It’s possible to make a budget that doesn’t feel restrictive and severe. You just have to put your money in the right bucket.
Rather than make an extensive budget spreadsheet with lines for each and every way you’ve ever spent money, break your budget into just three buckets:
Your budget will look like this:
Fifty percent of your budget should go to “needs.” This includes everything from your rent, to the parking garage at work, to your groceries and prescriptions. If it’s an expense that rolls around every month and is necessary for daily survival, it goes into this bucket.
Any money you put in your savings accounts—whether it’s short-term savings or contributions to a retirement account—goes into this bucket. If you’re paying off debt of any kind (credit cards, student loans, medical bills), put those monthly payments in the Savings bucket too. It should add up to about 20 percent of your take-home pay.
If it’s not essential, it’s not helping you save, and it’s not helping you get out of debt, then it goes into the Everything Else bucket. Some things that might fit here:
Having a hard time filling up that Savings bucket? See what expenses from Everything Else you can reduce or cut out completely.