How to budget for a family of 5, paycheck by paycheck

Five people spend money every day. Your income shows up every week or two. That gap is why a monthly family budget keeps falling apart around the 20th.

A family of 5 budget works better when you plan each paycheck on its own. You decide what that one check has to cover before the next one lands, and you stop guessing from the bank balance. If you've never set a budget up this way, start with how to budget by paycheck. This post applies it to a household of five.

Start with the real amount of each paycheck

Pull up your last two pay stubs and write down the take-home amount for each. Use the deposit amount, after taxes, insurance and retirement come out.

Then write down when each paycheck lands. You'll probably match one of these patterns:

• One earner paid every other Friday. That's 26 paychecks a year, so two months a year have three paydays.
• One earner paid twice a month, on the 1st and 15th for example. That's 24 paychecks, two every month.
• Two earners on different schedules. One might get paid biweekly and the other twice a month.

With two earners, pick one paycheck rhythm for the whole household. Use the bigger or more regular check to set the budget period, and log the other income as deposits inside that period. The budget app for couples page shows how that works when both of you share one plan.

Give every bill a paycheck

Make a list of every bill with its amount and due date. Then assign each bill to the paycheck that lands before it's due.

Here's an example for a family paid every other Friday. Swap in your own numbers.

If one paycheck ends up carrying far more than the other, call the lender or utility and ask whether they'll move the due date. If rent takes most of one paycheck, move the other bills to the second one.

Whatever is still unassigned after bills is your spending money until the next payday.

Plan the spending that five people do

After bills, split each paycheck into a few spending categories. Keep the list short. You'll check it on your phone in a grocery line, so it has to fit on one screen.

Start with these:

• Groceries and household supplies
• Gas and transit
• Kids' activities and school costs
• Clothes and shoes, because three kids outgrow things on three different schedules
• Medical copays and prescriptions
• A small fun category for the adults

Set each amount per paycheck, not per month. If groceries run about $450 every two weeks, that's the grocery line on every paycheck. You don't need to turn it into a monthly number.

Groceries are where small changes add up fastest. Plan dinners around what's on sale, cook big batches and turn the extra into lunches, and shop once per week with a list. The USDA food plans publish monthly grocery cost estimates by age and sex if you want a benchmark for your own household.

Use the third paycheck on purpose

If you're paid every other Friday, two months a year bring a third paycheck. The first two paychecks that month already cover your bills, so the third one has no bills assigned to it.

Put most of it toward the costs that hit a few times a year and wreck a normal paycheck. Think back-to-school shopping, summer camp, birthdays, holidays, car repairs and annual insurance bills. The way to do that is a set of sinking funds for family expenses, where you set aside a small amount every paycheck and the third paycheck tops them up.

If you're paid twice a month, you don't get a third paycheck. Put a small amount from every check into the same sinking funds instead.

Childcare, school and the costs that come in waves

If you pay for childcare, check childcare.gov for your state's assistance programs before you assume you won't qualify. Rules and income limits vary by state.

School costs come in waves. Fees, supplies and picture day arrive in August and September. Sports sign-ups come each season. Put each of these on a calendar with a dollar amount, then divide by the paychecks left before it's due. A $300 fee due in ten weeks is $60 from each of the next five biweekly paychecks.

Check what's left mid-period

The plan is only useful if you look at it before you spend. Halfway through a pay period, check one number. That's what's left of your paycheck after the bills and spending that have already gone out.

You can do the math by hand with the what's-left-of-your-paycheck calculator. Enter the take-home amount, anything you carried in from last period, and what you've spent so far. If the number is lower than you expected with a week to go, you know now and not on the morning of the next payday.

Where Budgey fits

Budgey is a paycheck budgeting app. The budget period runs from payday to the day before the next payday. Auto builds the period from your real money once you connect a bank, and the top number is what's left of your paycheck.

Core is $5/mo or $20/yr. It includes live sync for 1 bank, Auto from real money, and shared budgets, so both parents see the same plan on their own phones. Plus is $10/mo or $100/yr if you need 2 or more banks or budgets. A household where each parent banks somewhere different would need Plus.

You don't need an app to do any of this. A notebook and the calendar on your fridge work. The app saves you the math each time you check.

If you're still choosing a method, here's how the main budgeting methods compare, and how each one works when you're paid by paycheck.

FAQ

How much should a family of 5 budget for groceries?
It depends on your kids' ages, where you live and how much you cook. Look at what you spent over the last two months, divide by the number of paychecks, and use that as your starting grocery line. Compare it to the USDA food plan estimates if you want a benchmark.

Should a family of 5 budget by month or by paycheck?
By paycheck, if your pay doesn't arrive on the 1st. Planning each paycheck shows you what that money has to cover before the next deposit, which a monthly total hides.

What do we do with the third paycheck?
The other two checks that month already cover your bills. Use the third one for sinking funds, savings or extra debt payments. Decide before it lands.