend all of your hard-earned money!

First, start with your fixed expenses.

Fixed Expenses

Fixed expenses are basically monthly payments that do not change much. For example, mortgage/rent, car payment, etc that you can count on paying every month.

List out each of these using whatever budgeting system you have chosen.

Your variable monthly expenses come next.

Variable Expenses

Variable expenses are monthly expenses that you have to pay, but that may vary from one month to the next. Examples include groceries, gasoline, electric/natural gas, etc. some could be very consistent, but they still may vary depending on usage.

Regarding your utility payments (natural gas/electricity)… Get on a budget plan if your utility company offers it so you can move these items into the fixed expenses. It will make seasonal adjustments to your budget easier as the weather changes and these prices tend to fluctuate! Most plans will typically re-evaluate once a year, so you’ll only have to adjust once a year instead of planning for this variable expense every month.

List out each of these using whatever budgeting system you have chosen.

Finally, you can list out your discretionary expenses.

Discretionary Expenses

Discretionary expenses are the things that you spend money on that aren’t entirely necessary, such as going out to eat, going to the movies, or hitting the links for a round of golf. Also included here are the 9 million different expenses that having a family comes with, many of which I listed above.

When listing your discretionary expenses, you can choose a couple ways of listing them. You can break them out into categories, such as entertainment, clothing, eating out, kids’ activities, and charitable giving (if you are a tither, you can include this in your fixed expenses). The list is literally endless and can be as detailed as you’d like.

You can also simply list your total amount for discretionary expenses and choose to break it down later when you are maintaining your budget. This method is a little simpler but it has it’s drawbacks as well.

My preference is to lump all of my discretionary spending together.

That makes it a little more challenging when I’m looking to make spending cuts though, so the choice is yours!

Step 5: Determine the Difference Between Your Income and Expenses

This step is crucial to the implementation of your family budget! Simply take your total monthly income and subtract your total monthly expenses to get your difference.

If you’d like to add it up quickly, Quicken has a simple, free calculator here. If your number is positive, the good news is that you are currently spending less than you are earning. Feel free to skip down to step 7 if you are comfortable with where your discretionary spending is at and you don’t want to earn any extra income!

However, if you came up with a negative number, you’ve got some work to do as your current spending is higher than what you are making!

Step 6: Getting Your Family Budget Back in the Black!

So your number was in the red (negative)…

No worries! I’m here to help!

If you fall into this category, look hard at your discretionary spending and cut back as much as you can without feeling like you have to become a hermit. If you are drastically in the negative, head over to Money with a Purpose and see How to Drastically Cut Expenses so you can start to make some headway.

Then, look at your variable and fixed expenses and see if there are areas you can reduce your costs. Turning down your thermostat or calling the companies to negotiate lower bill payments are great ways to reduce these expenses.

In addition to doing all you can to cut your expenses, another way to bring your budget back into the positive is to earn some extra income.

Examples of how you can start earning extra income on the side include advertising on your vehicle, selling unwanted items around the house, pet sitting, etc. I could go on for a while, but my friend Nick over at Side Hustle Nation already put together this great list of 99 ways to earn some extra income on the side and I’ve also put together a list of How to Earn Some Extra Cash on the Side. You should definitely be able to earn extra income by trying out some of these methods!

By reducing your expenses and increasing your income, you should be able to get your family budget into the black! (A positive number when you subtract your expenses from your income).

Step 7: Focus on Your Financial Goals

Earlier in step 2, you should have outlined your financial goals. If you haven’t done that yet, head back up there and get those goals listed out!

Once you have a positive budget, you can take the extra money that is not going toward your expenses and apply it to your financial goals. If you have enough extra in the budget, you can spread this out over a few higher priority goals.

If not, focus on your short-term goals until you’re able to increase your income or reduce your expenses. Then you can start focusing on your long-term goals. Put the money toward each of your goals monthly until your family budget is balanced (meaning that your expenses are the same as your income).

Step 8: Maintaining Your Family Budget

Once you get your budget created and you get to step 8, you’ll be in maintenance mode.

Congratulations on making it this far!! You are many steps ahead of most of the population!

Keep track of your monthly expenses so you know how much you are spending in each area every month. (This is one of the many reasons I use an excel spreadsheet to keep track of my budget)!

If you need to make minor adjustments, then do that at the end of every month. Once you do this for a few months, you’ll start to see some patterns forming and you can really start to get aggressive with cutting your expenses when you see those opportunities!

Once you meet some of your short-term goals, start working on another short-term goal and start putting some of that money toward a long-term goal.

You’ll be on your way to financial freedom in no time!

Final Family Budgeting Thoughts

Don’t get too discouraged throughout this process!

Creating a family budget that works well for you can seem daunting.

Take it one step at a time, set aside a little bit of time to knock it out, and it will be well worth it in the long run.

If you still need more help, take a look at this example that The Finance Twins put together when they helped one of their readers get started with a budget.

You’ll be thanking me later when you are achieving your financial goals and you have more money in your pocket!

Stay on track with your budget and you’ll be stress-free about money in no time!

You’ve got enough to stress about anyway, you’re raising a family!

Drop a comment below and let me know how you like to budget!

-Robert Gale