The Ultimate Household Budgeting Guide for 2023

create your household budget

It’s time, now more than ever, to create a household budget. One in four Australians are struggling to make ends meet on their current income, says an Australian National University report. With the continuous rise in the cost of living, things can only get worse.

Living paycheck to paycheck, not being able to afford the essentials, and constantly worrying about money can seriously impact your well-being. Financial stress can cause anxiety, depression and strain on relationships with loved ones.

A budget can help you manage your money, track your expenses and save for the things that matter to you.

This will provide you with the ultimate household budgeting guide for 2023, which will equip you with the tools and knowledge to create and maintain a budget that works for you.

Understand Your Financial Situation

Before creating a household budget, it’s important to understand your current financial situation. This involves three key steps: determining your income, evaluating your expenses, and calculating your net worth.

Firstly, determine your income by identifying all sources of money that come into your household. This may include your salary, rental income, dividends, and other sources of income. Once you clearly understand your income, you can move on to evaluating your expenses.

Evaluating your expenses involves identifying them and categorising them into essential and non-essential. Essential expenses are those that are necessary for your basic needs, such as housing, food, and transportation. Non-essential expenses are those that are not necessary for your basic needs, such as entertainment and eating out.

Finally, calculate your net worth by subtracting your total liabilities from your total assets. Your assets may include your home, car, savings, investments, and other valuable items. Your liabilities may include your mortgage, car loan, credit card debt, and any other debts you may have.

By understanding your financial situation, you can identify areas where you can cut costs and increase savings. This will help you create a realistic and practical budget that works for you.

How to create a household budget that works for you

Now that you have a clear understanding of your financial situation, it’s time to create a budget that best suits your needs. A budget is a plan for how you will spend your money, and it’s important to ensure it aligns with your financial goals.

Set budgeting goals

This involves identifying what you want to achieve with your budget, both in the short and long term.

Short-term goals include paying off a credit card or saving for a vacation, while long-term goals may include saving for a down payment on a home or investing for retirement.

When setting budgeting goals, it’s important to prioritise them. Focus on your most important goals first, and then work on the less important ones. This will help you stay on track and achieve your objectives in a timely manner.

Consider the following questions:

  • Which goals are the most important to me?
  • Which goals have a deadline or are time-sensitive?
  • Which goals will have the most significant impact on my financial situation? (Hint: interest rates)
  • Which goals are achievable given my current income and expenses?

In the next section, we will discuss how to create a household budget based on your goals and financial situation.

Create a budget

Now that your goals are listed, it’s time to create a budget that fits your lifestyle and financial situation.

What is a reasonable household budget?

By and large, a reasonable budget is one that reflects your current financial situation and goals. A realistic, achievable, and flexible budget is crucial to your financial success.

A comprehensive family budget should include the following ten components:

  • income
  • housing
  • utilities
  • transportation
  • food
  • clothing and personal care
  • healthcare
  • entertainment
  • debt repayment
  • savings

By including all of these components in your budget, you can get a clear picture of your expenses and identify areas where you can cut costs and increase savings.

Budgeting rules

To help you prioritise your spending, consider using budgeting rules like the 70% rule or 50/30/20 rule.

The 70% rule suggests that 70% of your income should be allocated to essential expenses such as housing, utilities, transportation, and food, while the remaining 30% should be given to non-essential expenses like entertainment and personal care.

The 50/30/20 rule suggests that you allocate 50% of your income to essential expenses, 30% to discretionary spending, and 20% to savings and debt repayment.

Deciding whether to use the 70/30 rule or the 50/30/20 rule depends on your unique financial situation and goals.

The 70/30 rule is a good option if you’re struggling to make ends meet, have a low income, or have significant debt. By allocating 70% of your income to essential expenses, you can prioritise your needs and ensure that your basic bills are covered first.

On the other hand, the 50/30/20 rule is a good option if you have a stable income, have minimal debt, and are looking to save for long-term financial goals. By allocating 50% of your income to essential expenses, 30% to discretionary spending, and 20% to savings and debt repayment, you can balance between meeting your immediate needs, enjoying some of life’s luxuries, and building a financial cushion for the future.

What if budgeting rules don’t work for me?

If neither the 70/30 rule nor the 50/30/20 rule is applicable, consider creating a custom budget. Budgeting is a personal process, and there is no one-size-fits-all approach to making it.

Start by identifying your essential expenses, such as housing, utilities, transportation and food. Then, add your discretionary expenses, including entertainment, personal care and non-essential items. Finally, determine how much you want to save or allocate to monthly debt repayment.

Track your spending

The next step is to look for areas where you can reduce your spending, such as eating out less, cutting back on subscriptions or memberships, or finding ways to lower your utility bills. To identify these areas, you can use a variety of tools and techniques, including:

  • Budgeting apps and software. Budgeting apps can make it easier to identify areas where you can cut back and help you stay on track with your budget. Its main advantages are accessibility, convenience and automation. These tools can also provide detailed reports and analysis of your spending, making it easier to make informed decisions about your spending and prioritise your financial goals.
  • Spending journal. Did you know? Research has shown that writing things down by hand can help improve memory and retention. When you write something down, you engage different parts of your brain than when you type or use digital tools, which can help you process and remember information more effectively. So writing down everything you spend money on–including small purchases like coffee or snacks–will help you remember where your money is going and make better decisions about your spending in the future.
  • Credit card and bank statements review. Monitoring your credit card and bank statements regularly can help you identify areas where you may be overspending. Look for recurring charges, unnecessary fees, or purchases that don’t align with your goals or values.

Stay on track

Once you’ve created a budget, the next challenge is staying on track and making sure you’re sticking to your financial goals. Here are some tips:

Review your budget regularly

This helps you stay aware of any changes in your income or expenses, which can impact your ability to achieve your financial goals. For example, if you’re spending more on groceries than anticipated, you can adjust your budget to accommodate this expense. Alternatively, if you’re spending less on entertainment than expected, you can adjust your budget to allocate these funds elsewhere, such as towards paying off debt or increasing your savings.

Stay motivated and accountable

When you stay motivated, you are more likely to maintain the habits and behaviours necessary to achieve your goals. Likewise, when you hold yourself accountable, you are more likely to take responsibility for your financial decisions and maintain your commitment to your budget.

One way to stay motivated is to keep your financial goals in mind and remind yourself why you’re working to achieve them. For example, if you’re saving for a down payment on a house, remind yourself of the benefits of homeownership and the sense of pride and accomplishment you’ll feel when you achieve this goal.

If you’re having trouble sticking to your goals, there might be a deeper reason for it. Some say unresolved issues make us prefer immediate gratification to accomplishment. You may need to seek professional help.

Do it one step at a time

By breaking down your goals into smaller, more manageable tasks, you can avoid feeling overwhelmed and be more likely to make progress.

A popular concept from the book Atomic Habits emphasises the importance of small, consistent improvements over time. According to this concept, if you can improve your financial habits by just 1% each day, you can make significant progress by the end of the year.

For example, if you’re trying to save more each month, you might start by cutting back on a tiny expense, such as buying coffee at a cafe and redirecting that money towards your savings. By making this small change, you can build momentum and confidence and be more likely to continue making small, incremental changes over time.

Doing this can also help you create new habits that become part of your routine and are easier to maintain in the long run.

Dealing with unexpected expenses

Unexpected expenses are an essential part of household budgeting. If you’re unprepared, they can derail your financial plans. Here are some tips for dealing with them:

  • Build an emergency fund. An emergency fund is a dedicated savings account that you can use to cover unexpected expenses such as medical bills, car repairs, or home repairs. Experts recommend saving three to six months’ worth of living expenses in your emergency fund.
  • Deal with any existing debt. High-interest debt can be a major financial burden, making it challenging to stay on track with your budget. If you have debt, consider developing a debt repayment plan that prioritises paying off high-interest debt first. This can help you save money on interest charges and quickly reduce your debt.
  • Avoid financial traps. High-interest payday loans, rent-to-own schemes or other forms of high-cost borrowing are just some of the financial products that can be very expensive and trap you in a cycle of debt. Instead, consider alternative options for borrowing, such as low-interest personal loans or credit cards with low-interest rates.

Will household budgeting always work?

While household budgeting can be an effective way to manage your finances, it’s important to recognise that it’s not a foolproof solution. Unexpected expenses, changes in income or other financial challenges can affect your ability to stick to your budget.

It’s also worth noting that budgeting is not a one-time process. It requires ongoing effort and attention to ensure that it remains effective. This means regularly reviewing and adjusting your budget to reflect changes in your financial situation and priorities.

That being said, budgeting can be a valuable tool for improving your financial health and achieving your financial goals. By understanding your financial situation, setting realistic goals, creating a budget that works for you, and staying on track, you can take control of your finances and work towards a more secure financial future.

However, it’s important to remember that budgeting is just one part of an overall financial strategy. To achieve financial success, consider other factors, such as retirement savings, investing, or paying off debt.

Ultimately, the effectiveness of household budgeting will depend on your individual circumstances and the effort you put into it. But with the right approach and a commitment to your financial goals, budgeting can be a powerful tool for improving your financial health and achieving your dreams.


This guide has covered the key steps to creating an effective household budget, including understanding your financial situation, setting goals, creating a budget, staying on track, and dealing with unexpected expenses. We have also highlighted the benefits of keeping a spending journal, using budgeting apps and software and staying motivated and accountable.

While adopting a budget-conscious lifestyle may require some initial effort, the long-term benefits are well worth it. Taking control of your finances and working towards your goals can reduce financial stress, build wealth, and achieve financial freedom.

If debt hinders your financial goals, please feel free to reach out to us. Our team is here to help you navigate the complexities of debt relief and find a solution that works for your unique situation. Together, we can work towards a brighter financial future.


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