This is just a rough guideline to get an idea if your budget is reasonable. The 50-30-20 rule for budgeting consists of:

  • 50% of your income toward necessities (housing and bills)
  • 20% financial goals (paying off debt or saving for retirement)
  • 30% of your income can be allocated to wants (entertainment, hobbies, donations)

This can be a helpful guide just to get started with budgeting with broad categories. The main categories are:

obligations, goals and splurges.

The third category is the most flexible and easiest to change.

If it’s helpful, you can further break this down.

  • 10-15% of your income (necessities category) on food.
  • 2-10% of your income (wants category) on personal items (haircuts, clothing, entertainment)
  • No more than 30-35% towards debt (including mortgage) and monthly rent
  • Pay off highest interest debt first

Everyone will have their own breakdown depending on their goal, income, and expenses. This is just a suggestion.

It’s hard to keep a budget and stick with it. It can be time consuming and not that productive. There always seem to be exceptional expenses each month that can throw a budget off. However, it is helpful to have a rough idea of your monthly or annual spending. It can help you say on track for financial goals – including financial independence.

If you cannot measure your progress and what you are doing to reach them, it can be easier to give up and not reach your goals.

We recommend, at a minimum, keeping track of your net worth at least annually. This can easily be done on a spreadsheet that lists your assets (investment accounts, bank accounts, real estate, …), debts (mortgage, student loans, credit card debt that doesn’t get paid off each month, …), income, and expenses.

We have a free spreadsheet you can have at:

A further step would be to looking at the total amount of money that came in during the year and your total expenses. This would help separate the amount your assets grow and the amount you’re adding to them.