How to Create a Household Budget for Beginners

Start by determining your total household take-home pay—the amount that actually hits your bank account after taxes and deductions.

Include All Income Sources:

• Primary job(s) - salary or hourly wages (after taxes)
• Side hustles or freelance work
• Rental income
• Child support or alimony
• Investment income or dividends

If Your Income Varies:

For variable income (freelancers, commission-based, seasonal workers):

• Look at the last 6-12 months of income
• Calculate your average monthly income
• Budget based on your lowest monthly income to be safe
• Set aside extra from high-earning months for lean months

Before creating a budget, understand where your money currently goes. Track every expense for 30 days:

Easy Tracking Methods:

• Use a budgeting app (like Mudget) that automatically tracks spending
• Review bank/credit card statements for the last month
• Keep receipts and add them up weekly

Group your expenses into categories. Here's a standard household budget breakdown:

Pick the method that fits your household's financial situation and goals:

1. Zero-Based Budgeting (Best for Most Households)

Assign every dollar a purpose so income minus expenses equals zero. Great for intentional spending and maximizing savings.

→ Learn more about zero-based budgeting

2. 50/30/20 Budget (Good for Beginners)

Simple rule: 50% needs, 30% wants, 20% savings & debt. Easy to follow but less precise than zero-based.

3. Envelope Budgeting (Great for Overspenders)

Allocate cash (or digital "envelopes") for each category. When the envelope is empty, stop spending in that category.

Using your spending data from Step 2, set budget amounts for each category:

Start with Fixed Expenses (Easy):

These rarely change month-to-month. Budget exactly what you pay for rent, car payment, insurance, etc.

Then Variable Expenses (Harder):

Look at your average spending over the last 3 months. Set a budget 10-15% lower than your average if you're trying to cut back.

Don't Forget Irregular Expenses:

These trip up most budgets. List annual expenses and divide by 12:

• Car insurance: $1,200/year ÷ 12 = $100/month
• Holiday gifts: $600/year ÷ 12 = $50/month
• Car maintenance: $600/year ÷ 12 = $50/month

Before budgeting for wants, allocate money to financial priorities:

Priority Order:

1. 1
   Emergency fund: Aim for 3-6 months of expenses ($1,000 minimum to start)
2. 2
   Employer 401(k) match: Free money—contribute enough to get the full match
3. 3
   High-interest debt: Pay off credit cards (>15% APR) aggressively
4. 4
   Retirement: 15-20% of income to 401(k) and IRA
5. 5
   Other savings goals: Down payment, vacation, college fund

A budget isn't "set it and forget it." Check your progress weekly:

How Mudget Simplifies Household Budgeting

Creating a household budget manually takes hours. Mudget automates the process:

• Automatic budget creation: Tailored budgets generated based on your income and spending
• Real-time tracking: Connect your bank accounts for automatic expense tracking
• Household collaboration: Share budgets with household members, track together
• Financial education: Learn as you budget with personalized tips and lessons
• Gamified milestones: Earn achievements for staying on budget and hitting goals