How To Create a Family Budget: Expenses, Goals and Bill Splitting

Creating a family budget starts with deciding together where your money should go. It’s more than listing bills — it’s working together to use your household take-home pay wisely. We’ll walk you through which expenses to include in a family budget, how to divide shared expenses and how to stay on track toward your savings goals. 

Here’s what you need to know.

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What Expenses Should Be Included in a Family Budget?

A family budget — any budget, for that matter — should account for your everyday expenses, from monthly bills to debt payments to savings to occasional anticipated costs. In other words, it goes beyond just rent and groceries. When you share the monthly budget, everyone shares responsibility for spending wisely.

According to the Consumer Financial Protection Bureau (CFPB), pay special attention to the following expenses:

• Housing: Monthly rent or mortgage payments, taxes, relevant insurance and maintenance

• Utilities: Electricity, water, gas, internet and phone bills

• Food: Grocery and restaurant spending

• Transportation: Car payments, insurance costs, fuel, and even parking and other transit costs

• Health care: Premiums and any out-of-pocket costs like prescriptions and appointments

• Childcare: Fees for school and activities, clothing, and child support

• Debt payments: Monthly obligations to credit card balances, student loans and personal loans (don’t count auto payments or mortgage here)

• Savings: Pay yourself first with contributions to your emergency fund, retirement plans and other life goals such as vacations

After you’ve factored in these somewhat constant monthly expenses, you’ll have an idea of what’s left for personal spending — from subscriptions to hobbies to impulse purchases at the supermarket.

Start With Household Income and Shared Goals

Before you set hard family spending limits, you need to know exactly what your total monthly take-home is — and what you’re trying to accomplish financially as a family. Here’s what to do:

1. Add your net incomes: This means wages after any deductions, both W-2 and self-employment income after business expenses, and other income such as child support or side hustles.

2. Budget with caution when it comes to variable pay: It’s wise to step back and look at several months of earnings when a specific source gives you irregular income. This could be anything from tips to freelance writing, where you’re not a salaried employee. You’ll get a more accurate number to plan with.

3. Choose shared goals: List short- and long-term priorities as a family. For example, decide on a good emergency savings amount and reach it, or commit to setting aside money for a house or higher education. Whatever your goals, assign a target amount and a deadline to maintain your urgency.

Track Current Spending Before Setting Limits

A budget is the opposite of “wishful thinking.” It’s an action step you can take immediately. All to say, create your budget around your actual situation — not your dream scenario. Here’s a checklist to help you establish your starting point:

• Review a few months’ worth of bank and credit card statements. If you’ve got receipts for cash purchases, count those, too.

• Find recurring charges (including rent, utilities, subscriptions and memberships) and flag anything you may no longer use.

• Estimate your variable spending. You can do this by averaging your grocery, fuel, dining and other costs that aren’t exactly the same each month.

• Record your debt balances and factor in your minimum payments due each month. If at all possible, throw some extra money toward these, as interest tends to eat up a large portion of your payment.

• Account for your annual expenses. You do this by dividing your predictable yearly costs by 12, then depositing money into a special fund, such as a high-yield savings account, to cover those expenses when the time comes.

Use these totals to make realistic adjustments — together, as a family. You can also consider using a budgeting tool to help. 

How To Split Bills With Your Partner 

There are multiple ways to split bills with your partner, from an equal 50/50 split to a proportional split based on each individual's income, or taking charge of different categories. You’ll have to decide for yourselves what’s fair.

Here’s a comparison table of common approaches, many of which the Federal Deposit Insurance Corporation (FDIC) suggests.

As an example of a proportional split, let’s say you bring home $4,500 per month while your partner brings home $3,500. You would then be responsible for around 56% of the bills, and your partner would be responsible for the remaining 44%. You’ll need to revisit each partner’s contribution when income changes.

Build the Budget and Automate the Plan

It’s crucial that you turn your new income and expense lists into a system you can both easily follow. Here’s how to do it:

1. Agree on firm spending limits: Use your previous spending data to set realistic monthly spending limits. Create personal spending budgets for each of you after figuring out what's left after essential costs.

2. Fund your savings goals: Stick to your monthly contributions toward savings for emergencies, upcoming costs and any shared goals (such as home renovations or vacations).

3. Choose your shared accounts: Decide whether you’d like to pay bills through a joint account or separate accounts. Then agree on contribution amounts.

4. Designate bill owners: Make sure you’re both clear on who handles which payments. Write down due dates and which account will send the money.

5. Automate as much as you can. Schedule your payments and any savings transfers so you don’t have to do it manually. Autopay is a boon for ensuring you don’t forget to pay a bill. You can also monitor your balances and create alerts that will tap you on the shoulder if something goes awry.

Review and Adjust Your Family Budget 

It’s a good idea to schedule periodic meetings, perhaps monthly or quarterly, to compare your budget with what’s actually happening with your finances. Sometimes life gets in the way, and you exceed your budget. Just remember to focus on problem-solving together instead of blaming the other.

Here’s a monthly review checklist that you can use as often as you need:

• Track your actual spending in each expense category against the limit you’ve set.

• Update your shared contributions when your total take-home pay changes.

• Make adjustments for life changes such as a new child or housing changes.

• Plan for upcoming occasions where you foresee extra spending (such as holidays or back to school).

• Check savings progress and agree on any changes.

• Confirm upcoming bills, account balances and payment responsibilities.

If you find something isn't working, collaborate to overcome the issue. Don’t blow up and overhaul your entire budget when a thoughtful tweak could do the trick.

Key Terms

• Family budget: A shared plan for how a household will use its income to cover expenses, save and work toward financial goals

• Take-home pay: The income you receive after taxes and other payroll deductions

• Fixed expense: A cost that stays about the same each month, such as rent, a mortgage payment or a subscription

• Variable expense: A cost that changes from month to month, such as groceries, fuel or entertainment

• Proportional split: A bill-splitting method in which each partner contributes based on their share of the household income

• Joint account: A bank account owned by two or more people, often used to pay shared household expenses

• Sinking fund: Money set aside over time for a predictable future expense, such as insurance, holidays or school costs

Sources

• Federal Deposit Insurance Corp.: Saying “I Do” to Sharing Finances

• Consumer Financial Protection Bureau: Spending Tracker

• Consumer Financial Protection Bureau: Budgeting: How to Create a Budget and Stick With It

• Consumer.gov: Making a Budget

Parts of this article were created with AI assistance. Our editors reviewed, fact-checked and edited the final version.

Photo credit: Hispanolistic / Getty Images / iStockphoto