15 Proven Tips on How to Manage a Household on a Budget

Written by Jeff Campbell in Budgeting Last Updated January 19, 2024

Managing your finances when you are young and single may not require much. However, when you get married and plan to start a family, the need for a budget is undeniable. But how do you manage a household on a budget?

  1. Identify exactly where you want to be in 6 months, 1 year, 5 years, and beyond
  2. Add all sources of income for the household
  3. Add all known household expenses
  4. Prioritize expenses in case not all can be paid
  5. Create the budget (or use an app)
  6. Put the budget into action
  7. Adjust the budget as needed

Many people like the idea of making a budget for running their household but fall prey to procrastination. Unfortunately, some others are going about it the wrong way.

The challenges get complicated when there is more than 1 person spending money and especially if there are kids to take care of.

So today, we’ll do a deep dive into budgeting and how to get your household set up for success with a budget.

Let’s dive in!

Table of Contents:

So what are my . . .

19 Proven Tips on How to Manage a Household on a Budget

Step 1: Set short-term and long-term goals

The first step in creating a budget is to set realistic goals.

What is your credit and debit balance according to your bank statement? Do you have a large family with extended families largely dependent on you? Or do you have debts that you need to pay?

Maybe you purchased a car or house, and you have to pay an agreed amount every month. In addition, you have to consider short-term and long-term goals you may have for personal development or the family.

The reason for creating a budget may simply be to track expenses and cut down on unnecessary spending. It is regrettable to see someone who has worked a 9-5 all their lives say 30 years, with no concrete retirement plan.

Once you set a goal, you will be motivated to stay true to the course.

Step 2: Identify all income

Identifying income is the easy part of the job.

You know how much you earn. Suppose you get paid every two weeks; this will influence how you plan for long-term goals. It is easier to focus on short-term objectives and lose sight of the picture.

Don’t forget to use your NET income and not your gross income.

Step 3: Identify all expenses

Take about 48 hours to identify your expenses. If you write them too quickly, you may miss some essential items.

So make a list of every bill you have.

The obvious ones will be electricity, water, internet, car payments, and cell phone. But there will be other less obvious ones. Don’t forget streaming services and any recurring Amazon items.

But what about variable expenses that come up quarterly or annually?

I’m glad you asked that! Luckily, I have a recent article that explains EXACTLY how to budget for that. It’s actually a lot easier than you might think.

Just click that link to read it on my site.

Step 4: Prioritize all bills and expenses

The fourth step in making a budget is to make a list in the order of priority.

Doing this does not necessarily mean that you have to eliminate some. It may simply involve cutting down on the original amount of some items.

At this stage, “needs” come first, while “wants” come after. At the top of the list, we should have food, gas, electricity, and rent.

Afterward, we can have clothes, shoes, ice cream, and a visit to your favorite restaurant. Write out what you want to purchase clearly, with the estimated cost.

Step 5: Create the budget

Now, you are ready to create the budget from the list you have generated.

Suppose you have constant bills like housing, electricity, or insurance. Determine the percentage of your income that will cover them.

Then allocate the remaining income to other needs. It helps if you assign a portion to savings before attending to other “wants.” You now have a complete spending plan.

Step 6: Implementation

The budget is ready to go.

But most of us first get into budgeting because we’re in a financial mess. So we learn all we can about budgeting quickly and then want to put it into place ASAP.

That motivation is great, but unless you happen to be crafting it on the 1st of the month, go ahead and plan to start it on day 1 of the next month.

Remember, the main goal is for you to be intentional about your money habits, and you can still do that while waiting for next month to start.

Step 7: Adjust and update the budget

Budgets will need to change over time.

Hopefully, your income will go up. But there are also likely some expenses that got forgotten about too. So as you get into it, don’t be afraid to tweak it as needed.

I’ve been budgeting for over a decade, and I still do a new budget every month, balance it twice a week, and make minor adjustments as I go.

But what about budgeting apps? Are they better?

Budgeting apps are great as you can keep track of things on the fly on mobile. Plus, couples can each have access to the budget simultaneously. Want to know what the best ones are?

Luckily, a recent article of mine can give you a complete breakdown and review of the top 9 budget apps. Just click that link to read it on my site.

Step 8: Make sure you and your spouse are on the same page

Having a husband and wife both on the same page about household finances, the budget, and spending is essential for a successful marriage.

It is important to have open communication about money matters and to be honest with each other about financial goals.

Both partners should be aware of how much money is coming in and going out each month. This will help them make informed decisions about their spending habits and ensure that they are living within their means.

Having a budget in place can help couples stay on track with their financial goals and avoid overspending. It is also important for both partners to agree on how much money should be saved each month for emergencies or future investments.

When both partners are on the same page about finances, it can help reduce stress in the relationship and create a sense of security knowing that both parties are working together towards common financial goals.

Additionally, it can help couples build trust in one another as they work together to manage their finances responsibly.

Step 9: Monitor your credit score

It is important for a husband and wife to regularly monitor their credit score.

This helps them to stay on top of their financial situation and make sure that they are not missing any payments or falling behind on any bills.

It also helps them to identify any potential fraudulent activity that may be occurring on their accounts. Additionally, it can help them to negotiate better terms with lenders when they are looking for a loan or other type of financing.

Monitoring their credit score can also help them to identify errors in their credit report and take steps to correct them.

Finally, it can help them to plan for the future by understanding how their current financial situation will affect their ability to obtain loans or other types of financing in the future.

Step 10: Have 1 or 2 set days each week where you update your budget

Regularly updating a household budget is essential for keeping on top of income and expenses.

It helps to ensure that all bills are paid on time and that there is enough money left over for other needs. It also helps to identify areas where money can be saved, or where additional income can be earned.

By tracking spending, it is easier to identify areas where money is being wasted and make adjustments accordingly.

Additionally, regularly updating a budget allows for better planning for future expenses such as vacations or large purchases.

It also allows for better tracking of investments and savings goals. Finally, it provides an overall picture of the financial health of the household, allowing for more informed decisions about how to best manage finances.

Step 11: Pay off credit cards monthly

Paying off credit cards in full each month is essential to avoiding credit card debt and living within your means.

Interest rates on credit cards can be high, so if you only make the minimum payment, you will end up paying much more than the original purchase price.

Paying off your balance in full each month also helps to avoid the temptation of overspending.

When you have a balance on your card, it can be easy to justify making additional purchases that you may not be able to afford.

Additionally, if you are unable to pay off your balance in full each month, it can lead to a cycle of debt that is difficult to break out of. Paying off credit cards in full each month is an important step towards financial stability and avoiding debt.

Step 12: Save monthly for the holidays

Saving a little each month for the Christmas holiday season is an important step to take in January.

It helps to plan ahead and avoid the stress of trying to come up with the money for presents, travel, and food all at once.

Decide on the amount needed and divide it by 11, since it will start to be spent in November. This way, you can spread out the cost over several months instead of having to pay it all at once.

Setting aside a small amount each month can also help you avoid going into debt during this time of year. It’s also a good idea to set aside some extra money in case of any unexpected expenses that may arise.

Taking these steps can help make your holiday season more enjoyable and stress-free.

Step 13: Adjust and update the budget

Adjusting the household budget periodically is important for a husband and wife to ensure that their finances are in order.

It is important to review the budget regularly to make sure that it is still working as intended and that any changes in income or expenses are taken into account.

This can help prevent overspending and ensure that all bills are paid on time.

It is also important to be flexible when adjusting the budget, as unexpected expenses may arise or income may decrease. Being too rigid with the budget can lead to financial hardship, so it is important to be open to making changes when needed.

Additionally, it is important for both spouses to be involved in the process of adjusting the budget, as this will help ensure that both parties are on the same page and get control of your finances and how they are being managed.

Step 14: Pay off all debts except your mortgage

Paying off all debt except the mortgage is essential for a husband and wife to get ahead financially.

It allows them to free up more money each month to save and invest, which can help them build wealth over time.

Additionally, it eliminates the stress of worrying about how to pay off debt and can help them focus on other financial goals.

Paying off debt also helps improve their credit score, which can open up more opportunities for them in the future. Furthermore, it can help them avoid high-interest rates that come with carrying debt, which can save them a lot of money in the long run.

Finally, paying off all debt except the mortgage gives couples peace of mind knowing that they are taking control of their finances and setting themselves up for success.

Step 15: Start and maintain an emergency fund

Having an emergency fund is essential for any married couple.

It provides a financial cushion in case of unexpected expenses or job loss. A good rule of thumb is to start with a small amount, such as $1,000, and then increase it as the debt is paid off.

For couples with two income streams, the goal should be to have three months of expenses saved up in the emergency fund. For couples with one income stream, the goal should be six months of expenses saved up.

This money should only be used for true emergencies and not for everyday purchases or luxuries.

Having an emergency fund can provide peace of mind and help couples avoid taking on more debt when unexpected expenses arise.

It can also help them stay on track with their financial goals and avoid having to dip into retirement savings or other investments in times of need.

Frequently Asked Questions

Should the 50-30-20 rule apply to every budget?

The 50, 30, 20 rule does not apply to every budget as those with excess debt such as student loans should pay down debt before saving and should also spend less than 30% on the “wants” column.

You may be wondering what the 50 30 20 rule is all about. It is a method of budgeting that divides your entire income into three classes:

  • 50% for essential household needs
  • 30% for wants
  • 20% for savings

The 50% is set to cover housing costs, car or transport, school fees, and any other thing necessary for efficient household management.

The 30% basically covers other stuff like miscellaneous; for instance, your friends may invite you out. The money you spend comes from this part of the income.

Lastly, the 20% is your savings. And this can be a combination of saving for retirement or for summer vacations. It can be automatically sent to a saving plan or an investment portfolio.

This method sounds easy until the lines between needs and wants get blurred.

In addition, for high earners, saving only 20% of their income may not be a sustainable plan. For other people who pay a lot for needs, 50% may not be enough. Many people get confused in terms of categorizing wants and needs.

Suppose your income is not a fixed salary, or it comes at irregular intervals.

The 50-30-20 method will not work well in either situation. Another thing to consider is the cost of living in your location. If it is high, this method will not help you manage your household budget.

An alternative is the 80-20 method.

You simply save the 20% and use the rest as you see fit for your needs and wants. This method leads to less confusion, but you cannot apply it to every budget either.

It would be best if you consider several factors before dividing your income. 

Of course, if you’re broke or your salary is low, that does make it challenging to budget. BUT that’s when it’s the most beneficial! So if you’re struggling to budget due to not having enough money, make sure and read one of my recent articles that covers that.

CLICK HERE to read it on my site.

How do you create a simple family budget?

Create a simple family budget using a free or paid budget app, using a simple Excel spreadsheet, or just keep track on a notepad. Put all income for the month at the top and then list every expense below that, subtracting from the total.

A family budget is a sure way to avoid overspending, spending too much on the wrong things, or spending less on essential items. It helps us balance expenses and savings to safeguard the family’s financial future.

When creating a family budget, make sure to include your partner in the process.

Then set financial goals that you would like to achieve in maybe six months or one year. It may be something like getting a new car or buying a house. In addition, this will affect the percentage of your income that will go to savings.

The next thing to do is determine the total net income.

Suppose both partners are working and running the household together. They can choose the portion of their salary they are dedicating to running the house.

Make a detailed list of everything needed or useful in the home that will cover two weeks or a month, depending on cash inflow.

Then you merge it to create a budget that encompasses the needs of every member of the family.

Still need help with actually crafting the budget?

I have a recent article where I walk you step-by-step in creating one, for free, using Excel. It’s very detailed, and I have screenshots of every step to make it super simple.

Just click that link to read it on my site.

What should a household budget look like?

A household budget should contain all household net income, all known household expenses for the month, all discretionary spending, as well as savings for retirement or children’s college.

So, it can be simple or complex depending on the needs of the household. I recommend keeping it as simple as possible so that no one gets discouraged and so that keeping track isn’t too time-consuming.

Here are some general categories and ideal percentages of how much the cost should be of your total income.

Item Percentage
Rent 25%
Insurance 10%
Gas fee 6%
Food 20%
Kid school fees 10%
Savings 15%
Medical 3%
Internet 3%
Personal/ Relaxation 3%

But what about a family of 4 making around $60,000 a year?

It can be updated or adjusted to fit the circumstances that the family lives in any way. The main thing is to get the priority needs first, savings, and the remaining money can be shared among other wants.

Luckily, I have a recent article that goes into EXACTLY how I would do a budget under those circumstances (hint: I have been in that exact situation). There’s 1 crucial step that might not seem obvious.

Just click that link to read it on my site.

What are the three types of budgets?

The three types of budgets include a balanced budget, also known as a zero-balance budget which spends every available dollar, a surplus budget where there is excess money at the end, and a deficit budget where expenses exceed the income.

A balanced budget is a type of budget in which the income available equals the planned expenses. Some people argue that this is the best budget a government can make to sustain its economy.

Personally, I don’t like this budget as it allows for no margin of error or wiggle room.

What if you forgot about a quarterly bill that’s on auto-draft? Or you get that late notice of some past due road tolls and need to pay it immediately?

So, I like a surplus budget better.

As the name implies, a surplus budget is a type of budget in which the revenue available is more than the estimated revenue.

This budget is advantageous to households that want to save or set aside some money for investment. In addition, a family that has outstanding bills may wish to adopt this method to meet up their bills.

A deficit budget is a budget where the expenses exceed the income.

Obviously, while this works for the government, it can’t work for us at home. Now I will say that everyone who has done a budget at some point in time has had a situation where the bills exceeded the income.

The best course of action is to write the budget in order of priority (if you did not do that initially). You can remove the less important items to achieve the kind of budget you want.

When planning a personal or household budget, I recommend choosing a surplus budget.

A surplus budget ensures extra money is available after doing all you need to do. Furthermore, this increases your savings, something to fall back on during an emergency.

Is Excel a good tool for keeping your personal budget?

Excel is perfect for keeping a personal budget.

It allows for quick and easy formulas to calculate a running balance, it can be copied as a template for each coming month and is easily customizable.

That’s exactly what I have been using for my budget for over a decade.

First, as we have already established, maintaining a budget is easier said than done. Most often, people need a little help to manage their budget successfully. Excel is one out of many undeniably useful tools.

You can customize Excel anyhow you want to serve your budgeting purposes. The benefit of using excel is its high customization flexibility which you don’t often see.

Excel is quite simple to use.

There are options to add a security layer or two to your budget. Excel allows for transparency with its “track changes” feature for a household budget. In addition, if any family member alters the budget, excel lets you know.

Making, managing, and maintaining a budget does not have to be a boring affair.

Excel has several presentations that you can use. There are pie charts, bar charts, and histograms. When you use a graphical representation, it allows a quick overview of the budget.

Furthermore, using Excel for budgeting helps you set specific goals and allocate the appropriate finances. After budgeting, especially if you use graphical presentation, you may realize some inadequacy.

You can quickly correct it so that your money is well managed.

How to Create a Household Budget 💰

Conclusion

Managing a household on a budget is very important.

It helps you track earnings, spending, and savings. It is not uncommon to see people musing about how they spent all their money within a short time.

With a budget, you would have set goals you want to achieve for the family.

It increases accountability and helps you be disciplined in spending money. However, do not imitate someone else’s budget.

It should be a personalized scheme because every home is different and has unique needs. But it’s the best way to manage your personal finances, monthly spending, and regular expenses.

After reading this article, I hope you can make a budget and stick to it!

I have a copy of my Budgeting Spreadsheet available at no charge.

It’s a simple, highly customizable, Excel spreadsheet and you can download it quickly and easily FOR FREE!

budgeting-process-steps-free-household-budget-template-spreadsheet-middle-class-dad

If you like this post, please follow my Budgeting board on Pinterest for more great tips from myself and top financial experts!

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While I have years of successful financial & budgeting experience, and have run several million-dollar businesses and handled the accounting, P&L, and have been responsible for their financial assets, I am not an accountant, CPA, or a marriage counselor. Like all my posts, my posts are opinions based on experience, observations, research, and mistakes. While I believe all my personal finance and relationship posts to be thorough, accurate, and well-researched, if you need financial or marital advice, you should seek out a qualified professional in your area.

Image by Alexander Stein from Pixabay and Image by hamiltonjch from Pixabay

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