How To Create a Working Budget For Your Household
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I’ll be honest here, when my husband and I first got married, money, and creating a household budget, was the least of our worries. The biggest of our worries was that we fought constantly. I honestly don’t remember a honeymoon period, and the only reason I stuck it out as long as I did was because we had a very short ‘courting’ period (we had been friends for like 10 years and didn’t think we needed it..HA!) and I had already been through a divorce (whole other bag of night crawlers.)
So when some of the fighting did manage to settle down, the money finally came into play. And guess what–neither of our parents taught us jack about money or budgeting. In fact, when I first opened my husband’s checkbook, there was a woman’s writing in the register. His MOTHER had been balancing it for him when he was home! (Smh) He also thought it was ok to just overdraw whenever because there was a credit card attached to the account that it just flooded onto. (Smh with closed eyes.)
And at that time, there wasn’t a crap-load of information online about budgeting or how to manage money. And dare I say it, but, Pinterest wasn’t even invented!!! (Gasp!!) Yeah. So we knew nothing. And eventually began living paycheck to paycheck, both with student loans, both with credit card debt, and no idea what to do.
I learned very quickly that we had to do something, STAT. But what we ended up doing really didn’t get us very far for many, many years, and we still ended up living paycheck to paycheck most of the time.
So why should you dig into all this if you’re not living paycheck to paycheck? Well, to quote my mother after she and my dad split after 25 years of marriage, “Don’t ever get in a position where you have to rely on a man.” I hate to spout advice that’s as bleak as a prenup, but you seriously NEVER KNOW. I am a firm believer in Christ, but I also know that you have to help yourself for Him to be able to help you as well–and sometimes your best laid plan ISN’T His plan for you. (Case in point: my first marriage.) Be prepared, Mama.
And if you don’t want to listen to that advice, listen to this: You can’t get in a financially good place unless you’re working TOGETHER. It takes both people that are both spending money in a relationship to figure it out and put in the work.
Back a few years ago I read a book about the most frugal family in America. One thing that struck me in that book was the statement that in budgeting you need to know where every penny goes that you spend. I totally get that concept, and agree–except that when you have to pay attention to every penny (especially with kids muddling your every thought), money management tends to take up your entire day. I don’t know about you, but I ain’t got time for that.
But I still knew that to really follow and track where all the money was being spent, and to be able to give a true analysis of where expenses could be cut, I needed to track EVERYTHING–even if for a few months only just to get a game plan together.
Here are the things I found out:
-I didn’t realize I was combining ‘groceries’ with things like ‘household goods’ and ‘baby items’ (diapers, etc).
-My husband has a horrible habit of signing up for useless shit an then forgetting that it’s on auto pay.
-We could cut a lot of expense by just cutting groceries
-We only watched the channels in the BASIC satellite package, but were paying for premium + movie channels
-We didn’t really need a ‘house phone’
-Hubby and I each needed an actual allowance for ‘me time’ type stuff
-I didn’t do one ounce of self-care stuff at the time (which probably contributed to my uber anxiety and depression)
-The husband also was using any ‘extra’ money from his expense account from work to do whatever TF he wanted to with it. (which was never discussed with me.)
-We had JACK in savings–and needed some very badly for multiple reasons
-Every time we paid credit cards we ended up racking them up again
-We ate out A LOT
Ok, so I learned probably an endless list of things–but you get the idea. And once I started researching how to actually keep track of all this without losing my ever-loving mind, I found the software Mint.com (I am not an affiliate for them–I use this and love it!) This software is free, and totally changed how we viewed our expenses.
I would do a tutorial on Mint but there are so many crazy helpful ones already out there. Plus–I didn’t need a tutorial at all–the software is really user friendly and pretty darn self-explanatory.
Other than that software, I knew I needed some kind of calendar to keep track of expenses paid every month, when they were due, how much they were, method of payment, etc. But I got a good idea of steps I should take to get this money monster under control first.
Here are the steps you should tackle in creating your Working Household Budget:
Add up your monthly income from all sources that are guaranteed best you can (What I mean by this is that my husband is in sales, and gets paid a salary plus commission. We never know until the week before what’s getting paid on commission, but always know the salary rate. If you’re in a similar situation, I advise getting monthly expenses below the salary amount per month to keep you ‘safe’.)
2. STANDARD MONTHLY BILLS:
Make a list of every bill due every month, and the approximate amount due, plus due date–order them by due date.
3. NON-Standard EXPENSES:
Make a list of any bills due annually, quarterly, etc, get an annual total, then divide by twelve. This is your monthly amount that you should be putting back to make sure you can make that non-regular payment when it’s due. (I’ll cover more of this later) Add up all the other expenses you have throughout the year (ie: car maintenance, approximate doctor co-pays, Rx expenses, birthday expenses, holiday expenses, POA fees, self-care expenses–haircuts/maint/ massages, etc) These are all NON-standard expenses.
Get a real-time current amount due on EVERY single debt you owe. Make a list, and put in order of smallest to largest amount owed.
5. TITHING AND CHARITIES:
Add up what you donate to charities and/or what you give to your church.
6. IRA/ 401K/SAVINGS:
If this amount isn’t already deducted from your check, figure out either how much you pay or how much you need to pay into this.
7. Other SAVINGS:
Any amount for other savings that you need to put back (ie-if you need to build your emergency savings, or have a general fund for vacations, etc.)
Now, you’re going to work out the difference of how much you have coming in, and how much you have going out every month so you can determine what you can spend on debt payoff, then building your wealth. Once you have this working budget where everything is accounted for, you will be able to get to the debt-free point, then really start building your personal wealth.
So….what if my total is in the negative? Yeah…that’s when you need to start weeding out expenses. (What you’ve been currently doing is called ‘living outside of your means’ if your total is in the negative. You spend more than you make. No bueno, my friend.)
Here are some places you can cut down:
Toys and general crapola for kids
More inexpensive utility options
Cell Phone plan
*Make a list, do the research, find better options to cut your spending. And every time you do–update your bills list.
Once you have a small amount leftover every month, you will diligently pay it towards the smallest amount debt that you have due, using the snowball method (per Dave Ramsey) to pay off your debts. Once the momentum gets going, you’re going to be shocked how good it feels to get rid of it!!
Then, enter all info into the software you choose. What I love about Mint is that you can set your budgets individually to alert you when you’ve hit a certain amount or percentage of the budget. Seriously, there is no easier way to get a real grip on your spending than having every dollar spent being flashed at you daily!
Another option for budgeting is to use the envelope system. Again, Dave Ramsey recommends this because it’s in cash, and once it’s gone–it’s gone! There’s some evidence that having the physical money in your hands as apposed to just seeing a balance online can help you want to hang on to it longer, and thereby be more intentional about that spending.
Ready to get started?? Print out your budgeting templates HERE, and follow the steps outlined to get a true picture of your financial situation, and most importantly–get in control of your finances!!
Good luck! And let me know if I missed anything or if you have recommendations for additions to the binder!