How to make a household budget

* Transcript created by AI – may contain errors or omissions from original podcast audio

If money feels tight, but you can’t explain where exactly it’s going, this is your wake up call. Most people never learn how to manage household money properly, and then wonder why it feels so hard. Because here’s the thing, you are not bad with money. It’s just that no one has ever taught you how to create a household budget without feeling overwhelmed and restricted.

So today I’m showing you exactly how to build a budget for your household that actually works for you. Alright, let’s dive in.

 DISCLAIMER: Just a quick note before we dive in. Everything I share on this podcast is general in nature and does not take your personal circumstances into account. I’m not a licensed financial advisor, and nothing you hear on this podcast should be taken as personalized, financial, business, taxation or investment advice.

Before you make any financial decisions, please seek guidance from your accountant or a qualified licensed financial advisor who understands your specific situation.

 Let’s start by talking about why you actually do need a household budget.

A study by Money Magazine in 2018 said that 86% of Australians don’t know their exact monthly spending and that 59% of Australians admit that their current financial situation causes them stress. So what’s the benefits of having a budget? Your budget is basically your plan. It’s, here’s what I’m gonna spend, here’s how much I’m gonna earn, and giving you clarity around your financial position.

And what that does is it stops you from guessing where your money goes. It helps you to get ahead financially, and your budget actually gives you freedom rather than shame around spending. For example, I have an allocation of money for clothes in my budget. So I don’t feel bad when I do spend in line with the plan.

So before we go into actually building your budget, we need to address the mindset side of it first. Because deep down you know that budgets matter and there’s a reason why you’ve been avoiding creating one, even though you are smart and capable. So the first reason that you might be avoiding it is because you think, if I look, I’ll feel bad.

In some ways you think, do you know what if I just don’t think about it? Avoiding it feels safer than actually seeing the truth of what’s going on when it comes to my finances. Or maybe the concept of creating a budget feels like punishment. Like you think, oh gosh, I’m gonna be really restricted. I don’t wanna feel broke, and so you just think, I’m just not gonna do it.

Or maybe you’ve got shame because you’ve tried to build a budget before and you failed. Maybe you built your budget and then you couldn’t stick to it, and so you’ve got a this. Story, this shame around it, or maybe there’s some sort of identity story going on. Maybe you’ve told yourself, I’m just not good with money, or I’m no good with spreadsheets.

Or perhaps you just feel overwhelmed. You’re like, oh my gosh, I don’t even know where to get started. I had spreadsheets. There’s too many rules. Oh, it’s all too overwhelming. Oh, another reason might be that you are a perfectionist. I’ve seen this a lot as someone who’s helped a lot of people build budgets, and you get so overwhelmed wanting it to be absolutely perfect, and you think if I can’t do it properly, I just won’t do it at all.

But look, here’s how I want you to reframe this. Your budget is just information. This is not judgment it’s just being realistic. Having a look at, okay, what’s coming in? How much am I spending? What is my game plan here? And you can’t fail at building a budget, particularly the first draft. It’s just data.

And what happens when you build your budget is that over time you’re using that data and saying, okay, what worked, what didn’t work? What do I need to tweak? A budget, a good budget shouldn’t restrict your lifestyle. It should support the one that you want and your confidence with money will come after you really know what you’re looking at, because avoiding your money is the most expensive financial habit that you can have.

So with that in mind, hopefully that’s helped you to reframe how you actually think about the concept of having a budget. But where do you actually get started? So I know that there’s lots of really cool budgeting tools these days, and I’m sure in future episodes I will talk about some of those. But at the moment, I’m personally a bit old school, so I create my own budget in Excel.

Now, depending on the nature of your household, you might want to run your create your budget month by month, and this is particularly important if you have income or expenses that are particularly fluctuating. So for example, if you are someone who makes a third of your annual income in one month, you probably need to break down a month by month budget or if you’ve got really choppy spending.

But for simplicity, like for myself, I just do a generic one and I know that there are some things like travel that will, be sitting primarily in a month or two rather than split evenly across the year. So what I mean is that when you are having a look at your actual spend, you know there might be a month where a lot of the travel spend is, but I’ve just split the travel budget evenly across all the months because I didn’t wanna have to build a month by one, month one.

But you’ve gotta work out what’s best for your household. The first place to start is by mapping out your major expenses. So even if this is the only part that you get done, you’ve still made a good dent in it of, and of course, your income, which we’ll talk about later, but start with the big ones.

So this will be different for everyone, but for my particular household, this is what our big five expenses look like. Our biggest is the mortgage, next is groceries. Then we have general retail, which includes things like bunnings, buying Manchester, things like that. Then we have healthcare.

So for our household, those five categories actually make up about 70% of our overall monthly spending. Then we have our other essential things like occurs, rates, et cetera, et cetera. Then we have our discretionary spend, which includes holidays. We’ve got a cleaner sports expenses, hair and beauty takeaway, and eating out clothes, et cetera.

So that’s the priority that I would go through. First of all, your big ones, then your essentials, and then have your discretionary spend at the bottom. I like to put them in that order because when you are having a look, it can help to have them group together like that. So if you’re thinking elephant in the room, you’re thinking

I don’t even know how much some of this spending in these categories is the best thing to do. The place to start is to look at how you currently actually spend. So go and have a look at your current expenses over a period of time. I think you wanna have it for a minimum of three months, so be looking at a quarter to see what your current spend is.

Now, if you are new to getting started on managing your money, this might be a bit of a mission, but you have to start somewhere. So start with a big five is a great starting point. I’ve helped hundreds of people with their budgets over the years, and something that I will tell you that I’ve noticed is that people always forget things and they also underestimate their spending.

I know even when I build my budget, I feel like I do that. I feel like we don’t eat out a lot as a family because my husband’s a great cook and we mostly eat at home. But when I look back and see how much we actually spend, we might grab a cross on out for the kids here, or at the last minute we might be out with some friends and they say, Hey, let’s grab dinner.

And a meal for the four of us at the end of the month. I am always surprised at how much it adds up. And this is why when you’re building your money plan, I really do want you to go and check in on your actual spend so that you have clarity around what that really looks like. Now, this is not to say that you build your budget or that you need to continue to spend that way, but I just do want you to be realistic when you’re setting it up because something I’ve learned is that setting unrealistic expectations sets you up to fail.

For example, if I set my monthly eating out plan to zero, it’s not going to be realistic. As with our current lifestyle and the social circles that we’re in, it’s extremely unlikely that we will never, ever eat out. Now before I go onto the next section, I just want to take a moment here, because if you’re listening to this and perhaps already feeling a little bit overwhelmed and you’re thinking, oh my gosh, I’m struggling with how to do this, or with your money in general, I just wanna let you know about the Intentional Money membership that I’m launching very soon.

Inside the membership, I’ll be sharing templates and actually taking you through how to go and build your budget, how to track your money. There’ll be accountability opportunity to ask questions to help keep you on track with your money in 2026. So if you wanna come and join the membership, or at least find out more about it, click on the link in the show notes for today’s episode and you can come join the waitlist.

So you’ll be first to hear about it when it does launch. Okay, so in the section before we spoke about your expenses and capturing all of your expenses. Next what we wanna do is to add your income and other income streams. So you might have a 9-5 job. You might have shift work, part-time work, casual work, whatever it looks like.

You might run a business. Put all of that in as an income loan. Then I want you to add in any other income streams that you might have. So for example, you might have an investment property, you might have a side hustle, you might do dog walking, or have income from shares. You might do trading, buy and sell old cars, or you might have a podcast or some other creative stream. Capture all of those sources of income, and we wanna pop those all in there.

 Now, bear in mind with your income, this needs to be your post tax income. People often forget you might be on $80,000 a year, so you pop that in 80 divided by 12. Of course, you pop that in and you forget that, oh my gosh, I’ve actually gotta pay tax on that. So I want your income to be your post-tax income with your expenses. They come out after tax. You don’t need to touch those, but with your income, you want it to be post-tax income.

 Next, what you’re going to do is you are going to subtract your expenses from that income to give you your budget surplus, deficit or break even. So let me just quickly explain what each of those concepts means. A surplus means that there is money left over, which if that’s what you’ve got, fantastic. What that means is that you are spending less than what you are. Earning a deficit means that there is more going out in the plan than actually coming in.

And that means that you would essentially be going backwards every month or break even, means that you are basically spending all of your post tax income in your plan. And that’s really not a great place to be either, because it also means you are just getting by each month and you wanna be really getting ahead when it comes to financial aid.

So once you’ve got that surplus, deficit or break even, I want you to look at it objectively. And see if that aligns with what you wanna be creating, where you wanna be. I also want you to actually have a look at the breakdown of how you are spending your money and see if it aligns with your values. Now, when you listen to future episodes of this podcast, I’m gonna be talking more about your money values, but at a top line level, just have a think about what’s important to you and then whether your budget aligns. So let me share an example of what I mean. A friend of mine, she pays a lot of money in rent, but she’s single and works at home, and so she wants to be living in a beautiful high vibe space.

And I was exactly the same when I was single. Now that I’m married and have children, I wanna have space and a yard. And for us as a family, we really wanted to own a property. I know that’s not right for everyone, but it’s right for us. Maybe when you have a look at your budget, your plan, you might think, oh gosh I spend a lot on takeaway.

But maybe if you’re like, I love eating out. I really value convenience. I’m a terrible cook, and so I’m happy to spend less in other areas because that is something that feels really good to me and I don’t wanna cut that back. So have a look. Reflect on your spending, and also really be having a look at the surplus deficit. You might wanna be playing around a bit when you have a look at it through the lens of your money values, but then have a look at the end position and say, okay, do I actually have, if I can stick to this plan, do I have a monthly surplus? Do I have extra money that I can be putting aside for savings and investing?

And am I happy with the amount or do I wanna make it a bit more? I also want you to think, do you have enough fat in your budget if things go over, if an emergency happens, or unexpected bills pop up. I remember many years ago, a family member of mine had such a tight budget that when an unexpected bill of $200 popped up, she was completely panicked, not knowing how she’d ever pay it off.

So you wanna make sure that you’ve got room in your plan, because let’s be honest, life always doesn’t go to plan. There’s so much more we can talk about when it comes to budgeting, including making sure that you do have a buffer for emergencies and what to actually do with this budget once you’ve created it.

How to review your actual spend against this budget when you need to adjust it. But this is gonna be so much bigger than just a single podcast episode, if you do want a bit more support with this, if you actually want my budgeting template and more support with this process, come and join the wait list for the Intentional Money membership it’s launching in February.

And inside you’ll be supported with exactly how to get your financial situation under control and thriving. So I wanna close with some final thoughts about your household budget. Your first budget will probably be wrong. Don’t stress. The more that you do this, the more regularly that you get familiar with your money, it will get better over time.

I really, the, I hope this episode just inspires you to take that first step, even if all you do is put your income and your top expenses in, at least you’re a step ahead of where you were before. And then once you’ve got your budget. What you wanna be doing is actually tracking your spend each month to see am I actually earning and spending in line with what my budget is telling me?

Now in next podcast episode, I’m gonna be talking to you about some tips to actually be able to save. So make sure you tune in for next week’s episode as well, because I’ll be going a lot deeper into how you can actually make sure that you are getting ahead when it comes to your money. You don’t need to have it all figured out.

You just need to decide to start. I want you to feel like money is doable and way less scary than you’ve been telling yourself. So I’m really delighted that you’re here, that you’re investing the time and energy into learning how to change your money situation. Thank you so much for listening to The Intentional Money Show with Clare Wood.

And if you loved this episode, please share it with your mom, your partner, or a mate. I really appreciate you. Alright, have a fabulous week. Drop me a DM on Instagram @clare_wood_coach let me know how you got on with your budget. I can’t wait to hear, and I look forward to chatting to you again next week.

* Transcript created by AI – may contain errors or omissions from original podcast