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GOBankingRates’ editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services – our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines<\/a> and our products and services review methodology<\/a>.<\/p>\n 20 Years<\/strong> Trusted by<\/strong> Starting a budget<\/a> 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.<\/p>\n Here\u2019s what the AI recommended for families who want to get their finances under control<\/a>.<\/p>\n Step 1: Figure Out Your Total Monthly Income<\/p>\n 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.<\/p>\n<\/p>\n \u201cUse net income (what hits your bank account) for accurate planning,\u201d ChatGPT advised.<\/p>\n This makes sense because you can\u2019t spend money you don\u2019t actually receive. Many people make the mistake of budgeting based on their gross income, then wonder why their budget doesn\u2019t work<\/a>.<\/p>\n Step 2: Track Every Dollar for 1-2 Months<\/p>\n The AI said you need to understand your spending habits<\/a> before you can change them. ChatGPT recommended using apps like Mint, YNAB (You Need a Budget) or simple Excel or Google Sheets.<\/p>\n The key is categorizing every expense into these groups:<\/p>\n 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.<\/p>\n Step 3: Use the 50\/30\/20 Rule as Your Starting Point<\/p>\n ChatGPT recommended the popular 50\/30\/20 budget rule as a baseline:<\/p>\n 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.<\/p>\n Step 4: Set SMART Financial Goals<\/p>\n ChatGPT broke down goal-setting into three timeframes:<\/p>\n<\/p>\n Short-term (0-1 year):<\/strong> Pay off credit card debt, build a $1,000 emergency fund<\/p>\n Medium-term (1-5 years):<\/strong> Save for a car, vacation or home down payment<\/p>\n Long-term (5+ years):<\/strong> Retirement, college funds, paying off mortgage<\/p>\n The AI wrote that you should make goals specific and measurable rather than vague wishes like \u201csave more money.\u201d<\/p>\n Step 5: Create Your Monthly Budget<\/p>\n ChatGPT provided a sample budget for a family with $4,500 in monthly income:<\/p>\n 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\u2019t exceed your income.<\/p>\n Step 6: Monitor and Adjust Monthly<\/p>\n ChatGPT said budgeting isn\u2019t a set-it-and-forget-it activity. The AI recommended reviewing spending weekly or biweekly, making adjustments<\/a> where needed and celebrating small wins to stay motivated.<\/p>\n 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.<\/p>\n Step 7: Automate Everything You Can<\/p>\n 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.<\/p>\n Automation prevents the common problem of forgetting to save or pay bills. It also removes the temptation to skip savings when money feels tight.<\/p>\n Build an Emergency Fund First<\/p>\n![\"\"](\"https:\/\/cdn.gobankingrates.com\/wp-content\/uploads\/2023\/11\/icon-20.svg?webp=1&quality=75\"){kind=icon}
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