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How Much Is Too Much When It Comes To Planning Your Budget?

Do you know how much of your income should be spent on things such as housing and food? Creating and maintaining a budget is easier if you apply some basic guidelines.

What Does A Budget Look Like?

Some people prefer to use pencil and paper to create a budget, but you may find it easier to use our online budget worksheet. You'll save time and effort by following the instructions there. Having your income and expense information handy will make completing the budget faster and easier.

Dividing Up Your Money

While it's true that your budget is specific to your situation, it's useful to review basic guidelines for dividing up or allocating your money. Keep in mind that you should tailor your budget to fit your needs. However, many financial professionals agree that, in a typical budget, you might see income allocated as follows:

  • Housing, including insurance, 30% - 35%

  • Food, 15% - 20%

  • Transportation, including insurance, 10% - 20%

  • Debt, other than mortgage, 10%

  • Savings, 5% - 10%

  • Clothing, 5%

  • Health Care, 5%

  • Utilities, 5%

  • Other, 10% - 15%

    See the article Family Budget Example for more suggestions on expenses allocated by percentage of income.

Pay Yourself First

When allocating money in your budget, it's a good idea to remember to pay yourself first. This means that the savings portion of your budget should be fulfilled first. It can be difficult to put money in savings if it's the last thing you do with your money each month. You may want to include an emergency fund as part of your savings. Typically, an emergency fund is a readily accessible, interest-bearing account where you keep at least two or three months' living expenses. It may not be a good idea to use a checking account for this type of savings, as you may be tempted to use the money for other things. Instead, you could use a savings account or short-term certificate of deposit. For more suggestions on saving and budgeting, see the U.S. Federal Deposit Insurance Corporation article Pay Yourself First.

Is It Working?

Keep in mind that the information above serves as a guideline to help you create your budget. Don't worry if you need to make changes or need debt help. Your budget or personal financial plan should be used as a living document that reflects your current circumstances. If you run into difficulty sticking with your budget, take a look at your:

  • Goals

    • Did you set realistic, measurable goals? Remember that a goal is realistic if it can be achieved within a certain timeframe and is measurable if it can be quantified.

  • Spending

    • At the end of the month, are you out of cash? You may want to track your expenses over a 30-day period to see exactly where your money is going. In this way, you'll be able to see exactly where you can make changes. A cup of coffee purchased each day on the way to work, for example, will cost you $260.00 a year. Wouldn't you rather use that money to pay down your debt or start saving for a vacation?

  • Expectations

    • Did you think creating a budget would solve your financial problems? It's true this is an important first step in creating financial health, but it's also important to maintain the budget and make it work for you. It's not a punishment; it's a way to have control and continued financial success.

Don't despair if it's somewhat difficult to set a budget at first. It will get easier with practice. Remember that creating and managing a budget plays a crucial part in your financial health.

Take control of your finances with our debt help tools. Use our calculators and budget planner to help you manage your money.

For more information on budgets and managing your finances, search the CareOne Credit Knowledge Center Articles.


To learn about our debt management service, see the CareOne Credit Quick Answer Guide.


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