What Is A Family Budget? Why Do You Need One?

Most families dream about what they want – expensive holidays together, big mansions, costly meals out, yet limited resources don't allow you to get everything you want, so you have to prioritize. That’s where a family budget comes in.

Starting a budget can help the family plan and track all their income and expenses over a specific period to ensure they reach their financial goals and don’t end up in debt. It helps you to have a better grip over your family finances.

If your family has little money to face so many expenses, having a family budget is crucial, or you will all end up in debt. Spending two months' worth of your salary on a holiday trip to Disneyland can be very tempting. Still, it could also be dangerous if something happens, and you don't even have an emergency fund or savings to pay your mortgage or afford food. Let's learn how to build a family budget that gets you what you want.

What Is A Family Budget?

A family budget is a plan of what a family will do with their total income and keeps track of their expenses and financial goals. A family budget usually involves two adults and a number of kids, although it could involve grandparents or other family members too. It can help families spend less and save more to achieve some of their monetary objectives.

What Is A Family Budget

Most households choose a family budget to stop overspending on things they don't need and to pursue financial stability for themselves and their kids. Therefore, avoiding some of the most common budgeting mistakes like guessing their expenses, having unrealistic expectations, or choosing the wrong budget method would be best.

This means being deliberate in your spending. A family budget will make you more confident in spending your money and eliminate anything the family doesn't need (ordering food every day is unnecessary when you can save so much money cooking at home, or buying that toy your kid wants, might not be the right decision if you can't afford it).

Who Are Family Budgets For?

A family budget is for all families who want to control their finances better. It doesn't matter how good or bad a household's financial situation is, how many people live in the house, or if everyone is working or not.

A family budget is ideal for you and your family if you:

  • Desire to achieve your financial goals
  • Want to stop overspending money
  • Wish to get out of debt
  • Are not very good keep tracking your expenses
  • Want to cut unnecessary expenses
  • Wish to transmit values to your kids on how to spend and save money
  • Have different monetary needs each upcoming period.
  • Desire to build an emergency fund

Why Do You Need A Family Budget?

Budgeting has many advantages and some disadvantages too, but the truth is many factors influence why you should consider budgeting. Here we will look at the four most compelling reasons as to why you need a family budget.

A Family Budget Helps You To Achieve Financial Goals

How To Start Budgeting with financial goals

Having a family budget without financial goals is a big mistake most budgeters make. You and your family need to have clear motivations behind the budget, or you will fail to accomplish what you proposed. After all, spending money without a strategy is never the best of ideas.

When you have financial goals at home, you know exactly how much money you need to save to start a savings account, create a new business, make a big purchase, buy something expensive, or create an emergency or a college fund. A family budget will help you to understand how much money you can allocate to each financial goal every month.

A family budget with financial goals can:

  • Map out the family's monetary plans (save, invest, cut expenses)
  • Maintain track of the family's money and goals
  • Push the family to work toward their goals
  • Make the family achieve their objectives

A Family Budget Stops The Family From Overspending

What is a family budget needed for? Budgeters often start budgeting because they want to save money or stop overspending. A family budget will have a system in place where you and your family know exactly how much money you have in and out, preventing anyone from overspending. We all know how difficult it can be to manage money and have someone dependent on you.

Most people get surprised that they are in debt or overdraft because they didn’t think they spent too much money. Many families are on a tight budget, meaning they can only pay for rent, essential bills, groceries, and transport. So when they keep spending money on non-essential things, they end up in a complicated situation. I would say that most families don’t even know they are overspending cash till it’s too late.

A Family Budget Helps The Family Prepare For Emergencies

According to Bankrate, over 50% of Americans have less than three months’ worth of expenses covered if they have an emergency and around 25% don’t have an emergency fund. If 2020 taught us anything, it is that an emergency fund is a must because you can never predict the future.

why is it important to create a budget

With life getting more costly every year and salaries not keeping pace with inflation, it becomes increasingly necessary to have an emergency fund. You never know when gas, water, electricity, or essential foods like bread, milk, vegetables, or fruits are going up without notice.

Imagine a surprising bill, baby, or an event like a car accident, illness, or injury. For example, in 2021, my father had a work accident that required brain surgery, so he didn’t get his salary for four months and was on sick pay, which didn’t even cover half of my parents’ rent. However, my family didn’t feel financially burdened because I taught my parents the importance of having an emergency fund and saving money. As a result, they had the money to face those months when their income was much lower.

A Family Budget Can Help Your Marriage

According to Investopedia, the two top reasons couples fight are money and sex. The most significant problem when budgeting your money in a marriage is that two people can have different plans for what to do with the money. For example, one may want to buy a bigger house, and the other wants to save as much as possible for retirement. One spouse may like to handle and plan what to do with the money, and the other has no interest in planning but likes spending and living in the moment.

When you budget as a couple, you both sit down and understand how much money is entering your bank accounts and how much money is leaving. Then you can discuss what to do with it. Of course, no couple will agree 100% with what the other wants, so giving in some areas is essential.

Budgeting keeps money from becoming an obstacle in any relationship since you both agree on it at the start of every month, setting ground rules for handling the money.

Types Of Family Budgets

I have seen many websites stating that you only have three types of family budgets:

  • Deficit Budget – Your expenses exceed your income.
  • Surplus Budget – Your income exceeds your expenses.
  • Balanced Budget – Your income and expenses are equal.

In my opinion, these are not types of family budgets, they are just describing the outcome of a budget. This information doesn't help, and it definitely doesn't provide a method you can follow and obtain results.

When you decide to start a family budget, it can be overwhelming to find out so many different types of budgeting. It would be best if you planned how to use your money, calculate your net income, track your expenses, set financial goals, and adjust your spending based on your strategy.

Let me show you some of the many methods of budgeting that can help you:

Personal and family budgets can be similar, but some budget types work better for someone alone and others for both situations. Above, I've only considered budgets that I believe work better for families, but feel free to experiment with others.

What Family Budget Is The Best For You And Your Family?

A family budget is all about being considerate and deliberate with spending your money and planning ahead to guarantee you reach your financial goals and expectations. So picking the best personal budgeting method is essential for your success.

It would be best to answer a few questions to ensure you select the perfect budgeting type. Then based on your responses, you can check what family budget type is the best for your needs. Here are the questions:

  • Why do you want a budget? To save money, pay a debt, go on holidays, or any other reason?
  • What is your current financial situation? With huge debt, overspending every month, a stable situation, or a saving account with money?
  • What are your financial goals? Some budget methods are more direct to save money, and others to spend less.
  • How long will it take you to accomplish your financial goals? Some budget types let you reach financial goals more quickly.
  • How much effort will you devote to your budget? Some budgets are less time-consuming than others. 

It would be helpful to reunite the entire family, especially with the kids, and explain the financial situation and why you need a budget. You would be surprised by how much kids want to help cut expenses, especially if you make it fun, like a game.

How To Start A Family Budget?

Starting a family budget can be overwhelming if it’s your first time budgeting your finances or if you keep failing because you are unsure what to do. To make your life easier, I have put a simple guide of 13 steps on how to start a family budget, which you can read in more detail here.

How To Start A Family Budget

1 – Determine Why The Family Wants A Budget 

First, you need to understand why you and your family want to start budgeting your money. It’s because you want to save money, stop overspending, pay a debt, achieve a financial goal, have control over your money, etc. It's not easy to keep the entire family on the same page, so you all need to understand what motivations to start and maintain a budget.

2 – Gather The Family Financial Paperwork

You need access to all your financial documents to create a budget that works and allows you to follow it without significant problems. A simple budget template, bank statements, credit card bills, cash payment receipts, etc. Gather every information you can about every single family member.

3 – Add Up All Family Income

Add all family income to ensure you know how much money the family has available next month. Examples of income: salary, business income, commissions, money gifts, etc.

4 – Add Up All Family Expenses

Check all family financial paperwork and add all expenses to the simple budget template to know where all the money is currently going. Some costs you should include in your budget are rent, utility bills, groceries, transportation, insurance, loans, holidays, shopping, eating out, etc.

5 – Determine The Family's Financial Goals

Set realistic financial goals to keep the entire family motivated during the month and stick with the planned budget. Some examples of financial goals are purchasing a house, paying debt, investing the money, building good credit, saving for retirement, planning family holidays, buying a new car, etc.

6 – Learn About Different Budgeting Methods

You should know by now the different types of budgets you can use and which are the most suitable for your family's financial goals and needs.

7 – Pick A Budgeting Method 

After you have learned the different types of budgets you can implement, it’s time to choose one and stick with it to see if it works. Just remind the entire family about it.

8 – Choose The Right Budget Tool

Choose the best tool according to what you think will be the best. For example, some families prefer budgeting Excel spreadsheets, other budgeting apps, and some others printables and write it by hand. Learn how to make a budget in Excel.

9 – Implement The Chosen Budgeting Method

This is the part where you take action and implement the budget you think is the most suitable to the family's needs and the budgeting tool you think will be the best to keep track of the family spending.

10 – Keep Track Of The Family Budget

Keep an eye on the budget and check daily, weekly, or every two weeks to ensure the family's expenses are equal to or lower than your monthly income.

11 – Evaluate Your Budget Monthly

After one month of implementing your budget, you can check what went right and wrong. It's fundamental that the entire family talk about how they feel and make some adjustments, and keep trying to get it right. Don't be afraid of trying a different budgeting method.

12 – Readjust Your Budget If Necessary

Keep evaluating the family budget monthly till you find the right way to achieve what the family wants. Keep in mind that life changes from time to time, so you must also adapt and make changes to your family budget to ensure you accomplish what the family has proposed.

13 – Try Budgeting Again

After you have modified your family's budget, you try it again next month.

Family Budget Examples

Examples make everything clearer, including family budgets.

Here you will see three different budgeting methods: a percentage method, an envelope budget method, and a zero-based method. All these different types of budgeting will give you an idea of how to budget your money.

50/30/20 Rule Budget

Like any budget method, the 50/30/20 is based on percentages and focuses on three different categories:

50 30 20 rule budget
  • Needs – You will spend 50% on your basic needs like bills, groceries, rent, and transportation.
  • Wants – You will spend 30% of your budget to pay for things you want that are considered non-essential expenses, like Netflix or gym membership.
  • Savings – You will save 20% of your salary to build your savings, pay off debt or invest the money.
50 30 20 rule budget example

Envelope Budget Method

The envelope budget method is a budgeting process in which you divide your income into different spending envelopes to control where your money is going.

what is the envelope budget method

Suppose you don't like the idea of ​​the whole family walking around with money in envelopes. In that case, you can try the digital envelope method, which consists of the same concept but uses a budget app instead of physical envelopes.

Envelope Budget System Example

Zero-Based Budgeting

The zero-based budgeting is a method where you give a purpose to every dollar and penny you earn and spend.

Zero-based budgeting

With zero-based budgeting, you allocate all of your money to expenses, savings, debt payments, investments, or any other category you could think of. The goal of this budgeting method is that your income minus your expenses equals zero by the end of each month.

Zero-based budgeting example 1

Common Questions About What Is A Family Budget

These are the most common questions about what is a family budget.

What Is The Importance Of Family Budgeting?

A family budget will help you and your family be financially stable and keep everyone on the same page regarding money. It becomes easier to track expenses, pay bills on time, start saving for an emergency fund and save for milestone achievements, like buying a house or that family vacations in Disneyland.

What Should Be Included In A Family Budget?

A family budget should take into account the whole family. It should include all family income (salary, commissions, gifts, cash, money from investments, etc.) and all family expenses (mortgage, essential bills, groceries, eating out, shopping, dates, etc.) You should also have your savings, investments, debt payments, etc.

How Do You Create A Family Budget?

To create a family budget, you need to determine why the family needs a budget, gather all the financial documents you need, add up all your income and expenses, decide on the family's financial goals, learn about different budgeting methods and pick one. Then, you use the right budget tools, implement the chosen budgeting method, keep track of the budget, evaluate it, readjust it, and try it again.

How Do You Manage A Family Budget?

To manage a family budget successfully, you need to ensure that the entire family is on the same page and have regular meetings with them. Keep making adjustments to ensure you achieve the financial goals the family needs. Some people will be on different pages, so it's necessary to modify the budget and make everyone understand why you have a family budget in place.


Budgeting is not easy, especially when you need to get an entire family on the same page as you. No budget is a one size fits all solution, but what is a family budget? It's a way to dig into a family's finances and check where they are spending their money and how to manage it better.

The key to a successful family budget is making the family understand and prioritize what's important to avoid overspending and debt. With time and experience, your budgeting skills will improve, and making a monthly budget plan for the family that will work will become easier.

Michael launched Wealth of Geeks to make personal finance fun. He has worked in personal finance for over 20 years, helping families reduce taxes, increase their income, and save for retirement. Michael is passionate about personal finance, side hustles, and all things geeky.