![]() It may give you a place to start when creating a budget and a better idea if you are overspending in certain areas. It is a range, so keep in mind you can’t be on the higher end of the range in all categories or you will be over budget. Once you’ve tracked your spending in all of these categories, there’s a general rule of thumb regarding how much you should be spending in certain areas. Miscellaneous – Any other monthly expenses, such as childcare or babysitter, pet care, organizational memberships, gifts.Insurance – Health insurance, car insurance, homeowners insurance, renters insurance, life insurance, etc.Healthcare – Copays, medications, doctors/dental visits. ![]() Entertainment – Activities, gym memberships, hobbies, vacations, subscriptions, etc.Savings – Retirement, emergency, and general savings.Personal spending – Clothing, hair/salon, home goods, etc.Utilities – Electric, gas, water, sewer, trash collection, phone, internet, cable, streaming.Transportation – Car payments, gas, car maintenance and repair, registration, parking fees, E-Z pass cost, public transportation.Housing Costs – Mortgage/rent, taxes, maintenance costs.Categorizing also makes it easier to find ways to improve your budget. While this may work for some, it’s often better to start with a more detailed categorizing of expenses to get a better handle on your spending. That rule suggests you should spend 50% of your after-tax pay on needs, 30% on wants, and 20% on savings and paying off debt. The 50/30/20 rule is a simple way to budget that doesn’t involve a lot of detail and may work for some. Setting budget percentagesīudget percentages can be a good way to guide you as to how much you should be spending on various items each month, giving you a more realistic budget to work with. While developing and sticking to a realistic budget can be stressful, getting a handle on your spending can help you live a more financially secure life. It’s also important to plan for emergency expenses, such as a car or home repair or health emergency. To get a better idea of these costs, take a look at your bank and credit card statements. They include items such as groceries, gas, healthcare, clothing, dining out, entertainment, hobbies, haircuts, charitable giving, and vacations. Your variable expenses may change from month to month. These costs stay relatively the same and are easier to track. Your fixed expenses will include your recurring monthly bills, including mortgage or rent, phone and utilities, insurance, car payment, savings/retirement, childcare, tuition, and gym memberships for example. With a little research through your statements, you may be surprised to see just how much you’re spending. Don’t record what you think you should be spending on items such as groceries, but what you actually are. When calculating expenses, put them into categories. ![]() ![]() When determining income, use the amount you bring home after taxes and after any other deductions, such as child support, are taken out. Luckily, you can use resources like the calculator below to figure out how much green goes in each of your buckets.A realistic budget starts with determining your monthly income and then calculating all of your monthly expenses. Ultimately, you need to decide what type of budgeting system is right for you based on your habits and circumstances. For example, when you've paid off your student loans, you can allocate more of your monthly budget for savings. You may be able to meet those numbers in the future. If you try the 50/30/20 budget method and don't hit the percentages exactly, be kind to yourself. Or you might find the lack of detail makes it harder for you to improve your spending habits. You might find it easier to track the three categories rather than categorizing each individual expense. The categories also may or may not work for you. So, you may need to adjust the percentages to fit your situation. For example, if you live in a high-cost area, you may have to put a large part of your income toward housing, making it difficult to keep your needs under 50%. Depending on your income and where you live, earmarking 50% of your income for your needs may not be enough. ![]() The 50/30/20 rule can be a good budgeting method for some, but it may not work for your unique monthly expenses. ![]()
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