How to Set up A Household Budget

Do you want to know how to set up a household budget?


basic-household-budgetSetting up a household budget is not as hard as many perceive. According to experts, the first thing to do is gather your monthly income. This includes job-based revenue, along with other monies that you make on a monthly basis. The latter can include interest on bank accounts, along with money earned from investments or business endeavors. Once you have an approximate number, you need to create a spreadsheet with your approximate monthly earnings. Programs like Excel have existing templates to determine monthly or annual household budgets. Next, you need to take into account all your monthly expenses. This can include groceries, electricity, utilities, credit card bills, and mortgage payments if applicable. No matter what your monthly expenses are, you need to include them on the household budgeting sheet.


The next step is to simply subtract your monthly expenses from your monthly earnings. For example if you make $3,000 a month and your expenses total $1,500, the remaining balance will be $1,500. You can then deposit this money back into the bank, or allocate it for any unseen expenses within the month. The key to any successful household budget is cost-savings. Depending on your income, you may have to curtail your household expenses per month. Due to the recent fiscal crisis, there are several people still struggling to make ends meet. As a result, most are living on fixed incomes, or are facing financial constraints across the board. One way to secure extra income, however, is by eliminating any unnecessary expenses per month.


The best way to do this is by subtracting non-essential expenses from essential expenses. For example you will need food, electricity, water, and gas for your loved ones and household. There are known as basic necessities, which simply cannot be curtailed or avoided. Non-essential expenses relate to entertainment, eating out, or excessive use of electricity. Therefore, instead of having the air conditioner run day and night, you can open your windows to secure proper airflow and distribution. This will lower monthly energy costs, which can result in savings and more money per month. You can also limit both television and computer use to a few hours per day. Cooking at home can also prevent eating out, which can really add up at the end of the month.


Even if you have a limited income after expenses, there are ways to make the most out of your household budget. For example you can purchase generic or standard grocery products, as opposed to high-end brand names. You can also use a water filter, instead of purchasing costly bottles per month.

Your Questions About Household Budgets That Work

Laura asks…

Anyone know a good book or ideas on budgeting your household checkbook?

I made over 100k last year and my wife blew threw it as quick as I made it…I worked over 500 hrs overtime! I need a budget that is practical. Does anyone know of a good book or ideas?

richmama answers:

To start a budget…it is very important to write down where the money is being spent so you can identify where you can cut down and save.

You can do this on a monthly basis or whatever suits your situation, list down your expenses as

fixed payments like rents or motgage payments, car loan payments, student loan payments.etc. These are expenses that you need to pay and which are fixed amounts

expenses that you can control like groceries, utilities, petrol , other basic necessities

The above expenses are the ones which you can’t avoid, though they are controlable.

Deduct the expenses from your income and you will see whether you have excess cash or you have a deficit.

If you have excess cash from the process above, you can start planning on what to do with the excess, it is a good idea to put away some as savings….but don’t forget to have fun too if you can afford it. You can’t just work and not have fun!

Use a credit card only for convenience, meaning charge your expenses but pay all the balance at the end of the month to avoid paying interests which are extremely high. If you can’t pay your credit card balance, it means that you spent beyond your means. The credit card statement serves as a list of your expenses which can help you keep track of your spending. It is very easy to forget how $100 in your pocket was spent, so make sure you write down everything. Quite hard at the beginning but very helpful!

Good luck…I am sure that when you do this, you will have a better understanding of where your money is going.

Robert asks…

Could you run a household budget this way, and not bankrupt yourself?

A Household‘s budget is based upon 40-per-week of income from the employed. The Employed decide that they wish to work fewer hours, but insist that since working less (taking in less revenue) doesn’t cost anything (other than lost income), that they can continue to live on a budget based on a 40-hour work week, but only if they did not add anything to their budget (no new spending).

Would this plan work in your house? Why do “conservatives” continue to believe that revenues (income) can be cut without corresponding cuts in the budget?

Do not bother answering with a question. It’s a waste of everyone’s time, including your own. Snide comments that do not answer the question are best left untyped, as well.

If “trickle-down” is being cited, please support with data what is being asserted. 30+ years of hard data, and real life experience, prove trickle-down an abject failure at doing what we were told that it would do.

richmama answers:

No You couldnt..

Fact of the matter is, we DONT believe “Why do “conservatives” continue to believe that revenues (income) can be cut without corresponding cuts in the budget?”…….quite the opposite

In the 1980’s we TRIPLED revenues to the Feds by cutting taxes, and the Dems spent every penny of it and then some. It was only after we dug our heels in 1995, was change made. Tax rates WERE higher, but still not at the record levels they were back 40 years ago.. One could say that REP’s proved that holding the line on budget spending was the cause of our record surpluses in the late 1990’s, and only after Congress decided to go on future spending binges, did we get back in trouble.

People dont seem to understand the concept that government should NOT run continual surpluses. If they are in surplus for more than a couple of years, then they are taking too much in taxes, and that tax should be given back to those that paid it..

Please dont try to rewrite history… It is all there in black and white…

Helen asks…

I have $ 2,500 to invest in cd’s. Where to invest?

I have been doing lots of work on my household budget, projecting income and expenses for the next 3 to 5 years. I am totally debt free including house, and have a big emergency fund, and have an ample amount of money in mutual funds and retirement funds.
I still have a minimum of $ 2,500 that I want to put into CD’s, probably a 1 year Cd. Where do I find the absolutely higher interest that I can put this money ? Search internet sites for best rate? Take whatever my local bank is offering on cd’s ?

richmama answers:

My stock broker is offering one 1 year cd that pays 5.2% as the highest offering. Most are quoted at 5%. 6 mo t-bills pay 5% currently. That will give you a benchmark to shoot for.

Mary asks…

Why do people on both sides believe economic myths?

Conservatives think cutting the deficit in a recession is a good idea (disaster, one of the things that started the Great Depression and made it come back in 1936). And they think that the stimulus hasn’t worked (wrong, latest estimate from the non-partisan Congressional Budget Office is that it saved 2.5 million jobs).

Liberals think that ending wars is good idea for the economy (wrong, war is an economic stimulus, WW II forex ended the Great Depression)

Why can’t people learn a little bit about Keynes and monetarism and realize that the economy doesn’t work like a household budget? All it really takes is a few hours of reading and thought to realize that most people have things backwards.

richmama answers:

I don’t care about the economy when it comes to ending war, I care about human life.

I agree that war can be good for an economy, but North Americans can manufacturing more than destruction.

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Your Questions About Household Budgets

Steven asks…

What is Cap and Trade and how will it affect our household budgets?

I doubt anyone knows of this impending expense.
I’m surprised this made it through.

richmama answers:

It should be called what it is-an energy tax, which will make everyone’s taxes go up thousands each year-especially the working class, which 0bama promised would see no new taxes.

Charles asks…

Do you believe in times of extreme recession the gov’t should run it’s budgets like a household budget and?

halt spending?

Or do you think that the gov’t needs to spend in order to keep the money flowing(i.e. it takes money to make money)just as companies invest in R&D during tough times?

richmama answers:

Even in extreme situations, household spending can’t be brought to a halt. There are always things like food, shelter, utilities, gas and car insurance that still need to be paid. The government isn’t a home and people who believe it can be run the same way are simplistic in their views.

Linda asks…

household budgets… What;s the best on-line help to organize your money??

richmama answers:

Friend my suggestion try it.
log on

Paul asks…

Household budgets – funny or not?

Seamus on looking at the household budget complained to his wife on her spending.
“If you cleaned the house yourself that would save on the cleaning lady” he exclaimed.
“You should also learn to cook and that would save on having to go to restaurants all the time.”
“And while we’re at it, you should learn to iron so that we wouldn’t have to pay the ironing lady”
After pondering on his comments for a few moments the wife replied “And if you would learn to f uck, then we could get rid of the gardener.”

richmama answers:

Ha! Ha! What a shock for the husband….

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Your Questions About Household Budgets Examples

Laura asks…

Why are so many horrible things going on at once in USA economy?

either things that are worst ever or worst in a long long time ..since world war 2 or in the last 25 years etc…

just to give a few quick examples(again this is not the entire list, but just examples). Record budget deficits, record trade deficits, rerord consistently high gas prices, record unaffordably high health care costs, several years of declining real wages, massive illegal immigration problem where we seemingly have lost control of who is allowed in this country, record foreclosures, record car repossessions, record household credit card debt, ) it is not enough to say as some suggest that things are cyclical and good and bad times comes or that since our economy is larger that 25 years ago that every number is naturally bigger thus explaining the “Records”. Clearly something is wrong. The question is …how did we get here? I am looking for some honnest intellectual analysis, instead of propaganda.
I see some people just prefer to pretend there is nothing wrong. Notice how their typical response is “there is nothing wrong…is all cyclical”..but they dont go into any serious depth to explain what is going?? why like I said, are all these things happening right now.
The low uemployment has been touted for years now as a sign of our booming economy…and even as justification why massive illegals influx is not a problem..that our economy is doing so great we need more people coming here by the millions to take extremely low paying jobs,etcc….well….if your factory closes and you lose your $18 an hour job and go take one at a fast food joint to make ends meet at $8 dollars an hour…you are still considered employed….and you are not on an unemployent rolls. So go sell that one elsewhere to people who don’t really know what’s going on.

richmama answers:

You must be young.

Early 70s, runaway inflation, gas not available at any price and lots of unemployment.

Not to mention that brief dive in 87, or the first Saddam sell off in the early 90s; or the March-2000 tech meltdown….. Do i need to keep going on or is your memory refreshed. Oh, that little thing called 9-11 kinda put a damper on things…..

Heck a quarter or two of slow growth and increased commodity values is hardly worthy of this “sky is falling” mentality.

Mark asks…

To what extent can the neoclassical labour-leisure choice model explain trends in female participation rates?

I am revising for an exam in labour economics and this is a question from a past paper. I’m trying to write a model answer, in case something similar comes up on the real exam. How would you answer the question?

I was thinking: introduce the answer by giving a definition for the labour supply participation rate. Next, explain the labour supply model where workers make their decisions based upon utility maximization, and draw an indifference curve/budget line diagram to illustrate this idea.

Then, once the model is explained, I could give some figures for female participation rates (I need to obtain and memorize these, in case this question comes up on this year’s paper, but for simplicity’s sake let’s just say that female labour supply has increased massively over the past 50 years).

I think this is where the crucial part of the question comes up, so some help here would be particularly helpful. I could then state and briefly explain the factors that affect labour supply for females (increase in wages over time, increased household productivity, reduced birthrates, and changes in cultural attitudes/legislation towards women in work), and then show whether (and if so, how) they would affect the position of the indifference curve and budget line. For example, an increase in wages would rotate/pivot the budget line upwards.
I know that household productivity and reduced birthrates could be incorporated into the model, but could someone explain to me what effect they would have on the indifference curve and budget line?
And I’m pretty sure that changes in cultural attitudes/legislation, although increasing the participation rates of women over time, couldn’t be specifically incorporated into the model – is that right?

So I’m thinking that a reasonable conclusion would be that the model can explain a number of the factors, although not all of them.

What else would be important to include? I’m not sure whether writing about the backward-bending supply curve is necessary; what are your thoughts, based upon the question?

Any help/suggestions/explanations would be greatly appreciated – I want to be as prepared as possible, should a question like this turn up.

Thank you!

richmama answers:

I’m not sure that I completely understand what you are trying to convey, however, I would like to add that there are more women in college than men, and that has been happening now for some time. It is my theory that men are becoming complacent in our society, and becoming low achievers, due to their outlook and lackadaisical attitudes, of life in general. It has become more common place for the women to take charge and do everything, while the men lay back and do nothing! It is a downward trend that I do not see ending, anytime soon.

Sandra asks…

do you think spouses should merge finances?

I am married and my husband and I see absolutely no reason to do so. We each have our own checking and savings accounts. He gives me money for rent and we split up the other household bills, for example he pays the cell phone bill and I pay the car insurance. We would like to buy a home in a few years and are each saving in our own accounts. We discuss finances frequently and help each other with our budgeting. But I see no reason to merge accounts. This works very well for us. What do you guys think? Why do people feel it is necessary to merge money? PS we have no kids and do not want any, if that’s a deciding factor.
Don’t get the idea that we don’t share money. We definitely do. I’m just talking about having joint accounts. We would never let the other one go without something if they were short on cash.

richmama answers:

Good for you, I think this is a great idea. One of the top, if not THE top thing couples argue about is money. With separate accounts, there will never be any problem with “Why did you spend XXX on YYY?” or discussions on how to use “our” money. I plan on doing the same thing next year.

William asks…

Feel guilty after buying non-necessary items – please help.?

I feel quite guilty and get a lot of buyer’s remorse after I buy items for myself or non-necessary items. I don’t know why.

I do not have a shopping problem. I like buying essentials that we get use out of. But when it comes to non-100% essential items; I think about it too much – whether or not I should buy it – to the point where it bothers me. Afterwards, I feel guilty for spending money on something we didn’t truly ‘need’.

I have Microsoft Money installed, always have been good with budgeting and finance, and I keep monthly tabs on how much we’re spending: groceries, household, gifts to ourselves, pet, baby, etc etc…

2 Examples: I bought slipcovers to protect our sofas (did need) and they turned out to be a true hassle. I should have kept the packaging and returned in time but I didn’t. I feel bad about that.

Then last night, I bought a quilt and shams because I’ve been wanting a quilt for a while, when we already have a lot of bedding, none of quilt-related though. My husband said buy it, he wanted to get me something for mother’s day beyond the $15 toy he got me. I almost put it back and didn’t buy it, but I didn’t want to make a big deal about it in front of hubby, and it was pretty. It cost $72 or so last night. Then I think the $ could have gone for baby’s birthday toys or fixing something on the house instead of for me and the bed.

Why can’t I just feel okay about it and things like this? I constantly think about it and whether or not it’s okay to keep…it takes the joy out of things. I feel nervous about it too.

We don’t have any financial problems, no credit card debt and we have a savings. So why do I get so guilty? Any help/suggestions on how to deal w/this? Thank you!
If it matters, I forgot to mention that only my husband works. I take care of my 10-month old son during the day, alone. So technically he earns all the $.

richmama answers:

Ah, the true mother syndrome. Give, give, give, and never take for yourself.
I once owned only two pairs of jeans, one with holes I could put my fist through, and only one pair of shoes that were literally falling apart because I felt too guilty to go buy new ones when I could have spent the money on something needed for the kids and the house.
Believe me, sweetheart, you DO earn it. Your husband may be the only income source, but you earn what you get.
One way to get over this bad feeling of letting yourself have items you don’t “need” and not feel guilty about it is to put into your budget an allowance that you pay yourself weekly or monthly, in what ever amount you feel comfortable with financially, that you are allowed to spend in any way you want. That will be YOUR money for services rendered. And you can spend or save it in any manner you choose.
Did you see in the news recently where a “housewife” earnings would top $138,000 a year if they were paid for their services?
Give yourself an allowance and stop feeling guilty.

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Your Questions About Household Budgets Percentages

Susan asks…

What percentage of grocery budget on drinks?

What do you think the average % of the grocery budget is spend on drinks? I’m a female college student, and I spend around $250 a month of food/drinks/toiletries/household products. I don’t drink alcohol, so I didn’t include that, but I tend to drink alot of liquids. Like sports drinks, juice, milk, soda, etc. What would be a good % to expect to spend?
I know there are alot of calories in drinks. But, I’m thin and pretty athletic, so its not a big concern. Thanks!
I live off campus at an apartment. I don’t have a meal plan, so I buy and cook everything. I include the grocery budget as anything I buy at the grocery store, such as food, drinks, toilitries (shampoo,coditioner,soap, etc), household items (toilet paper, paper towels, laundry detergent,etc)

richmama answers:

Less than 15%
We are all adults in my house – 3.
I rarely buy sodas and if I do it’s generic with a 12 pack costing less than $3. I buy tag less tea bags, 100 for $1.50, A little milk, no sports drinks, vitamin waters etc.
I buy bottled water and I hate it, but our water is nasty and the filters are expensive.
I do buy box-o-wine about $30 per month

Sandy asks…

Is this reasonable? (first job and helping with household bills)?

I’m about to interview for a job that will pay out £13,000 a year, which would mean I’m getting £250 a week. I live with my parents because I have a mental illness and was not ready for University yet. A while ago my dad said when I got a job he would like me to put £50 a week towards the rent.

What percentage of your paycheck would usually go towards rent and household bills? I’m guessing I will have to spend more if I want certain groceries. I was hoping to give my parents £20 on top of that for a computer I have to pay off, then I was thinking about giving myself £50 a week in pocket money and saving the rest.

What do you think? What does your budget look like?

PS, I’m not sure if the £13,000 is before or after tax. I think if you get under £23,000 a year you can claim your tax back at the end of the year.

richmama answers:

It totally depends on where you live, but most people spend between 25% – 50% of their income on shelter. In this includes, rent / mortgage, utilities (ie. Water, electricity), phone, tv and internet access. Things like food and household necessities (ie. Laundry detergent) are a whole other category and totally depend on the number of people in the household.

I would say to give £70 a week to your parents is not unreasonable, if they are also paying for most food and everything. Save as much as you can for school though.

George asks…

Im having trouble understanding some math, Its consumer math. I would appreciate it!? have written a check for $39.95. You have recorded it in your check register.
What amount would you record using the quick method?
(d).$39.90 have written a check for $43.75. What would you record using the quick method?

9.You make $32,500. Your state tax rate is 1 1/2%. You have two allowances (exemptions).
If you double the rate, you will double the tax.
(a). True
(b). False

1o.Your gross weekly pay is $750.00. Your medicare rate is 1.45%.
What is your medicare deduction?

11.A charge card charges a minimum of $10.00 or 2% of the oustanding balance.
Your oustanding balance is $400.00. What must you pay?

12.Your unpaid balance is $2,750.00. Your card has a minimum of $10.00 or 2% of the oustanding balance.
What must you pay?

13.A credit card charges a daily periodic rate of .05318%. What are the monthly and yearly rates?
(a). 2.34% monthly and 24.59% yearly
(b). 1.59% monthly and 19.14% yearly
(c). 1.43% monthly and 17.16% yearly
(d). 1.85% monthly and 18.50% yearly

14.Three pounds of hamburgers for $2.97. The unit price is _?

15.Change 65% to a fraction and then to a decimal.
(a). 13/20 and 0.65
(b). 63/100 and 0.65
(c). 11/20 and 0.65
(d). None of these

16.If you are using a mortgage to buy a house, then you must have a down payment.
(a). True
(b). False

Monthly payment for a $1,000 Loan
Length oF Lean in Years

Annual Interset Rate: 20 25 30

5.00%: $6.60 $5.85 $5.37

5.50%: $6.88 $6.14 $5.68

6.00%: $7.16 $6.44 $6.00

17.You are borrowing $90,000.00 at an annual rate of 5% for 20 years.
What is the total amount you will pay? Use the monthly payment table at the top!

18.According to books on household budget, you should spend 20-25% of your income on housing.
(a). True
(b). False

19.Calculate the simple interest earned on $2,000.00 saved at 11% APR for 1 year.

20.Calculate the simple interest earned on $1,500.00 saved for 8 months at 6% annual interest.

21.Calculate the simple interest earned on $1,500.00 saved for 55 days at 2 1/2% APR.

22.You buy cisco stock at $17 a share and sell at $14 a share.
(a).Loss of $3 a share
(b).Profit of $3 a share

23.You have made $3,000.00 on the sale of your stock.
The original cost of the stock $15,000.00. Find the percentage of increase.
(a). 20%
(b). 10%
(c). 5%
(d). 3%

24.You purchased shares for $15 each. They are paying a $0.75 dividend.
What is the annual yield?

25.You have purchased a $10,000.00 bond at 85% paying 7% APR. Calculate cost of bond.

26.You have purchased a $10,000.00 bond at 85% paying 7% APR. Calculate Interest.

27.You have purchased a $10,000 bond at 85% paying 7% APR. Calculate the yield.

28.You are paying $1,000.00 a month on rent and you earn $36,000.00 a year.
What percent of your income are you spending on rent?

29.60% of what amount is 720?

30.What percentage of 800 is 80?

31.70% of 400 is what amount?
(a) 28
(b) 2.8
(c) 280
(d) 0.28

32.A lending institution has informed you that they will lend you 350% of your income.
Your income is $45,000.00. What amount will they lend you?

33.Change 225% to a mixed number.
(a).2 1/4
(b).22 1/2

34.Find the average: $27,500, $28,500.00, $29,500.00, $30,500.00, $31,500.00

35.You budgeted $360.00 for one year of dry-cleaning. Find the monthly average.
This month you spent $25.00 on dry-cleaning. Are you under budget?
(a). Yes

36.Fixed expenses do not vary from month to month?

37.Annual expenses include car and life insurance and real estate taxes.

38.Your total monthly expenses is the sum of monthly living expenses plus monthly fixed

40.To find a sales tax of 5% on a puchase of $90.00 using the proportion method you
would write the following: 6/100 = ST/$90

richmama answers:

Are you sure you couldn’t fit any more questions in there?

Nancy asks…

Help needed with confidence levels?

Select the best interpretation, and criticize the others.

In a survey of household spending, Statistics Canada report that households in Ontario, spent 22% of their annual budget on shelter, with a 95% confidence interval of ± 3%. This means that if we were to undertake repeated random samples of the same size:

a) 95% of such intervals will overlap (intersect) the interval 19% to 25%;
b) 95% of such intervals will cover the population percentage of the share of Ontario households’ annual budget spent on shelter.
c) 95% of such intervals will completely cover (contain) the interval 19% to 25%;
d) 95% of such intervals will cover the midpoint 22%.

richmama answers:

Sounds good

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