How To Budget Your Finances and Monthly Expenses
It can be difficult to stay afloat financially when your money is going to things you cannot account for. This may leave you feeling like you have been buying the wrong things or misplaced your money somewhere. Thankfully, budgeting can save you from this situation.
Budgeting refers to defining what your money will be spent on. This can be done on a weekly, monthly, or yearly basis. It is simply a calculated financial plan to show the percentage of your income that would be allotted to your various needs, wants, and loan repayment. This would help you to streamline your spending and live within your means.
How To Budget For Your Monthly Expenses
Not all monthly expenses are fixed, so you may be wondering how working with a budget can be feasible.
When making a budget, list out all of the things you will have to spend on. Then, you start with the ones with a fixed amount like a mortgage, followed by those with unfixed amounts like groceries. In collating your proposed expenditure, round up the figures for things with unfixed amounts.
When you are done calculating the proposed expenses for the week or month, estimate the total amount that may go towards things that are not priorities. The amount left after calculating monthly expenses will determine how much will be allocated to this category.
It is important to treat the percentage dedicated to saving as a need. This should be number one on the budget before all the others to ensure that there would be money for savings regardless of the bill for the month.
Check out this article for a step-by-step guide on how to start a budget.
Average Monthly Expenses
According to the US Bureau of Labor Statistics, families in America spend about $5,111 on average. Some of the most common things money is spent on include rent or mortgage, student loan repayment, groceries, transportation, clothing, and healthcare.
From the survey, it was found that most Americans spend over 80% of their monthly income. A good number of people spend more than they earn every month.
It is important to pay keen attention to what you spend your money on so that you can save a sizable percentage, at least 20% or less.
Average Monthly Expenses For a Family Of 3
The total average monthly expenses for a family of three is $6,178, or $74,134 annually. For most people, housing/rent takes up 50% of their income. Other expenditures like clothing for the entire family may take 3% or more. Entertainment could amount to 5%.
Most people tend to spend double the amount spent on entertainment on healthcare. Transportation costs, feeding, and insurance take up an almost similar percentage.
On average the total monthly income for a family of three is $7,631 or $91,581 annually. As a result, the proposed expenditure for every family will differ slightly. All that matters is spending within your means and saving at least 20% of your income monthly.
Average Monthly Expenses For a Family Of Four
The larger the family, the higher the expenses. A family of four would need a bigger apartment compared to a family of three. Rent for such a family would start at $4,000 and way higher. Most four-bedroom apartments tend to be on the high side.
Do a thorough search and settle for an apartment that would not take more than 35% of your entire earnings. Other household costs like groceries, commuting costs, and clothing would take up an extra 35-45% of your earnings.
A frugal lifestyle might help you get some quality stuff at cheaper rates, increasing your chances of sticking to your budget. Look out for discount sales when you go shopping. On average, a family of 4 in the US spends $7,095, or $85,139 annually.
Average Monthly Expenses For A Family Of Five
The average monthly expenses of a family of five is $6,700. This includes the cost of housing, transportation, insurance, student loan payment, clothing, school bills, hiring services, and many more.
Sticking to a budget consistently is way harder for larger families. Assess your budget for the things that are needed monthly as well as the ones that have fluctuating prices.
When prices of certain things drop, you may want to increase the budget for that month to accommodate the bulk purchase of that product.
This may decrease the amount left for saving in that month, but more money is saved in the long run.
Average Monthly Expenses For A Family Of 6
A family of 6 would have a monthly budget that ranges between $7,400 and $7,900. In making a budget for such a large family, the cost of housing should not exceed 45% of the family’s total income.
Savings may not be fixed as you may be looking at getting your groceries in bulk quantities. When it comes to clothing, entertainment, and other needs, try to search for cheap and convenient alternatives.
Average Monthly Expenses For A Family Person
According to the U.S. Bureau of Labor Statistics (2021), a US-based family of 2 spends a minimum of $5,271 monthly. The largest percentage of the expenditure happens to be on housing and insurance.
Although the total expenses for every month would not remain the same. Total expenditure monthly for a family of 2 ranges between $5,500 and $5,900.
Average Monthly Expenses Per Month For A Single Person
The average monthly rent for a one-bedroom apartment in 2020 was $1,098 a month. When other expenses like insurance, utility bills, healthcare, entertainment, and clothing are added, the total expenditure will be somewhere near $3000.
From the bureau of labor statistics survey, a single person would have an average monthly expenditure of $3,189.
Sample Family Budget
Below is a budget for a family of two. Dave and Zara are a couple. Dave’s take-home pay is $2,300 and Zara’s is $2,400. Their total income is $4,700.
|Expenses||Budgeted||Amount spent||Amount left|
Sample Budget For Family Of 6
Managing a family of 6 can be quite difficult as everyone has lots of needs to be met and money needs to be saved as well.
A robust budget will have the details of all your expected expenditure including miscellaneous to cover for some wants.
Below is a sample budget for a family of 6 with a total take home income of $7,500.
|Expenses||Budgeted||Amount Spent||Amount Left|
|Food Eaten Out||$400.00||$382.00||$18.00|
Sample Budget For Family Of 3
A family of three could be a couple and their child, a couple and an elderly parent or three siblings, and so on.
When making a budget that involves a child, have conversations with them when they are old enough to understand money. Prioritize their needs and wants and teach them how to do the same.
Here is a sample budget for a family of 3, a couple and their child. The family’s total monthly income is $6,000.
|Expenses||Budgeted||Amount Spent||Amount Left|
|Food Eaten Out||$320.00||$306.00||$14.00|
|Tuition fee savings||$200.00||$200.00||$0.00|
Budget For Family Of 4 Making 100k
A family of four making 100k per year can live a very comfortable life if the right percentages are allotted to the right expenses. Here is a sample.
|Expenses||Budgeted||Amount Spent||Amount Left|
|Food Eaten Out||$430.00||$423.00||$7.00|
|Tuition fee Savings||$150.00||$150.00||$150.00|
How Do You Budget For A Family Of 4
Budgeting for a family of 4 can be tricky. Several expenses are difficult to predict, leading to spending outside your budget, but this can be managed.
Understand seasons and buy in bulk when things are cheap. Also, allocate enough money to the miscellaneous unit to cover for possible inflations from the budgeted amount.
What Is A Good Budget For Family
There are many ways to make a budget. The best method is to list out all of your needs and settle them first before attending to your wants.
Some want that may require a huge chunk of your income can be saved in bits ahead of time. There are also plenty of apps and calculators that can aid in drafting your budget.
What Is The Average Monthly Budget For A Family Of 4
The average monthly budget for a family of 4 is $7,100. The adults in the family will have needs that would likely be different from that of the kids.
All needs must be assessed objectively so that the right hierarchy is achieved when the budget is drafted.
Five Reasons Why Budget Is Important
1. It helps you understand where your money is going to
A lot of people earn averagely well monthly but they cannot account for what they spend their money on. Sometimes, their needs go unmet, and they are left with little or no savings. Working with a budget helps prevent this situation.
2. It leaves you with enough for rainy days
A budget helps you spend the right percentages of your income on the right stuff. While doing that, a minimum of 20% of your salary goes to your emergency fund or just savings for rainy days.
3. A budget will keep you out of debt
A good percentage of Americans have gotten used to the habit of spending above their means. Having a budget will ensure you are conscious of what you have and what you need to spend on.
4. It would help you manage bad spending habits
Our daily interactions are filled with loads of adverts and it can be tempting to buy products that we do not need. Budgets prevent people from developing such a habit.
5. Guarantees a happy retirement
Retirement is a time many people look forward to. More people are developing strategies to help them retire early. Sticking to a budget helps you plan and save enough for your pension.
What Is The 50 20 30 Budget Rule
The 50 20 30 budget rule is a rule where 50% of one’s total earnings are kept aside for settling bills that fall in the category of needs.
An extra 20% of the income is put in a savings account, and the money is left untouched. The remaining 30% is used in paying for things under the category of wants.
This rule is the best as it gives room for everything to be covered.
50 30 20 Rule Alternative
The 50 30 20 rule is the same as the 50 20 30 rule. The principle is the same as the former. Half of the entire earnings are used to pay for necessities like mortgage, insurance, utilities, etc. 30% is spent on wants like eating out and extra fashion accessories. 20% is left for savings which is often kept in a separate bank account.
60 30 10 Rule Budget
The 60 30 10 budget rule is another alternative when drafting a budget. It is most suitable for people who have large projects that they have to save for or debt they wish to repay quickly.
In this method, 60% of the entire income is set aside for savings. 30% is used to cover needs like housing, utility, and transportation, while 10% is left for needs. This approach requires a greater deal of discipline as only a small amount of the income can be spent on wants.
40 30 10 Rule
The 40 30 10 rule is also known as the 40 30 20 10 rule. This entails that 40% of your entire income or less be budgeted for loans and debt payments. Monthly expenses would take up 30% of your income. 20% will be kept for savings for a project, an emergency fund, retirement or vacation. 10% will be kept for insurance.
10 20 Rule
The 10 20 rule is a guideline that helps people manage their debts as well as the percentage of the income to be allocated to debt repayment.
This rule states that the total debt owed by an individual should not exceed 20% of their entire earnings. Also, the monthly repayment plan should not exceed 10% of the total monthly income.
70 20 10 Rule
In the 70 20 10 rule, monthly expenses, including needs and wants, take up 70% of the monthly expenses. 20% is reserved for savings, while the remaining 10% is used for debt repayment or charity.
Frequently Asked Questions
What is a typical household budget?
A typical yearly household budget for an average American family is $63,036.
Can you support a family on 40k a year?
Yes, you can support a small family on a 40k per year income. You just have to commit to a budget that works for you and your family.
How much do families spend in a month?
The average American family spends about $22,666 annually or about $1,889 a month on household bills.
Final Thoughts On Budgeting Family Finances
Making a family budget and sticking to it can be simple or difficult, depending on the path taken. The golden rule is to allow flexibility and take note of everything that would be spent on in advance.