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Creating a budget isn’t always straightforward when it comes to doing it for your entire household, and does require some careful planning and consideration. Here’s how to make a family budget, whether you’re a single-income, or a dual-income family. So grab some paper, a pen, and get ready to make some budgeting lists.
(Bear in mind that it’s sensible to create/monitor your family budget once a month if you can. This will help you to plug any gaps and manage your money more easily.)
Table of Contents
Analyse Your Spending
It’s a big job, but in order to budget correctly, it needs to be done. Firstly, take a look at your bank statements for the past three months, and list each and every debit transaction in a category (food, fuel, entertainment, etc). You’ll be able to see how much you’ve been spending on groceries, eating out, internet shopping at a glance. Take those figures and divide by three to get an average.
Fixed Income
This is the total amount of money you have coming in each month which won’t regularly change. You need to list each and every source of frequent, fixed income. This can include salaries, child benefit, tax credits etc.
Additional or Variable Income
If you work shifts, do overtime, or have a side hustle, your additional income is going to be variable, which is why it’s important to make time to budget that money at the beginning of each month. Only include money that is guaranteed; that is, income that you know will land in your account that month. (You will also need to log this for tax purposes, as additional income must be declared.) Otherwise, make a note to carry it forward to the following month if you’re confident you’ll receive it at a later date.
Fixed Expenses
These are the living expenses that you know won’t change each month.
The majority of your fixed expenses should cover your essential living costs of housing (shelter, warmth etc) and what you need for it to function, but of course it will include other costs such as motor insurance, or life insurance.
If you’re looking to save money, you should cut back on any unnecessary expenses such as satellite TV or unnecessary subscriptions. Remember to shop around when your annual expenses are due for renewal, such as energy service contracts or car insurance.
Examples of fixed expenses will be your mortgage/rent, council tax, gas/electricity, water, internet, line rental, mobile phone bill, car insurance and tax. Wherever possible, have your loan and credit card repayments as fixed amounts (and as much as you can afford to get your debts paid off quicker).
When it comes to your mortgage, understanding exactly how it works and what your interest rate is will be useful – you might be able to find a better deal once you have all the facts.
Variable Expenses
This is where you need to split your spending into Essentials, and non-Essentials.
Essentials will include basic living costs such as food, fuel/fares, clothes, shoes etc. (If you can’t afford to eat or get to work, you need to cut back on your expenses!)
Remember to include things like car maintenance costs (MOT, servicing, etc). Work out your average yearly spend, divide by 12 and use this as a monthly figure to add to your budget.
Take a look at this article for 13 things we overspend on and forget to budget for.
Non-essentials will include things like entertainment (think family time, meals out, takeaways etc), swimming lessons/riding lessons/dance lessons/other, items for the house/garden, etc).
To manage your variable expenses, subtract your total fixed expenses from your total income figure, which will give you the figure you need to split between your essential and non-essential costs.
Decide how much you want to budget for essentials and non-essentials, and make an effort to stick to it. For example, the ONS revealed that the average household spent £61.90 per week on food and non-alcoholic drinks between April 2018 and March 2019. This will vary depending on your household, preferences and diet. You should have an idea of how much you are spending on food from analysing the transactions from the past three months.
Decide whether you can reduce your spending on any areas. It’s very easy to blow your money without realising when you don’t have a budget.
Family Expenses
These will come under your variable expenses. Depending on the category, you’ll need to decide whether they fall into essential, or non-essential expenses and add these in accordingly. Again, look to see if there are any areas you can cut back, such as days out. They don’t have to cost the earth, and many are free.
Each family will vary, with some categories being a common thread. Here are some ideas to get you started:
- School uniform, shoes and accessories (Essential)
- Kids parties and birthday presents
- Other families/friends birthdays
- After school activities
- Family fun money
Track Your Spending
Once you have your budget set out, it’s a good idea to track your spending on a daily basis. You’ll be able to see patterns where you might be overspending, and will be in a position to do something about it. Monitor your money, manage your spending, and you’re on your way to winning with your family budget.
PS – I have a Financial Planner Bundle available to purchase here for just £3.49. It covers everything from projection to income, to essential and non-essential spend, to debt, savings, and spending-tracking. There are also some handy hints and tips to help you fill it in along the way.
If you’re really struggling financially, please contact a charitable organisation such as stepchange.org, or nationaldebtline.org for free, impartial advice.