How to Create a Realistic Family Budget

Mar 18, 2022

Here’s how I created a realistic budget for my family of three for 2022.

So, what’s the damage? 😳

As a family of two that became three halfway through the year, our grand total spent in 2021 was $63,405. This breaks down to $5,284 per month.

Here’s how I use our actual spending to create a realistic family budget.

Who are you people?

We live in Pennsylvania in a relatively small three bedroom house that we purchased and renovated in 2018-2019. 

For all of 2021, my husband and I worked from home. Even though our daughter arrived in June, we paid little in childcare expenses throughout the year since we were able to enjoy parental leave. 

We have no student loans or credit card debt and own our primary residence outright. We do, however, have a mortgage on an investment property located next door to us that we purchased in 2021. (The down payment for this is not included in our expenses. I’d consider that an investment.) I also own a Honda CR-V that’s financed. 

Category 2021 Annual Spend Per Month
Liability Pay Down $ 7,317 $ 610
Groceries $ 6,723 $ 560
Retail (Inc. HD & Lowes) $ 5,100 $ 425
Gas/Elec/Water $ 4,778 $ 398
Healthcare $ 4,312 $ 359
Business Expense $ 3,801 $ 317
ATM $ 3,730 $ 311
Pets $ 3,005 $ 250
Dining Out $ 2,942 $ 245
Insurance $ 2,833 $ 236
Cell Phones $ 2,490 $ 208
Childcare $ 2,326 $ 194
Vehicle Services $ 2,278 $ 190
Venmo $ 1,739 $ 145
Gifts $ 1,683 $ 140
Electronics $ 1,629 $ 136
Transportation-Fuel $ 1,199 $ 100
Amazon $ 1,173 $ 98
Streaming + Subscriptions $ 1,111 $ 93
Hotels $ 638 $ 53
Clothing $ 434 $ 36
Services $ 393 $ 33
Madi Hair 💇‍♀️ $ 364 $ 30
Baby $ 270 $ 22
Alcohol $ 247 $ 21
Sodastream $ 242 $ 20
Education + Books $ 219 $ 18
Parking $ 115 $ 10
Recreation $ 101 $ 8
Postage $ 80 $ 7
Second Hand Stores $ 77 $ 6
Interest Charge $ 29 $ 2
Printing $ 29 $ 2

Truthfully, I’m not much of a budgeter.

I’ve never been inclined to focus on the saving or budgeting side of the household cash flow equation. My husband and I are moderately high earners and have always lived somewhat frugally. Since our cashflow was fine and we were able to routinely invest our surplus, I’ve never been forced to dig too deeply into the fine details. Plus, I’m not going to beat myself up for spending $30 per month on my beloved Sodastream refills instead of $20. 

My blind eye into monthly spending is a real financial weakness for our family, though. In the future, it’s something I’ll track more closely through automation. Having a tighter handle on what our true survival expenses are versus discretionary spending is critical if push came to shove. Further, we’re currently working on truly combining finances, which will make my budgeting efforts much less painful. 

Related: Download My Free Budget Template

How do you use this to create your realistic family budget? 

Reviewing past spending is the first step to create a realistic family budget, especially if this is your first rodeo. There are a lot of ways to go about creating one, but no matter which method you pick, it’s tough to build a budget you’ll stick to if you have no freaking clue what you’re spending today. 🤠

I had access to data for the full prior year, but a shorter period of time would work, too. As long as you feel that the time period you’re using is a fair representation of what you’re spending, use it.

There are two areas of our spending that I anticipate will be much higher in 2022: childcare and parking. (Party!) I’ve returned to my office at work, and my daughter goes to daycare four days a week. For parking, I’m budgeting $3,600 for the year. And for childcare, I’m expecting (literally pains me to even type this) $21,000. My daughter’s daycare is about $1,750 per month. 

All in, we’re expecting to spend about $85,000 in 2022. 

Personal finance is behavioral finance; know thyself.

Wondering why I put all this effort into quantifying our spending only to gross it up by $20,000? I think my husband is, too.

Creating a budget has the connotation of hunkering down and cutting spending, but that isn’t always the case. My husband and I are both working full time jobs while raising an infant, so we’re giving ourselves some grace. This is something I know we need.

To us, this means ordering takeout probably just as much as we did in 2021. In other words, my assumption is that our spending at the category level will remain steady.

And sure, certain categories had “non-recurring expenses” last year that are probably overestimates for 2022. (Like that one time I delivered a baby.) But my philosophy here is that the categories may change, but surprises are constant. Just because we have a plan doesn’t mean we control the future.

Related Post: Downsizing a Budget to Transition to a Single-Income Family

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments may be appropriate for you, consult with your financial advisor.


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