How to Create a Household Budget | 15 Effective Tips

While most people have a general idea of how much they can spend on household expenses, many struggle to stick to a budget. This may be because the thought of allocating a fixed amount of money for a fixed set of expenses is difficult to stick with.

A household budget allows you to create and stick with a plan of how much money you can spend on your monthly expenses so that there isn’t any confusion as to whether or not the money is being spent wisely. Here are some tips on how to create a household budget.

What is a Household Budget?

A household budget is a plan of the income and expenses for an individual or family. It can be done on a monthly, weekly, or daily basis.

The goal of the budget is to identify where your money goes and how much you have left over at the end of each month. This helps to make sure that your money isn’t going towards things that are not necessary or places that don’t contribute to your goals.

This also helps you keep track of what you’re spending on so you know when it’s time to cut back if needed.

Top 15 Tips on How to Create a Household Budget

how to create a household budget

01. Try a simple budgeting plan

If you are not sure where to begin, try using a simple budgeting plan for people with variable incomes.

With this type of system, each month your income is divided into two categories: discretionary and baseline. The goal is to make sure that the amount allocated towards necessities isn’t less than 25% of your total spending.

For example, if you earn $1,000 in rent and would like it cut down by 20%, then allocate another $200 per person towards essentials such as electricity or groceries instead so that they will still be covered when necessary without causing an overspend at other parts of the budget.

02. Set your goals

It is important to understand what you are trying to accomplish with your budget. Are you trying to pay off debt? Have a clear idea of where your money should go each month. What type of lifestyle do you want?

It is easier when creating the budget if these goals are set beforehand so that it can be more specific in terms of how much money goes towards each expense and how many people will need this information for their budgets as well.

03. Establish a baseline income

This is the amount that you spend on your basic monthly expenses each month before any other money goes into it, including debt payments or other things that are needed to pay for necessities such as groceries and household utilities.

Estimate how much you’ll need each month so this can be included in the budget later on once all of your needs have been determined.

For example, if you plan to travel for one week during Spring Break but will need to take out $500 from your savings account, then allocate another $200 per person towards gas and car insurance.

It’s important to set a baseline before any major changes happen in your life that could cause drastic expenses.

04. Monthly goals for everyone

Establishing monthly goals for each person or family member helps to give them more of an idea of what they’ll need to do throughout the year, which can help make sure there are no surprises when it is time for this budget to be approved by the entire family.

If things change during the year, usually you want everyone’s needs and wants changing at about even pace with one another so everything stays on track without having too much extra money being spent just because different members have changed their ways over time.

05. List monthly income

This is the amount of money that you make each month, which can be adjusted based on your monthly expenses.

It’s important to take into account any other sources of income such as side jobs or even bonuses for work, because these are usually not included in your regular salary and you should want to know how much extra spending power they give you during the year.

06. List monthly expenses

This is the amount of money that you spend each month, and this includes both necessities such as food and utilities as well as other regular household expenses.

It’s important to not only look at what you’re currently spending on these items, but also how much money is left over after this amount. It is also important to look at each expense and see if there are any ways that you can save money on these items or even cut them out entirely.

07. List fixed expenses

These are items that need to be paid regardless of what you do or how much money you make, like mortgage payments and other loans. It’s important to make sure that these are covered as they can’t be cut back on or eliminated.

08. List variable expenses

These items change from month to month depending on your income and spending, like groceries for example.

These changes should also probably occur at a more even pace, especially with buying food since it is often something that people tend not to notice changing unless they go out of their way each time they go grocery shopping by carefully tracking their spending.

09. Prioritizing Expenses

It’s important to see if there are any items that you can cut back on or eliminate completely.

This is especially true for fixed expenses since they don’t change significantly from month to month, so it makes sense why cutting them out would have a much bigger impact than something like groceries.

10. Consider the model budget

As you start to put together a budget, it’s important to think about where your money is going and what the best place for that money would be.

It may seem backwards at first since people often assume that they should spend more on big ticket items like cars or homes, but in reality putting all of the same amount of money towards these things will actually take away from other areas such as saving up for retirement.

11. Budget for future wants

Something that people often don’t consider when planning their budget is what they are going to want in the future. This can be things like a new car, home or even something as simple as wanting an upgrade to your cellphone plan.

These items shouldn’t necessarily take up all of your savings since you should have some room left over both for emergencies and other expenses so it’s best not to put them at the forefront.

12. Compare and Calculate

Once you’ve put together your budget and calculated the numbers, it’s time to compare what you currently have compared to what they should be.

This way there is no guessing involved for any of the expenses in the future since everything will be based on actual figures that can easily be checked against each other.

13. Budgeting for credit card debt

Credit card debt can be a huge drain on your finances since you end up paying interest every month.

There are a few different types of credit cards to choose from so it’s important to decide which one(s) will work best for you and what purpose those cards serve as well as what the monthly spending limit is going to be.

14. Adjusting Spending

To keep a check on your expenses, you need to adjust your spending. You need to start by understanding the difference between your current income and your current expenses.

Once you have determined the difference, you can make an adjustment in your spending. Here is a helpful checklist to keep track of your expenses:

  • Write down all direct and indirect costs (also known as fixed costs) such as rent or mortgage, electricity, water/sewer services, property taxes; insurance; car payments; interest on loans like credit cards and student loans; professional fees for legal documents required by the state or federal government.  These are not variable expenses because they will always be paid regardless of how much you spend so do not include them in your budget.
  • List out other monthly recurring bills which should remain constant no matter what amount you spend such as auto insurance, cell phone bill and internet bills.  If the amount of money that you are spending is too much for your budget, it is best to cut back on those expenses rather than completely eliminate them from your monthly budget.
  • List out all variable costs which can fluctuate depending upon how much you spend like groceries or utilities; what kind of entertainment do you prefer; whether or not there’s a lot going on in the family and so forth because again these vary according to how much we pay for them Therefore adjust accordingly with things like: cutting back on certain items such as food, movies and such.
  • List your fixed costs such as rent or mortgage payments; repairs on the house or car; taxes required by state/federal government that is paid automatically every month like Social Security tax etc.; utilities for water, electricity and gas.
  • You should also include any additional debts you have incurred without paying it back yet because these are not included in your budget. For example: If you owe money to an auto loan company but do not pay them off until January 1st of next year then this would be a variable expense since they need to be paid regardless of how much you spend.
  • To determine what your monthly income is, subtract variable expenses from fixed costs and pay debts if applicable .  If the amount after this process is too high or low then adjust accordingly to bring it within budget.
  • The final step in creating a household budget which leads us to our next topic on How Much Money We Need for Our Family’s Needs : What are My Monthly Needs’ Amounts? These are all things that each member of the family would need for their basic needs such as food, clothing/shoes , housing etc., but not included in the budget . The answers to this vary from person to person, depending on how much they spend on entertainment or other things.

15. Track your goal progress

Once you have a budget in place, it’s important to track what changes are being made over time so that there is no question as to how well or poorly things are going.

It may seem like an unnecessary step but knowing where your money is going will be valuable information that can help make decisions on the future and it’ll also give you some idea of whether or not your spending habits were successful at saving more than what was planned.


Creating a household budget is a lot easier than you think. In fact, once you have the basics down, it’s actually quite simple.

To start, all you need to do is set your goals and establish a baseline income. Once that’s done, you can prioritize your expenses and make changes as needed to make sure your spending meets or exceeds your income goal.

If you’re not ready to create a budget yet, now is the perfect time to start! Start with our free guide on how to create a household budget and then use it as a base for future budgets as you see fit. If you want more details on what we cover in this post, let us know in the comments below!

Read and Learn More:

How to Save Money Fast: 20 Tips to Grow Your savings

How to Set a Goal and Achieve Your Dreams – The Ultimate Guide!

How to Make Your Small Business More Successful

How To Stop Wasting Money | Top 25 Tips To Change Your Life

How to Improve Your Self-Control: 13 Simple Tips To Help You Control Yourself


Scroll to Top