Minimalist Guide to Budgeting?

[Eagle]

I read this today… Thoughts?

Does anyone else use the 50/20/30 rule as a helpful benchmark when assessing their finances?

I started by creating a cash-flow summary/budget spreadsheet to see where all of my money was going, and then divided my expenses as follows:

Essential Expenses (less than 50% of income):
Rent/Utilities/Food/Transportation

Financial Priorities (at least 20% of income):
Saving contributions and/or debt

Lifestyle Choices (no more than 30% of income):
Cell phone/Entertainment/Etc.

This might be of help to anyone looking to create a budget, or perhaps just to see where they stand financially.

Does anyone else stick to this "rule" or what do you think?

Originally found here in this article.

[bigdaddybus]

I have compared our budget to that guideance in the past.

What I learned was was that my family is more conservative than that.

1. Our Essential expenses are under 50%. Primarily because our home (PITI) is 15% of our income. We dont want or need a more expensive place and having home expenses as a fairly low percentage of our income frees up flexibility elsewhere in the budget. Our transportation expenses are high (by choice) as my wife and I like driving newer cars with warranties.
2. Our financial priorities (saving and retirement) are higher than than this guideance.
3. Our Lifestyle choices are lower than 30%.


I dont know the exact numbers right now, but you household is around. 42.5/35/22.5

[bjl584]

My budget is pretty sloppy. I wouldn't recommend the way that I budget for someone that comes here looking for advice. What I do isn't the best budget for someone drowning in debt and looking to clean up their finances. But, it works for me fine.

I basically have a set amount each month that I save, invest, and service debt with. Whatever is left over I really can't tell you where it goes. I don't have line items for expenses.

[Eagle]

For us off the top of my head Essential Expenses are probably around 50%. Maybe even closer to 60%.

Lifestyle Choices may be around 25%.

Financial Priorities (savings, etc.) is probably less than 20%.

I'll take a look at the actual numbers at the end of this month.

[Retired To Win]

No Set-Percentage Budgeting For Me

I cannot see a set percentage-of-income approach like that working for me. Too restrictive, in my opinion. Could push a person into badly shortchanging themselves in one place, while overspending in another. (About the only set-percentage spending limit I could see myself applying might be one to set a top limit on the amount to spend on housing; but I don't have a mortgage anymore, so...)

I built up my budget from the ground up, one line item at a time, doing the best job I could of using my money wisely. Then I "budget by exception" continuously, looking to optimize each budget line even more -- if possible.

[corn18]

I'm at 42% essentials, 25% savings, 27% non-essentials. This is a percentage of net after tax income.

If I use gross income it's 30% taxes, 30% essentials, 17% savings, 19% non-essentials.

While the percentages are interesting, I bet the absolute values are even more interesting. Someone who nets $4,000 / month and spends 30% on non-essentials is spending $1,200 / month in that category. Someone netting $10,000 / month spending 30% on nonessentials is spending $3,000 on non-essentials. I imagine if anyone saw my non-essential number they would barf. I am working on fixing that. It used to be much, much worse. At least I have the percentage under control, right?

Tom

[scfr]

I cannot see a set percentage-of-income approach like that working for me. Too restrictive, in my opinion. Could push a person into badly shortchanging themselves in one place, while overspending in another.

Perhaps you missed some key words: LESS THAN, AT LEAST, and NO MORE THAN

Essential Expenses could be 0-50%
Financial Priorities could be 20-100%
Lifestyle Choices could be 0-30%

Lots of room for variation in there depending on individual circumstances.

[TBH]

I like this budget approach. It does seem to be a better goal for me than hard-and-fast amounts for specific expenditures. I've seen something similar in the past--the 60 percent budget solution.

That one is broken up differently:

60% committed expenses, including taxes
10% retirement savings
10% long-term savings
10% short-term savings
10% fun money

I wouldn't be comfortable saving just 10% for retirement, but I do like the idea of budgeting using very broad categories.

No idea what my current numbers are, however. I need to get a better handle on what I'm spending.

[investorwithmoney]

more savings/investments

I have more percentage for savings and investments, and try to reduce entertainment percentage

[YolandoAmaya]

Yeah, in todays life expanses are increased, we should have to cut our daily needed things to save more. I always try to save more money by replacing things by their cheapest options available.