How to Create a Family Budget

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Francis Taylor

Last Updated: 19th October 2022

Are you and your partner looking to start a family? Or perhaps you’re done with babies but need more or cash to pay for the (expensive!) kids you’ve already got, Either way it can be important to consider what it takes to maintain a financially secure and stable household for you and your offspring.

At a glance, planning a family budget requires meeting expenses, spending less than you earn, and having enough money available on the side in case of an emergency. Check out the tips we’ve outlined below so you can start creating a practical budget plan for you and your family.

Make it a family matter

A family budget isn’t dramatically different from your run-of-the-mill budget. The main difference is just that it has to account for the income and spending of your entire household: that’s you, your kids and, if it’s a two-parent household, your partner.

If you are building a family with your partner (or just getting started), you may want to consider creating a budget both of you can understand. This will make it much easier for both of you to follow. So just make sure it has a clear format for your income, expenses and total balance, and that it’s kept in an easy-to-find location – whether that’s on your desktop or in a manilla folder.

You’ll also want to involve your partner when you’re making the budget. Not only will this help you build a clearer picture of how much money the two of you are bringing in and where it’s going, but it can ensure you’re both on the same page with your finances.

Planning for your first child

Are you an expectant parent getting ready for your first child? If so, then congratulations are in order! If not, then it’s safe to say you can skip this section. Single folks and couples without kids – we see you and love you.

However, if you’re planning to welcome a little bub into the world, then there’s probably a lot on your mind. For one, you might be wondering how much it costs to raise a child.

According to the Australian Institute of Family Studies, your first child could cost anywhere from $3,000 to $13,000 before it turns one1. That’s a broad range, to say the least. And while you’re planning out your future budget, it can be a little tricky to take all of these coming expenses into account.

That’s why it might help to strip everything back to the basics as a first step. Jot down a list of the bare necessities to plan for your first child, essentials like:

  • Cot or crib
  • Pram or stroller with reclining action
  • Changing table
  • Baby ointment (to prevent those annoying rashes!)
  • Disposable baby wipes
  • Nappies with sticky strips in place (or safety pins/velcro snaps to hold cloth nappies in place)
  • Clothes (undershirts, onesies, pants, tops, hats, socks, booties, scratch mittens, jackets)
  • Cotton blankets
  • Baby bottle
  • Dummy
  • Bibs and burp cloths (so you don’t get baby spew on your clothes. But honestly, you probably still will.)
  • Breast pump and milk storage containers
  • Nursing pillow, nursing bras, and breast pads
  • Lotion for sore nipples (from frequent breastfeeding and breast pumping).
  • Baby bath tub
  • Wash cloths
  • Baby soap, baby hair brush and baby towels (aww)
  • Nail clippers
  • Baby thermometer
  • Medication in case your baby gets a fever
  • Safety car seat
  • Family health insurance.

Estimating these expenses will help you plan out your budget for the months to come. You can get a good sense of the added costs you’ll need to cover and prepare for them in advance.

Add up your expenses

It’s also worth sitting down with your partner and writing down a list of your other expenses, both the essentials and non-essentials.

Your day-to-day essentials would include things like:

  • rent or mortgage repayments
  • car or public transport fares
  • childcare requirements
  • groceries and utilities
  • health, household, and other types of insurance
  • electricity, gas, and water bills
  • internet and mobile bills.

Once you’ve covered the bases, consider your non-essential spending: are you buying a lot of takeaway or video games for the kids? If so, ask yourself whether having these things would make a significant impact on your family’s day-to-day life if you didn’t spend as much on them. Like many of us, if you find yourself making frequent emotional or impulsive purchases, learn more from our main money-saving tips here.

A couple planning at a laptop

Calculate your income

After you’ve tallied up your expenses, you’ll want to work out how much money’s coming into your household. If you’re a two-parent family, both you and your partner will need to add up your respective incomes. This could come from a variety of sources too, such as:

  • work salary
  • interest accrued from savings accounts
  • government benefits (e.g. Parenting Payment, Family Tax Benefit)
  • gifts
  • selling items you own or made (e.g. paintings, jewellery, etc)
  • passive income (e.g. rental income, affiliate marketing, etc).

Next, you’ll want to compare your monthly income against your expenses. If you’re earning more than you’re spending each month, then this is good news. It means that you’re bringing in money that you can put towards your debts, investments or even that cute cubby house for the kids.

If, however, you’re spending more than you’re bringing in, then it might be time to take another look at your expenses. A budget ‘in the red’ could be one that empties your savings account or pulls you into debt if left unchecked; so let’s look at how you might go about fixing this.

Audit your non-essentials

If you look at your spending in the past 12 to 24 months or so, you’ll get a good idea of where most of your money went and an indicator of where you’ll keep spending it. Take a look through old payslips, cheques, receipts, and statements to better gauge your habits. Chances are you’ll find a pattern of some non-essential items that are doing little more than sucking your savings. So, give yourself an audit. No one really needs three online streaming accounts – or do they?

Non-essential things such as entertainment, gifts, holidays, or various other ‘treats’ can be put to the side to make room for mid to long term payments such as:

  • household maintenance costs
  • school uniforms, textbooks, and stationery
  • medical and dental fees
  • registration fees and equipment for sports, music, or hobbies.

Look at the bigger picture

Once you’ve audited your spending on non-essential items, it might be nice to sit down and talk about your dreams and long term goals with your partner. But if you’ve been together for some time, it’s likely you’ve already got a fair idea of which direction you’d like to take your family together.

Perhaps you’re both keen travellers and want to be able to take your family on annual holidays? Or take a six-month road trip around Australia? Or move to a bigger house?

Having a long term dream to work towards together is a strong motivator for sticking to your family budget. Fantasy realisation theory supports the idea that we can find great momentum in achieving our long term goals when we contrast our dreams of the future with our present reality.

This theory advocates for a more practical approach that differs from purely fantasising about the future, which can be rather dispiriting at times. And it also takes you out of the hum-drum of everyday routine – no one likes to feel like Bill Murray in Groundhog Day.

So when you decide to sit down and have a chat with your partner about your future, don’t just fantasise and forget about where you are now, and don’t just talk about the present without considering the future. Link them together and visualise the journey on the way. Then, get to work.

Create your future budget

Now that you have a grasp on your finances and some goals to keep you motivated, you’ll want to create a budget for the month to come. Provided you follow it, this budget should also help you limit your spending.

Generally, you’ll want to draw up your budget with the following sections:

  • income
  • essential expenses
  • non-essential expenses
  • balance (income minus expenses).

Of course, when you’re budgeting for next month, your projected income and expenses might just be estimates. That’s okay though! We’ll talk about what to do if you overshoot these figures in the next section.

For the meantime, you’ll just want to write up your budget. Doing so with pen and paper works just fine, though if you prefer, you can also use:

  • software like Microsoft Excel and Google Sheets;
  • budget planning phone apps; and
  • Moneysmart’s budget planner.

Once that’s all done you’ll have a spiffy, brand-new budget ready for use. Try to stick with it for the month to come – especially if you set a limit on the non-essential expenses – and circle back when the time comes to create another budget.

Review your progress

Once your budget period has come to an end, it’s time to look at how much you actually spent in the last month: your real income minus your expenses. Does it match what you planned? Or did something unexpected force you to spend a little more than you intended?

If it’s the same as your intended balance then you can breathe a sigh of relief. You followed your budget to the letter and you’re on the way to meeting your financial goals.

If it’s higher than your intended balance, that’s even better! You might have brought in some extra income or spent even less than you intended for the month. Now you have some additional money to save up or put aside for an emergency.

If it’s lower than your intended balance then this might be worth investigating. If you’re unable to hit your monthly budget goals then this will negatively impact your long-term financial goals, so it’s important to work out why this happened.

If it’s simply a matter of buying too many non-essentials, that’s easy enough to fix on your own. But sometimes you can still do everything ‘right’ and life will still find a way to mess with your plans. Maybe there was a medical emergency you had no way of predicting. Or maybe the budget was too strict or too unrealistic for you to ever hit.

None of which is the end of the world! It just means you have to adjust your next budget to make sure it’s easier to stick with.

Adjust as necessary

There are a couple of ways you might be able to revise your budget. For instance:

Make substitutions

When it comes to certain expenses, swapping out one kind product for a cheaper brand could help you free up some funds. For instance, caffeine addicts could replace their premium instant coffee with a less expensive home brand; or maybe it’s time to switch out the kids’ pricey, high-sugar cereal with Weet-Bix.

Plan for emergencies

If sudden or unexpected emergencies are blowing out your budget then you might want to plan for them ahead of time. Factor these into your future expenses so that you’ll have a more accurate view of the month ahead. Even a rough estimate can give you some idea of how much you’re likely to spend.

Revise your long term goals

Let’s say you want to save up $10,000 for the year but you only managed to save up $500 last month, even after cutting back on non-essentials. If the goal just isn’t realistic, you might need to adjust the timeline to two years. That way, you can adjust your budget so that it’s actually achievable.

Now, when you sit down to write your next budget, you’ll be able to craft something that’s more realistic and can better predict where your finances will stand at the end of the month. Remember, you want something to aim for, but you don’t want a budget that’s so unrealistic there’s no chance of following through.

A final word

If you’re still struggling to meet your financial goals, then it might be worth looking at certain day-to-day essentials: such as your insurance and utilities bills. Comparing the cost of different providers may be able to help you get a new deal at a more competitive price.

iSelect* might be able to help out on this front, too. With us, you can compare a range of different products and plans online: from home loans to life insurance to credit cards. So if you’re looking for a suitable lender or utility provider, it might be worth getting started today. We’ll do our absolute best to help you!


Francis Taylor

Content Writer

Francis Taylor is an experienced content writer, passionate about providing accurate and helpful insurance information.
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