Starting a budget from scratch can be overwhelming. To help families get started, I asked the AI chatbot for practical budgeting advice for average families. The response was surprisingly thorough and easy to understand. ChatGPT focused on understanding income, tracking expenses, setting goals and planning ahead.
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Here’s what the AI recommended for families who want to get their finances under control.
Step 1: Figure Out Your Total Monthly Income
ChatGPT said to include everything that actually hits your bank account. This means your salary after taxes, not your gross pay. The AI also suggested including bonuses, side gigs, child support, government benefits and passive income like dividends or rental income.
“Use net income (what hits your bank account) for accurate planning,” ChatGPT advised.
This makes sense because you can’t spend money you don’t actually receive. Many people make the mistake of budgeting based on their gross income, then wonder why their budget doesn’t work.
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Step 2: Track Every Dollar for 1-2 Months
The AI said you need to understand your spending habits before you can change them. ChatGPT recommended using apps like Mint, YNAB (You Need a Budget) or simple Excel or Google Sheets.
The key is categorizing every expense into these groups:
- Fixed Essentials: Mortgage/rent, utilities, insurance, child care, etc.
- Variable Essentials: Groceries, gas, medical expenses, etc.
- Discretionary: Dining out, entertainment, subscriptions, etc.
- Savings/Debt: Emergency fund, retirement, credit cards, loans, etc.
This tracking period reveals where your money actually goes versus where you think it goes. Most families are surprised by how much they spend on small, recurring expenses.
Step 3: Use the 50/30/20 Rule as Your Starting Point
ChatGPT recommended the popular 50/30/20 budget rule as a baseline:
- 50% for Needs: Housing, utilities, groceries, transportation
- 30% for Wants: Hobbies, dining out, vacations
- 20% for Savings/Debt Repayment: Emergency fund, investments, debt payments
The AI noted that you should adjust these percentages based on your goals, cost of living and income level. Some families might need to spend more on housing in expensive areas, while others might want to save more aggressively.
Step 4: Set SMART Financial Goals
ChatGPT broke down goal-setting into three timeframes:
Short-term (0-1 year): Pay off credit card debt, build a $1,000 emergency fund
Medium-term (1-5 years): Save for a car, vacation or home down payment
Long-term (5+ years): Retirement, college funds, paying off mortgage
The AI wrote that you should make goals specific and measurable rather than vague wishes like “save more money.”
Step 5: Create Your Monthly Budget
ChatGPT provided a sample budget for a family with $4,500 in monthly income:
- Rent/Mortgage: $1,500
- Groceries: $700
- Utilities: $250
- Transportation: $400
- Insurance: $300
- Entertainment: $200
- Savings: $600
- Debt Payments: $350
- Miscellaneous: $200
The AI suggested using your income and spending data to assign target amounts for each category. The key is making sure your total expenses don’t exceed your income.
Step 6: Monitor and Adjust Monthly
ChatGPT said budgeting isn’t a set-it-and-forget-it activity. The AI recommended reviewing spending weekly or biweekly, making adjustments where needed and celebrating small wins to stay motivated.
If expenses exceed income, the AI suggested cutting back on wants before touching needs. This approach helps families maintain their basic lifestyles while getting their finances under control.
Step 7: Automate Everything You Can
The AI strongly recommended automation to remove the human element from budgeting. ChatGPT suggested autopaying bills to avoid late fees, setting up automatic transfers to savings and investment accounts and using budgeting apps to track everything in real time.
Automation prevents the common problem of forgetting to save or pay bills. It also removes the temptation to skip savings when money feels tight.
Build an Emergency Fund First
ChatGPT says you should start with a $1,000 emergency fund, then build up to three to six months of expenses. The AI recommended keeping this money in a high-yield savings account for easy access.
This emergency fund prevents families from going into debt when unexpected expenses arise. It’s the foundation that makes everything else in the budget work.
Extra Tips for Middle-Class Families
ChatGPT provided several bonus tips specifically for middle-class families:
Meal planning reduces food waste and cuts down on expensive restaurant visits.
Use cash or debit for discretionary spending using the envelope method.
Review subscriptions every three to six months to cancel services you’re not using.
Teach kids about money and include them in age-appropriate budget discussions.
The AI even offered to provide a customizable Excel or Google Sheets budget template for families who want to get started immediately. So, if that’s your thing, take it up on it!
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This article originally appeared on GOBankingRates.com: I Asked ChatGPT How To Create a Budget for the Average Middle-Class Family: Here’s What It Said
