We’ve already discussed making “Housing” its own category consisting only of our rent or mortgage payment. These are broad guidelines that you can tweak to fit your situation. If you have a cell phone and a landline (why do you still have a landline!?) from two different providers, you may want to use two different categories. If you have a mortgage, your home owner’s insurance may be part of your mortgage payment. This is going to look a little different for everyone. Now that we have broad budget categories, we know what percentage of our money is going where we have to break them down a bit further while keeping things as simple as possible. If you don’t fund these categories, you will never pay off your debt, save an emergency fund or invest enough to retire.

It’s easy to leave this category out and just tell yourself whatever is left over at the end of each month is the money you’ll put towards these things.īut the problem is, when you don’t dedicate money to these areas up front, there is no money left over.Money that isn’t assigned a job tends to disappear without a trace. This budgeting category too many people overlook, but it’s the most important.The 20% is for debt repayment, (if you have any) saving and investing. This percentage includes things like meals out, leisure activities, clothes (clothes are a necessity, yes, but presumably you haven’t been running around nekkidto this point, so you already have some), hobbies, and grooming. The 30% is to be budgeted on nonessentials, things that you spend money on but could live without (although the living might be pretty miserable). It might mean you have to tighten up in other areas of the 50% but housing isn’t cheap, and unless you take on a roommate, live really far from your place of work in the case of city dwellers or can live with your parents rent free, there aren’t a lot of ways around the high cost of housing. I think it’s more realistic to budget that 35% just for your rent or mortgage payment. That is one take on it, but it’s pretty unrealistic. In short, it includes every housing-related expense.” That includes the mortgage or rent, all home repairs and maintenance, property taxes, utilities such as electricity, gas, water, and sewer, and homeowners or renters insurance. “Housing should comprise 35 percent of your take-home income. Housing is the most significant expense for most of us so how much of the 50% should be devoted that and what exactly does “housing” encompass? That these expenses are essential doesn’t mean we can’t reduce them though. This also includes things like child care and child support. The 50% represents the essentials in your budget, expenses like housing, hoa fees, utilities, transportation, parking fees, insurance premiums, and groceries among them.

You can certainly just use 50/30/20 as your categories for the most straightforward system ever, but unless you have your finances on 100% lockdown, you probably need to expand out a bit. And to be clear, the numbers you’ll be using are post-tax,so the amount of money you get in your paycheck each month, not how much you earn. We’re going to break down what expenses fall under each. You allocate your total budget at these percentages.

Best household budget categories