The Basic Budget

After mindset, budgeting is the most essential part of money management. I personally use a very simple budget that can be implemented by just about anyone.

Here are the 6 groups I divide my money into:

Living Expenses – 50%

50% of my income is allotted to living expenses. This includes housing, utilities, gas/car maintenance, groceries, insurance etc. Basically, all the essentials you need to live. If your living expenses are above 50% of your income, you either need to find a way to lower your living expenses, or find a way to make more money. If your living expenses are less than 50% of your income than you can either upgrade your lifestyle or allot the extra percentage to another category.

Short Term Savings – 10%

The number one question I get asked is “how much should I be saving?” The answer is 10% of your income. I use this 10% to save for big items like vacations or a new car. It always helps to have something specific you want to encourage you to save. I keep a picture of my next big ticket item somewhere I can always see it to keep me focused on saving for that particular item.

Long Term Savings – 10%

Another 10% goes to saving for the long term. This portion of your budget has different milestones. The first should be saving up so you have at least 6 months of living expenses. This is your rainy-day fund. This is a nice cushion in case you lose your job, make a bad investment that loses a ton of money, or the roof on your house collapses. 6 months of living expenses is the first milestone. If you plan on taking any kind of financial risks, I recommend increasing it to 9 months or more. The more you have, the bigger risks you can take without worrying about ending up homeless. Let’s say you are starting a business. If you have 12 months of living expenses readily available, starting that business is going to be a lot less stressful than if you need to start making money after the first week of launch. Once you have your desired amount saved up, you can start allotting that 10% to investments. I personally put it towards FOREX and real estate.

Fun Money – 10%

This is probably most people’s favorite part of the budget, fun money! 10% absolutely must be spent every month on things you enjoy. The best thing about this section of the budget is that as your income increases, the more extravagant your fun activities become. When I first started with this budget, my fun money usually went to things like eating out whereas now it goes to things like weekend getaways. Making sure that you spend this 10% each month will make it easier to save because you won’t feel like you’re restraining yourself by saving so much money. It will also minimize randomly splurging because that’s what your short-term savings is designed for. If you find that you feel a lot of guilt when spending money or can’t stick to the allotted 10%, read my post on a healthy spending mindset.

Education – 10%

Learning doesn’t end when you graduate. I have learned FAR more in the 4 years after I graduated college than I did in all of my schooling. I spend 10% of my income on furthering my personal growth. This money can go towards books, seminars, workshops, or coaching. Anything that will further your personal goals. As Ray Kroc says “when you’re green, you’re growing. When you’re ripe you rot.”

Charity – 10%

What we do for ourselves dies with us. What we do for others and the world remains and is immortal.
— Albert Pine


Find something you believe in and truly care about and give 10% of your income to that. I used to pick a different charity that I liked each month and donated my money. Now, I donate to, an organization that allows you to loan money out to people around the world to help start/grow a business, go to school, or access clean energy/water. You can go through the site to read people’s stories and choose who to lend to. The person you lend money to will then pay you back and you can either take the money back or pick someone new to lend the money to. I love Kiva because you can essentially recycle your money to help give people the opportunity to fulfil their dreams and potential, which is something I personally love. Regardless of how you choose to use your 10% of charity money, make sure it’s something you believe in and feel good about giving to.

Happy budgeting!