A budget is a written plan that helps you estimate your income and expenses. Budgets provide guardrails for your spending. Planning how you will spend your money in advance can help prevent impulse purchases and overspending, which are often major source of stress.
A well-planned budget gives you vital information to help prioritize expenses and make healthy decisions about money.3
To create a budget, you need to know two things:
- How much money is expected to come in each month
- How much money is expected to go out each month
Of course, there will always be unexpected changes in income and expenses, but those can also be built into your budget.
Common spending categories include the following: 1,3
| Category | Percentage | Description |
|---|---|---|
| Housing | 25% | Mortgage, rent, lawn care, HOA fees, repairs |
| Utilities | 10% | Electric, water, cable, phone |
| Insurance | 10% | Health, auto, home, life, pet, travel, umbrella, etc. |
| Health | 10% | Out-of-pocket costs for medications, copays, coinsurance, deductibles |
| Transportation | 10% | Fuel, car loan, maintenance, repairs, parking, public transportation |
| Food | 10% | Groceries, dining out, meal delivery services |
| Savings | 10% | Emergency fund, college savings, car replacement |
| Miscellaneous | 10% | Expenses that do not fall under other categories, such as gifts, continuing education, entertainment, vacations |
| Clothing | 5% | Clothing, shoes, dry cleaning |
Your budget may have additional categories like pet care, childcare, or medical expenses, depending on your family’s needs. Similarly, you might choose to include clothing and entertainment expenses in the miscellaneous category or create separate categories for each.
You may also choose to create different savings buckets for future needs like car replacement, college education, or home repairs.1
Some popular budgeting apps include:
- Mint
- You Need a Budget (YNAB)
- Goodbudget
- EveryDollar
- Honeydue
It is important to understand how much money you have, where your money goes each month, and how you will fund your future needs. A budget can help you do that. Our EAPs offer free work/life services including financial tools and resources. You can find more information in the EAP section of our website. You may also check with your 401k provider or bank for additional assistance.
SOURCES
- U.S. News & World Report. How to Determine Budget Percentages to Meet Your Money Goals. Jan 1, 2020. Accessed Sept 27, 2023.
- Nerdwallet. What is a Budget? May 16, 2023. Sept 23, 2023.
- Money. Budgeting 101: How to Budget Money. Jun 20, 2023. Sept 23, 2023.