What does a budget look like?

Everyone’s budget will look different based on their individual circumstances. However, there are a few different typical budget structures that can be used as a starting point. Below are a few example budgets to consider as you create your own. 

The 50 / 30 / 20 budget: 

This budget uses a simple rule of thumb instead of specific line items for budget categories. This is a great first step toward a budget tailored to your needs.  

• Allocate 50% of spending to necessary spending (i.e., “needs”)
• Allocate 30% of spending to discretionary spending (i.e., “wants”)
• Allocate 20% of spending to savings

This type of budget is great for its simplicity. However, it has several drawbacks. First, you have to define for yourself what is considered a “need” vs. a “want.” Second, this type of budget doesn’t work as well if you have a lot of debt and need to allocate a significant amount of money toward credit card or student loan repayment. 

The essentials + other budget: 

This budget outlines the most important budget categories and then captures the remaining disposable income as “miscellaneous.” This gives a simple spending framework with plenty of flexibility to shift spending between discretionary categories. 

The detailed budget: 

This budget is the most granular type and has to be refined on a case-by-case basis. You have set budget amounts for each category and fine tune them over the course of a few months. The downside is that you need to estimate spending for a wide variety of individual categories, which can be difficult to do accurately.