Why a Household Budget is Necessary


If your New Year’s resolution has anything to do with learning how to save money, reducing debt, being financially free, or managing finances better, congratulations on choosing the path to freedom and security!

But right now, you may feel anything but secure as you are trying to figure out how and where to start your new journey. First of all, you may need some motivation and support as you move into a more frugal life. Read these blogs for some inspiration and encouragement first: Living the Frugal Life and More of Living the Frugal Life.

Okay, now that you’ve committed to your new frugal resolution, the first step is to set up a budget.

You may have one already established but you should re-evaluate and update your budget yearly. Things change over the course of a year and your budget should reflect those changes. If you haven’t ever had a budget, search the web for resources and tools to help you establish one. There are many online resources which help you establish and maintain your budget. Or a good old piece of paper and pencil will work just fine, too!

Jon and I started budgeting when we were first married. My parents had a great system, so Jon (my groom with a Finance major!) asked them to train him on how to set it up and maintain it. Fourteen years later, we still the same system. Although, it has endured many an overhaul as our expenses and incomes have changed over the years. We took a lot of heat from friends when we were in our twenties and would talk about our budget.

Many people feel too confined by a budget and they want freedom to do whatever they want with their money. What our friends didn’t realize was by having a budget we actually gained a lot more freedom and control of our money and, ultimately, our lives.

The very first step in establishing your budget is to track ALL your expenses and income for at least a month. According Jon, who now teaches budget planning to engaged couples, three months is a more accurate picture of your expenses.

Begin with at least a month to get you started. Tracking the expenses is sometimes a hard thing…it’s like confessing your sins.

 Erin's husband, Jon, works with their household budget book.

Erin's husband, Jon, works with their household budget book.

But the important thing is to be honest about everything. When we were first married, I really didn’t want to ‘fess up to the fact that I bought a new pair of shoes every month (okay, well, maybe it was two pairs!), but it had to be documented! Once all those items are included into your expenses, then you know how you are spending your money and can prioritize your expenses.

Once we had a list of our expenses, then we developed various categories for each of the expenses. Using a three-ring binder, we had a divider page for each category. Jon included a financial journal page in each category to keep track of what was spent in that area each month. This may seem like an unnecessary task, but it helped us know if we needed to readjust that particular part of the budget. If every month one of the categories was being depleted or overspent, then we needed to look at things and make changes.

One of the categories we included was “Personal Allowance”. This is where we were able to reach a lot of freedom quickly. Each month, both of us takes a small amount of money from the budget and we can spend it however we’d like. Yup, you guessed it… I used it to buy new shoes!

Nowadays, I use it mostly for home décor items and other household items. (My love affair with shoes has sizzled slightly since kids came around.) Jon mostly uses his allowance for lunches and hunting supplies. Having a personal allowance gives us the freedom to buy what we individually think is important. This way we never feel bad about our purchases or frustrated at each other for the other’s purchase.

Once you have your categories established, determine what amounts need to be dedicated to each category. This is where you need to look at the monthly statements of all your bills and fill in the amount you will need. Our category for savings changes every now and then, based on the expenses going out and any income coming in. But we ALWAYS make sure we are adding to the savings account, whether it is a small amount or a bigger amount.

Regardless of what expenses you may have or how much you can put into savings, having a category where you save each month is a positive step in a successful budget. It gives you hope and thus gives you freedom.

The final key to our successful household budget is operating primarily on a cash budget. We do have credit cards for certain purchases, but only charge what we can afford to pay off immediately. We only use checks to pay household and utility bills. So the rest of our budget is placed into envelopes and we operate from those. When they are empty, they are empty until next month.

This has forced us to be much more conscious of our spending. At first it was frightening, because I initially felt trapped by the amount of cash (or lack thereof) I had with me. But once I realized the power I had by using cash and increasing our financial freedom, the more I bought into it and began to like the concept.

To help you get started I’ll share with you a list of possible categories:

  • Mortgage/Rent
  • Utilities (water, gas, electric, garbage, cable, phone, etc.)
  • Grocery
  • Car (gasoline, payments, insurance, maintenance)
  • Health/Medical (premiums, co-pays, prescriptions, etc.)
  • Animals (vet bills, food, leashes, etc.)
  • Holidays (start saving in January for the following Christmas)
  • Vacations (this includes long vacations and short weekend getaways)
  • Savings (always add something to this each month)
  • House repairs (appliance repairs, roof repairs, etc.)
  • Clothing

Each household budget will look and operate differently. Designing it to be easy, efficient, and useful is critical for success. Add or change your categories depending on your needs and lifestyle. Jon also mentioned each household can be as specific about the categories as they’d like. Maybe you’d prefer a category for gasoline only, rather than lumping it into the car category. Whatever helps you manage things best is what works!

But most importantly, be honest about what you do spend. If you’re not, a budget won’t work and you’ll continue bad spending habits.

A budget is necessary for a frugally healthy life. It should serve as your roadmap to financial freedom and security. As with any new routine, you need to give it time and patience.

Soon, you will grow to love your budget and depend on it for accomplishing your New Year’s resolution to save, manage, and prosper!


Erin’s got tons of tips for saving money, couponing, and sticking to a budget in her previous posts: In 2012, I Resolve to Be FrugalLearn How to Save with a Couponing Class, and Teaching Money to Kids and Teens. Be sure to check out the Missoula Save it Club.

   Visit the Coupon Queen’s “Save It” archive.


Erin Eisenman-Turner is proud to be a native Missoulian. Along with her husband and three sons, they raise chickens, pigs, rabbits, and vegetables at Turner Family Farms in the Orchard Homes area. When the farm chores are done, the coupons clipped, and the blog written, you can find Erin exploring Montana, collecting antiques, and trying to maintain a well-run, happy, and organized home for her family.