This article was written by Ashley over at Everything Finance. Everything Finance is a site about just that, everything related to finance. You can get information about investing, saving money, shopping, blogging, and making money online. If you like what you see here, make sure to stop by or better yet subscribe to their feed so you don’t miss a thing.
Sometimes people ask me how much they “should” be spending in a certain budget category. The problem with this question is that there is no one-size-fits-all answer. There are plenty of websites that will make you a budget based on percentages of your income. The can tell you how much you will need to invest in a pension plan for retirement, or how big your mortgage payment should be based on your current take home pay. You can also calculate how much insurance you need based on your paycheck.
However, successful money management isn’t about averages, or rules of thumb, or any other measuring stick that’s outside of your family. People like to have a system to make sure they are on track but at the end of the day it’s whether or not you are making the most of your money… for you. Your financial success is not based on some percentage system developed by someone else but based on whether or not it’s making you as happy as it can.
You choose how to spend your money and the level of frugality you will live with, Moneysupermarket.com can help you be better prepaired. You don’t have to start washing baggies and reusing tin foil if that doesn’t float your boat. As you cut back you will find places you can cut without pain. As you experiment with frugality you will find where your true values lie. You will find categories that are more painful to cut than others.
For me, I like food. I spend a lot of money on food. But I have a very small clothing budget because clothes are not important to me. On the flip side of that my in-laws think it’s fun game to see how inexpensively they can feed their family of 5. My dad has a very frugal lifestyle because he spends all his money on travel. None of our budgets would fit into pre-designed budgets based on percentages but they all work for us individually.
I would be unhappy to spend more on clothes and less on food, even if that meant that my spending was closer to “average”. My brother-in-law would feel wasteful if he had to spend more on food. My dad would be miserable if he lived in a bigger house but couldn’t travel on a whim.
Some people are turned off of budgeting because they think they have to fit their life into someone else’s plan, and that’s not the case at all. You decide your own spending categories and amounts. It doesn’t matter if some software agrees with your spending. Are you meeting your financial goals and your average family budget? Are you happy? If so, then I think you are doing just fine.
Well put Ashley. Too many people rely on rules of thumb as if budgeting is “one size fits all.” It’s called personal finance because it’s just the opposite.
A good budget is supposed to help you reach your financial goals. You set your priorities and the budget should reflect it.
Good point. Budgeting is really just a way to look at your expenses and income and decide if you need to change anything to meet your goals. I like reworking my budget to maximize my savings, but in the end it gives me a snapshot of where my money is going.
I agree with the other comments here. Budgets should be custom-tailored to each family or individual’s situation and should be designed to help reach financial goals, not restrict you from living.
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Goal setting is the first most important step to making a budget. It helps you setup up all those tricky budget amounts.
Budgets are so personal and too many people assume that a generic budget can fit everyone. I think people need to take that first step of actually figuring out that what they have to spend create a budget accordingly.