Types of Family Budget: Which Will Work Best For You?

types of family budget (1)

If you’re part of the 70% of Americans who say their financial planning needs work, this blog is for you.

An effective family budget doesn’t just ensure that there is enough food on the table every month.

A budget also helps you achieve financial goals such as paying off debt or family holidays.

We explore the different types of family budgets and help you decide which one will work best for you based on your personal situation and preferences.

Types of Family Budget

Three types of family budget

A budget is either:

Deficient – when your outgoings exceed your income.

Surplus – when your income is more than your outgoings, allowing you to save money.

Balanced – your income and outgoings are equal.

If your budget is currently deficient or balanced, follow our tips and advice below to create a successful budget that the whole family can take part in.

Advantages of family budgeting

You’ll be surprised at how many benefits budgeting can bring your family. Here are just a few of them:

  • Gives you control back over our money.
  • Helps you meet financial goals.
  • Eliminates unnecessary spending.
  • Helps you save for unexpected costs.
  • Makes talking about money easier and teaches children good financial habits.
  • Keeps you out of debt.

Three parts to a successful family budget

Let’s go back to the basics and make sure your budget contains everything it needs to before deciding on which method is best for you and your family.

1.    List your income

Do you know exactly how much you earn as a family every month? If not, it’s time to find out.

Include wages, cash from hobbies or side hustles and any state benefits that you may receive.

Total everything up and make a note of the final figure.

2.    List all outgoings and assign household budget categories

 Next, it’s time to print your bank statements out, grab a highlighter and mark all of your outgoings, both fixed and variable.

Once you’ve done that, decide on your household budget categories using the list below.

 Essential budget categories:

  • Housing (mortgage/rent).
  • Utility bills.
  • Travel (car payments, fuel, insurance or public transport costs).
  • Groceries.
  • Debt repayments.
  • Savings fund.
  • Medical and healthcare.

Non-essential budget categories:

  • Personal spending (eating out, clothes, gym memberships etc).
  • Entertainment (concert tickets, family days out, hobbies).
  • Miscellaneous (anything else that doesn’t fit into the above categories).

For each spending category, carefully consider a budget for each area. For example, allocate $400 a month on groceries.

Don’t set your budget too tight to begin with as this may encourage overspending.

You can always make your budget stricter if you have money left over, or transfer it to your savings fund instead.

3.    Track spending

Here comes the most important step, tracking your spending.

This includes every outgoing, including that takeout coffee and subway fare.

The easiest way to track spending is by making a note of every transaction and adding it to a spreadsheet.

Alternatively, there are free budgeting apps such as Mint that can link to your bank account and monitor activity on your behalf.

Budgeting systems for families

There are plenty of options for families to consider when deciding which budgeting method to use. We’ve picked the four most family-friendly and explained how they work below.

The cash envelope system

If you’re looking for a more back to basics budgeting method for your family, this one is for you.

The purpose of the envelope system is to organize your expenses into categories that are represented by an envelope. For example, if you use all of the categories listed earlier in this article, you would have 10 labeled envelopes.

Step 1: use your carefully considered budget to set an amount for each envelope.

Step 2: once you get paid, go to an ATM and draw out the exact amount you need for each category and place the cash inside your envelope.

Step 3: only use the cash in each envelope for that purpose. Once you’ve run out, don’t take money from another envelope. The idea is that seeing the cold hard cash will mean you’re less likely to part with it for items you don’t really need. If you have cash leftover in an envelope at the end of the month, you can either leave it in there for the next month or take it out and top up your savings.

Computer budgeting

Our computers do a lot for us, and that doesn’t stop at budgeting.

Several programs can be linked to your bank account to track spending and even send you alerts if you’re close to spending your allocated monthly amount.

The software can even give your insight into your spending habits to help you adjust your budget accordingly.

Another benefit of using software or apps for your budget is that it’s easy to edit at the touch of a button. You can also take your budget wherever you go.

Step 1: choose a personal budget software program or app. There are plenty of free ones to choose from, but also consider paid ones if you are looking for lots of features and peace of mind when it comes to security.

Step 2: enter your income, expenses and budget categories manually or link to your bank account if you want this process automated.

Step 3: if you decide to use automated software as a method for your family budget, it’s important to check it regularly to make sure no mistakes are made.

Paper budgeting

A traditional pen and paper will help your family budget for a month just as well as any other method.

It does take more time than the other methods we’ve described, but it has its own benefits.

Physically going through previous bank accounts and analyzing your spending patterns will force you to make changes.

Step 1: print off three months’ worth of bank statements. Highlight every incoming and outgoing transaction and organize it into spend categories.

Step 2: set a limit for each spending category that you’re comfortable with.

Step 3: create a bullet journal that details all of your financial activity each day. Journals are a great way to look back and reflect on your spending and identify areas of improvement.


Many families find that combining the benefits of using a computer with an old-fashioned pen and paper to make a note of income and expenses extremely effective.

Step 1: pick your program. It’s important to pick a program that you can comfortably use. Microsoft Excel has been a popular application for a long time, or Google Sheets is a good alternative. Both have versions for Android and iOS to enable you to budget on the go.

Step 2: enter your numbers. Here comes the manual bit. Typing in all your numbers may be repetitive, however it’s good practice to do it yourself so you are familiar with your expenses and financial habits, both good and bad.

Step 3: keep tracking. Regularly going back to your spreadsheet is a crucial step in making your budget work. Checking that you’re on track and sticking to your budget will allow you to adjust it if needed, without getting your credit card out.

Which family budget will work best for you?

The key to sticking to a budget is finding one that works for your family.

Paper charts and the envelope system will work well for families who are trying to get control over their finances and reduce spending, while a computer budgeting tool would work well for people who want to analyze their financial habits in more detail.For all the latest advice on managing your family’s finances, browse our extensive collection of financial articles.

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