Two levels of household budget

The higher level and the lower one with more details.

One key objective of household budget is to estimate whether we will have savings or deficits before the next paycheque comes in.  This way, we can plan.  If we have extra money left, we can save for emergency fund, pay down debt, contribute to retirement savings, etc. If we foresee a deficit, we have to find ways to cut cost somewhere to avoid it. If we really can’t avoid it, we have to dip into the emergency fund to cover it. If we don’t have an emergency fund, we will have to find ways to borrow it from somewhere. At least this gives us time.

We can forecast the income and spending for the next 3 months. For this exercise, it is easier to use higher level budget. No need to breakdown the details of the credit card payment. Usually each of our credit card monthly payment amount is similar.  Of course, we want to be as accurate as possible. We can adjust it if we know what extra spending we might have when we try to forecast.  When the credit card bill come in, we can update the budget with the actual amount.  This allows us to be well-prepared to avoid any surprise.

The lower-level budget got more details. The purpose is to deep dive to see whether we overspent and for what.  We only need to do it when we need to cut cost rather than for every month like the high level one mentioned above.

Hope this explanation helps to make budgeting easier for you.

I understand spreadsheet is not for everyone. If you have to use certain budgeting app, go for it. Just be very careful of your privacy. The free budgeting app might share your data with third parties.