What Is a Home Budget?

A home budget is a comprehensive budget that details all the financial aspects of a particular household. A home budget typically includes the basics such as a breakdown of both income and expenses.

According to an online article published by Bankrate, the average American household earns close to $85,000 annually and spends an estimated $70,258 a year. Based on statistics, around $5,854 was spent on bills and other expenses. The largest expenses were housing and transportation. 

Components of a Home Budget

One’s home budget would greatly depend on each individual’s household needs and circumstances. But there are a number of essential or general items that comprise a typical home budget. The following examples enumerate and describe some of these essential components of a basic home budget.   

Rent. One of the most common and universal items found in any home budget is rent. For many people, monthly rent is an essential bill along with electricity, water, etc. Like food, shelter is a basic need and right. Most people either purchase a home or rent. If it is the former, there can also be various means to pay for or buy a home. For a vast majority, buying a house outright is expensive so they typically take out a loan in order to purchase it. For others, renting a house or apartment is more practical or economical. But just like rent, buyers still need to pay a mortgage if a loan was taken out. It can take several months to a few years to be able to pay back the loan, depending on the agreement terms of the lender and home buyer. Thus, rent or mortgage should be categorized as essential in one’s household budget. Grocery. Another essential entry in a home budget is groceries. Every household needs supplies in order to meet daily needs. Groceries including food and non-food items alike should be properly budgeted in a home budget. A typical household would need to do a grocery run every week, two weeks, or even once a month, depending on the needs of the family. In order to stick to your budget, it is helpful to list down everything you need prior to grocery shopping. Keeping a grocery list could help you avoid any unnecessary purchases or impulse buys. Obviously, the more people there are living in the household, the more supplies you would need. So it is of utmost importance to know how to budget your grocery expenses to make sure you are not spending money beyond your means. Utilities. Along with rent and food, all households also need to pay for basic utilities. Every household needs to pay for these monthly bills in order to continue using utilities such as water, power, and internet connection. Whether you live in a house, apartment or condominium, you are subject to these payments. Water and electricity are basic necessities for any home to operate or function. If you are unable to budget properly and responsibly, you could lag behind your monthly dues or worse, fail to pay at all. So as much as possible, ensure that you stay on top of these payments because your comfort and survival pretty much depend on it. Since these are essential expenses, payment of these utilities must therefore be at the top of your list. Failure to prioritize the payment of these basic utilities could result in a lot of inconvenience and problems for your household.Credit Card and Loans. Most American households have at least one credit card holder living in the home. Or if no one owns a credit card, another possibility is at least one member of the household has taken out a loan or owes some form of debt. Whatever the case or individual circumstance, a credit card is just another form of debt. When you take out a loan to purchase a house or to buy a car, you need to pay for it one way or another. It could be through installment, depending on the payment structure or scheme that was agreed upon by both the buyer and lender. Individuals pay for all kinds of things using their credit cards too. From mobile phone bills to appliances to groceries to retail shopping, credit cards are designed for convenience but need to be used responsibly. When creating your home budget, it is crucial to pay for your credit card bills as soon as they arrive. The last thing you want is for your debt to pile up, thereby acquiring or generating high interest rates in the process.

Tips for Creating a Home Budget

There are many different ways to craft a sound home budget. Of course, you need to establish a budget that works for you. In this case, one size may not fit all. There are, however, some universal and practical tips that you can keep in mind the next time you need to create a household budget.  

Take advantage of templates. If you want to save time and effort, consider taking advantage of the hundreds of home budget templates available online. You do not even need to look far. Microsoft Excel or even Microsoft Word carry dozens of budget templates that you can easily download and customize. Not only are you not starting from scratch, there are curated budget templates that can suit even the most specific of needs. These sample templates are designed to help you create a household budget more quickly yet accurately. But due to the many options available, the challenge may be finding one that meets your needs and preferences. You just need to select one that works for you. Hold consultation meetings. Since it is a household or home budget, then it obviously involves the entire household. Unless of course you live on your own, it is important to consider the needs or input of those you live under the same roof with. Whether you live with family members, friends or acquaintances, it might be difficult to come up with a realistic and feasible budget without consulting everyone in the household. It is not just for the sake of practicality that you sit down and meet with members of your household to discuss the budget, but it is also practicing courtesy and consideration for everyone. The more responsibility and transparency is evident in the handling of the home budget, the more beneficial it is for all household members. Monitoring is key. Another useful tip to keep in mind is regular monitoring of the budget. The work does not end once you finish creating your budget. For most households, regular budgeting requires monthly, bi-weekly, weekly or even daily monitoring. Learning how to properly budget is a process and not an overnight task. Income and expenses change over time and therefore, need to be modified once in a while. So it is vital to make the necessary adjustments and changes to your household budget whenever the need arises. Regular tracking or monitoring of your expenses can also help you better understand your household’s spending patterns and habits. With a clearer picture of your household expenses, it may even aid in better financial decision-making.

How to Create a Home Budget

To create a sustainable home budget, you need to have a good grasp or understanding of your finances. And if it’s ease and convenience you are looking for, try using a sample template. The selection of sample home budgets above can help you get the work done faster! Simply choose one that matches your needs and follow the basic steps below.  

Step 1: Objective 

The first step is setting a financial objective. Similar to student budgets or personal budgets, a home budget is largely subjective. In order to have a more realistic and sustainable household budget, you need to set a clear goal or objective. Whether it is to save enough money for your children’s education or to grow your emergency fund, having an objective in mind can keep things in perspective. It can also help you refocus your commitment in case you exceed your budget. It can be quite challenging to stick to a budget; but if you know the purpose behind what you’re doing, it can help you stay focused and committed. 

Step 2: Format

The next step is deciding on a format. There are many ways to present a budget. All you need is a format that works for you. It is important to find one that you are comfortable with and one that suits your immediate needs. If you are having trouble looking for a format, there are dozens of sample home budgets above that you can easily select and download. If you are looking to make a basic home budget, a simple table or chart should do. Using an Excel spreadsheet is one popular option too. The key is looking for a budget format that works for you.      

Step 3: Income and Expenses

Once you have established a clear format and your home budget objective, you can proceed to the finer details of your budget. This section should be dedicated to the breakdown of both your household income and individual expenses. In order to know what kind of budget you should be following, you must have a firm grasp of how much incoming and outgoing money you have. These two factors are key when creating a budget. For instance, if your expenses exceed your income, then you know that you should make the necessary changes and adjustments to your spending habits.     

Step 4: Categorization 

Once you have identified all your household expenses, make sure to classify each one. There are different ways to categorize your expenses. The most common one is by assigning each item as either essential or non-essential. Examples of essential household expenses include rent, mortgage, utilities, tuition and food. Non-essentials might be items spent on entertainment or recreation. It is important to know which items to prioritize so you can better manage your finances and avoid spending unnecessarily or irresponsibly. 


What is the 50 20 30 budget rule?

The 50/30/20 rule is basically splitting your income into three main categories. The rule is 50% of your income should go towards needs or essentials such as rent, gas, etc. Whereas, 30% of it can be allocated towards your wants, including personal shopping. Lastly, 20% of your monthly income should be allocated to your savings or used to repay any debt.

What is a good home budget?

A good home budget is realistic, fair and sustainable. The budget shouldn’t promote an excessive lifestyle or living beyond one’s means. It should also see to it that expenses do not exceed one’s income.

What are the types of home budgets?

According to YourArticleLibrary, there are three types of family budgets. These are deficit budget, surplus budget, and balanced budget.

Ideally, a good home budget should be balanced and able to accommodate the needs of all household members. Are you ready to get your finances in order? Browse the wide selection of sample templates above to get started on your own household budget now!