Today we’re getting into the nitty-gritty of HOW to create a family budget.

We’ve done budgets and had to revisit them. We haven’t always been consistent with keeping a budget with moves and job transitions. But when we are budgeting, the stress in our marriage is much lower!

First, let’s clarify what we know from what we don’t know.

We know:

  1. That there are many sound, recommended financial practices
  2. That these practices come from reliable sources
  3. That following these financial practices actually works and produces greater net worth and increased life satisfaction
  4. That only a minority of people uses them.

Which leads us to what we don’t know:

  1. We don’t know why we frequently do not use them
  2. We don’t know why, when we do use these tools, we don’t always use them properly. This scenario is typical for most families.[i]

So let’s talk about discussing your budget and the role that personal qualities play in the likelihood of your success in establishing a budget before turning to the steps by which you’ll create your own budget.

Discussing Your Family Budget

It’s difficult to have a productive discussion about the budget itself because most couples do not discuss the meanings they give to budgeting.

So have a discussion with your spouse to get this stuff out on the table. Don’t fight about what to spend or attempt to talk to each other into budgeting, just aim for understanding. Your spouse is not on board? This is not the time for hot debate. Rather, seek to understand WHY your spouse does not want to actually follow through with the budget. What is the meaning behind the resistance? It’s been my experience (Caleb) in working with couples that there is often a valid reason why resistance is present.

You need to do this because it’s no fun banging out an awesome budget only to have your spouse say, “Good for you! Let me know how that goes!”

That sucks… So make sure you’re on the same page by having a good discussion first. Often if you can get to a discussion at the meanings level, you’ll be able to connect and get on the same page. Listening to understand is a vital skill for this type of conversation.

Remember, you’re not alone. If you can’t settle on this together, reach out for help and we’ll set up some coaching.

Understand Personal Qualities

So after you’ve discussed and understood the meanings you each ascribe to budgets, the next step is to grasp the impact your personal qualities have on budgeting.

For example, discipline (as a quality) and knowledge (of financial matters) are qualities that impact one’s ability to establish and follow a budget. Possessing these qualities will help you make progress against your financial goals.[ii]

If you don’t feel you have these qualities: don’t fret. It’s gonna be ok.

What this means is that budgeting is possible for everyone who wants to do it because personal qualities can be developed and action is a result of choice. Anyone can make choices. So be encouraged! Have a good conversation to find out where each of you are at, then make decisions together and take action. Again, it’s not unrealistic to think that you might need to reach out for help.

Creating Your Family Budget

Caleb blended content from both the Australian government (ASIC)[iii] and Dave Ramsey to provide a robust description of how to create your budget in this episode.[iv]

Both resources are really valuable, and we’re taking the best of both of them and blending them because they really get along well. We know it can be overwhelming to create a budget, so let’s break it down.

There are four steps here:

  1. Track your current spending
  2. Compare money in and money out
  3. Prioritize where you want your money to go
  4. Take steps to make your money work for you.
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1. Track Your Current Spending

The easiest way to start budgeting is simply to start tracking where your money currently goes. Do not try to change your spending, just keep track of it so you know what you’re dealing with and can assess the situation. Do this for a period of time; at least one week or a pay period, but the best is if you run it for a month.

All this tracking is going to enable you to make better choices in Step 3.

2. Compare Money In and Money Out

Get clear on your income.

Your income is typically comprised of your payslips, your bank statements (including any interest being earned) and investment statements. If your income is variable, either average it out (based on last year’s earnings) or create a 5-6 month strategy to set aside enough so that you can live off the previous month’s income.

Figure out how much money is going out of the work you did in the previous step. At this point, also use your best guess if you think there are other things you should consider that didn’t happen last month (e.g., budgeting for vehicle maintenance).

Next, compare your income and expenses so that you know how to prioritize your budgeting:

  1. If you are spending less than you earn then budgeting is about balancing spending versus saving
  2. If you are spending more than you earn then budgeting is about reducing your expenses so you don’t keep creating debt.

So compare money in to money out and choose the correct course of action

3. Prioritize Where You Want Your Money To Go

There are usually three categories of money for every family:

  1. Income
  2. Needs expense (e.g., groceries, rent or mortgage, utilities)
  3. Wants expense (e.g., saving, dining out, entertainment)

The first step is to highlight on your list of expenses from #1 your needs. Add these to your budget first.

Second is to identify your wants: things you could do without if you had to. For this, ask the question (especially if you are overspending): what can I cut out or cut back?

Think of this in terms of a switch or save:


  1. Are there memberships or subscriptions you can cancel or get for a lower cost (e.g., gyms, clubs, magazines, online gaming)
  2. Are there less expensive mobile phone plans?
  3. Can you shop around for a better deal on car insurance?
  4. Are you paying for more health coverage than you need?


  1. What can you get for free elsewhere? (e.g., can you use the Internet at the library for a while?)
  2. How can you spend less on groceries
  3. Can you reduce your spending on eating out by packing lunches or planning meals better?
  4. Can you turn lights and appliances off to cut back on electricity?

Go through and identify the savings and cuts you can make. As you go through this, discuss them with your spouse so you both agree and ask yourselves, are these reductions realistic?

Now add these in along with the needs part of your budget. It may be helpful to categorize items into groups (Utilities, Entertainment & Travel, etc.). Identify what you will spend on each item on a monthly basis

Add up all of these needs and wants and revise the list until your outflow is less than your net income. Keep revising until you achieve this.

4. Take Steps To Make Your Money Work For You

Time for action!

Set up important bills so they are paid by direct deposit (things like rent or mortgage, personal loans or car payments, debt and so on).

Smooth out your big bills. We’ll talk more about this in our next post but if your car insurance is $1,200 per year, set aside $100 a month to pay for that.

Now you have your budget and your money flowing nicely. You’ll want to check your budget monthly and see how you did. Once you get in the rhythm of it, it’s still a good idea to review this together quarterly.

One of the guiding principles here is to make sure that every dollar has a place to go. If you don’t plan to spend it, you should plan to save it.

If adhering to the budget is a problem it may be helpful to use an envelope system. Put the budget for the pay period or month in one envelope per category. When you run out of grocery money, it’s time to start eating leftovers or digging deep in the freezer! This tactic really forces you to start thinking about the consequences of your spending.

Personal Qualities for Family Budgeting

By using these tactics and strategies you’ll really begin to create the discipline and action that will serve so well in many areas of life. These core qualities can be learned by anyone and will help you create the life you want.

Family Budget Worksheet

Our patrons get instant access to the MS Excel Family Budget Worksheet! Downloading this will help you lay out your income and expenses so you can see exactly what your budget needs to look like. If you’re not a patron, it only takes a few moments to become one.

Make your dollars work for you! Again, if you need any help with this, feel free to reach out. Investing in some coaching to help you get on the right track financially will pay dividends for years to come.

Finance Series

This is Part 3 of 5. Make sure you view the rest of the series:


[i] Glenn Muske and Mary Winter, “An In-Depth Look at Family Cash-Flow Management Practices,” Journal of Family and Economic Issues 22, no. 4 (Winter 2001): 353–72.

[ii] Barbara O’Neill et al., “Successful Financial Goal Attainment: Perceived Resources And Obstacles,” Journal of Financial Counseling and Planning 11, no. 1 (2000): 1–12.

[iii] Australian Government Australian Securities & Investments Commission, “Budgeting,” February 18, 2015,

[iv] “Free Download: Dave’s Guide to Budgeting,” accessed June 16, 2015,