What Does A Realistic Budget Look Like?
The general rule of thumb for budgeting is to spend 50% of your income on essentials, 30% on things that you want, and 20% should be sent to your savings. If you can save more than 20% that's even better! That being said, your actual budget might be a little more complicated than that and should be specific to you.
When creating a budget, you should start by going over your expenses and separate your fixed from your variable expenses.
What are fixed expenses?
Fixed expenses are recurring monthly expenses. These expenses are usually the same each month, which makes them easier to track. Some examples of fixed expenses are:
Rent/Mortgage
Utilities such as water, gas, electric, phone, and internet access
Insurance
Car payment
Childcare/tuition
Pro Tip: You can start automating your savings by considering them as a fixed expense.
What are variable expenses?
Variable expenses are a little bit harder to track because they fluctuate from month to month. Some examples of variable expenses are:
Groceries
Gas
Healthcare
Clothing
Dining out
Entertainment/hobbies
Self maintenance
Vacations
Charitable giving
Budgeting categories
Once you have separated your fixed expenses from your variable expenses, you should start categorizing your spending. You can categorize them into the following:
Charitable giving and donations
Mortgage payment or rent
Automobile payment
Personal loan
Charge accounts
Federal income taxes
State income taxes
FICA (social security taxes)
Real estate taxes
Other taxes
Utilities
Household repairs and maintenance
Food
Clothing and laundry
Educational expenses
Automobile expenses (gas, repairs, etc.)
Other transportation expenses
Life insurance
Homeowners (renters) insurance
Automobile insurance
Medical, dental and disability insurance
Entertainment and dining
Recreation and travel
Club dues
Hobbies
Gifts
Major home improvements and furnishings
Professional services
Miscellaneous expenses
Join our community and get access to our Cashflow Calculator, where you can enter your itemized income and expenses to calculate your budget (AKA cashflow).
Cutting Down
After categorizing your expenses and creating a budget, you may start to notice items that you can cut down on. You may also find out that you are still paying for a subscriptions that you forgot to cancel. We recommend allocating this extra income towards paying off any debt, adding to your emergency savings account or to fund a financial goal you have been working on.
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The content on the Futurvest website is developed from sources believed to be providing accurate information. This material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. Some of this material was developed and produced by other sources, to provide information on a topic that may be of interest. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.