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It can feel complicated at first – for example, how do you categorize everything?

What about expenses that fluctuate or aren’t monthly? The best thing to do is take a step back and look at some practical steps toward creating your family budget. Here are some tips.

3 Basic Budgeting Categories

Have you been talking about a family budget, but aren’t sure where to start?

Sometimes it’s good to start with the basics, such as the basic outline for a budget and the categories you want to include.

Here are some tips to help you formulate a simple family budget.

1 Income

The first place to start in the outline of your budget is with your income.

There will be some estimating here, no doubt; but make sure it’s estimation, not dreaming, say experts. The income area of your budget is not the place to write down ideals.

Simply take a look at your net income over the last three months and estimate an average monthly income.

Or you might have income that changes very little month-to-month; it should therefore be pretty easy to figure out your monthly income.

2 Expenses

Your next category should be expenses. It’s good to include enough detail that you have a grasp on things.

But splitting your expenses into dozens of little categories will probably only frustrate you.

Try to make your categories fairy general – “Entertainment,” for example, is a more general category than “computer games, movies, cable, and DVDs” listed as separate categories. There will probably be more estimation here than in the income category.

As you break down your expenses into understandable categories and numbers, remember that charitable giving or any giving away of money should be also listed as an expenditure.

3 Actual Expenses

Estimation gives way to “real” numbers when you write down your actual expenses during the month.

This is the last section of your budget plan. Keep a running tally of your expenses for several months, and then look at where you are.

free household budget worksheet pdf

Download Your Free Household Budget Worksheet PDF

Steps to Getting Started on a Family Budget

In budgeting, there are some principles that are considered basic. Here are some of them.

Wants versus Needs

This can be a hard one, but it’s vital for a budget to function properly.

Beware of convincing yourself that a want is a need when it isn’t – you may just be trying to find an excuse to buy the item. 😂

Real needs are things like clothes, food, and shelter; but designer clothes, gourmet food, and a palatial dwelling are more like wants!

Expenses should not be greater than your income

You may find yourself surprised the first time you do a budget and discover that you actually don’t make enough money to cover your expenses.

If you discover this, you need to look carefully at your income section and see where you can increase it, and look just as carefully at the expenses and see where you can make cuts.

Be Realistic 

Remember that your budget is a tool, not a dream machine.

Goals are important, but a family budget should first focus on the numbers you’re dealing with.

That’s the basic first step.

Once you have a grasp on that, you can begin a bit more idealizing, such as saving for vacations, desired items, etc.

Start with Your Net Income

First, figure out your net income for each month.

This means your income minus taxes, insurance, 401K deductions, and so forth. If you are self-employed, subtract estimated taxes, insurance costs, retirement account savings, etc.

At this point, you just need numbers.

*Please note that this is very basic advice based on my own experience. Always consult a professional when calculating for tax purposes*

Keep Categories Expenses Broad

Next, figure out your monthly expenses.

If they vary, figure out an average by looking at the last three to six months’ worth of expenses.

For example, if your electric bill was $150 last month, $140 the month before, and $175 the month before that, then you can estimate a monthly expense of around $155 for electricity.

You could also take the highest amount, $175, and go with that.

It’s a good idea to keep your categories as general as possible while still preserving clarity. Otherwise, you might get confused or overwhelmed by all the “hair splitting.”

Example, instead of having “food, paper products, drug items, etc.” as categories, you can lump all those expenses under “groceries.” Items like “pet supplies” can be their own category, but you might want to include vet bills in that category.

Here are some suggestions for categories:

  • Charitable giving
  • Payment off debt
  • Home (mortgage, rent, property tax, insurance, repairs, etc.)
  • Vehicle
  • Utilities
  • Health Care
  • Birthday and Christmas gifts
  • Cushion (this is money set aside to offset surprises, mistakes, or unexpected expenditures)
  • Personal (eating out, hair appointments, etc.)

Stop and Assess

At this point, stop and take a look at what you’ve got so far.

Are your expenses greater than your income? It’s time to cut back significantly, or find another source of income (or both).

Actual Expenses

So far, you have two columns – income and estimated expenses.

Now you need to add another column: actual expenses. Keep track of the real numbers each week over the next month and see how much/if they differ.

Now you’re well on your way to a workable budget!

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