How to make a budget you can live with


I’ve gotten a few emails these past few weeks about how to create a realistic budget.

First I feel it necessary to point out that I’m not big on budgeting. My budgeting style consists of automating debt payments and transfers to savings, and then spend, spend, spend whatever is left over until it’s absolutely all gone. Other people like to budget more carefully, but I’ve found if I get too into it, I start to feel constricted and will self-sabotage at the first opportunity.

So when I’m asked, “How much should I spend on…?” my response is, “whatever you feel is right” — but there are suggestions. I suggested a balanced spending plan like this:

Screen Shot 2013-01-22 at 1.59.48 PM

Awesome! I think that works for most people.

That’s your net income, by the way. Don’t make a budget with your gross income. You don’t get to spend your gross, you only get to spend your net.

Personally when I look at that pie chart, my thoughts are: 35% is way too much to spend on housing, and 15% is also way too much spend on Transportation. 15% is not nearly enough to put towards your debt, and 25% on “Life” doesn’t sound fun at all.

This is a chart representing ALL MY SPENDING for 2012:

Screen Shot 2013-01-22 at 1.49.22 PM
I use a program for my Mac called MONEY 4 made by Jumsoft to track all my finances. It is available for download from the Mac App Store for $39.99 — pricey, but well worth it!

Now, I have a few more categories than the Gail way because I like to be a bit more detailed, but ultimately, I know where my money is going (this chart actually isn’t a great representation because it leaves out all my Savings which are labelled as “transfers” in my money-tracking program and therefore don’t register as “spending” — you can see I did buy a few thousand dollars of stocks though under “investments”! I save 20-30%+ of my income any given month).

If you’re thinking it looks like I’m having a lot of fun, you’re right — but that’s because I’m not paying for a car and living in a cheap apartment, so I don’t need Gail’s generous 15% and 35% for those categories, respectively. Instead, I pay what I have to and then I can use what’s left over to boost my debt payment and have a little more fun.

Long story short, you do what’s best for you!

Note that best for you doesn’t mean neglecting savings or dragging your debt out over 40 years. That’s not what’s best at all — that’s actually probably the worst possible thing! Likewise, your budget shouldn’t be about maxing out the suggested categories. If you can afford a $1,200 apartment according to the pie chart, don’t go out looking for that if a $900 one will do the trick.

Secondly, don’t worry what other people are doing. I spend an obscene amount on food because I like to cook and bake, and enjoy going out to eat 3-4 times per week. This isn’t a bad thing, this is just something I value and am willing to put a bit more money towards.

Lastly, recognize that your budget will change over time. Once my debt is gone, I’m hoping to roll that whole pie slice into more savings and investments. Additionally, I committed to spending less than $4,000 on personal travel in 2013, which should cut down that Life category significantly. Furthermore, as my income increases I’m hoping that my lifestyle doesn’t inflate at the same pace, so that should change the balance as well.

How do you make a budget?

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14 Comments. Leave new

  • We have a budget, but we don’t follow it super closely. We make sure that we are still saving at least half of our income, and make sure that it’s still realistic.

  • “35% is way too much to spend on housing” lol

  • “Secondly, don’t worry what other people are doing.” I could not agree more. You have to go with what works best for you and what helps you sleep at night. We focus as much as we can on saving and putting aside money that we want for things like vacation or different needs our kids have.

  • Our budget usually revolves around housing. We spend almost 50% on housing, even though we don’t live in a city. Doing so allows us to keep only one car, even though our commutes are in opposite directions because we have access to public transit into the nearby metro area. And it puts us in a nice, safe neighborhood that we like; one that actually has things like grocery stores, a gym, churches, etc.

  • I put all my financial goals (savings, debt, bills) first, then what is left is money for the month. If there is a lot at the end of the month I consider another financial goal. It works better for me than a strict budget with lots of categories.

  • I use a budget/spending plan but like you I have all my monthly bills set up on a pre-authorized debit from my cc (reward points) and I also transfer a set savings amount. I do give myself an amount to spend on whatever I want. It works for me. As you rightfully said, you have to do what works for you.

  • Ours bounces around A LOT from month to month, partly because we have months where we have big investment expenses (take taxes on two investment properties!), but then we also have months with big income swings because Mr. PoP’s income is so variable with commissions.

    So we aim to keep all of the “everyday” stuff on my paycheck alone. And it works for the most part – for us! And you’re right. Finding what works for you is the most important part.

  • We do the same thing, once everything is paid whatever is left is spent however we see fit. We make sure there’s food on the table and gas in the car but some weeks we shop, others we eat out, it varies but when the extra money is gone, that’s it!

  • I made my budget by first laying out all of my regular expenses and then the irregular/variable ones. I budget for pretty much everything and there are a lot of line items that only see activity once every few years. Need a new computer in 4 years? I set aside the estimated cost over 4 years. I do the same thing for my passport, my driver’s license, etc. This strategy really helps to even out the higher months because the same amount is going into my checking account every month, even if I don’t spend it all. There are some things that are so hard to budget for, like clothing. I definitely try but I fail miserably pretty much every time.

    I have my paycheck split so the amount I’ve determined I need for my budget goes directly into my regular checking account and the rest goes into my online savings account, from which I make my mortgage payments.

    My split according to Gail’s items looks like this:
    * 25% Housing (hers: 35%)
    * 0% Debt (hers: 15%)
    * ~3% Transportation (hers: where the heck does 15% come from???)
    * ~50% Savings (hers: 10%)
    * ~22% Life (hers: 25%)

    Maybe if you included in the amortized cost of my car over time in my transportation budget could I get to 15% on transportation spending. Maybe.

  • I try to self-sabotage my budget all the time, so as long as I meet my savings goals each month I don’t get too caught up in the rest unless I find myself going way overboard on something.

  • I made a new budget over the summer, but don’t keep track of it. I just make sure we save x amount of month, pay x to debt, and pay all our bills on time!


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