Budgeting
37% of Americans can’t cover a $400 emergency [@fed2024]. Most don’t budget. The correlation isn’t coincidental.
A budget isn’t about restriction. It’s about intention. Money without a plan disappears.
The 50/30/20 Framework
| Category | % of Income | Examples |
|---|---|---|
| Needs | 50% | Rent, utilities, groceries, insurance, minimum debt payments |
| Wants | 30% | Dining, entertainment, subscriptions, travel |
| Savings | 20% | Emergency fund, investments, extra debt payoff |
This is a starting point. Adjust based on income and goals. High income? Push savings to 30-50%. Debt crisis? Squeeze wants to 10%.
Pay Yourself First
Don’t budget what’s left after spending. Spend what’s left after saving.
Automate it: Set up automatic transfers on payday. Savings happens before you see the money. Willpower not required.
The Only KPIs That Matter
- Savings rate — Are you hitting 20%+?
- Expense vs. income — Spending less than you earn?
- Trend — Is your net worth growing monthly?
If all three are green, the specific categories don’t matter much. If any are red, dig into the details.
Common Failure Modes
- No tracking: What you don’t measure, you can’t improve
- Too detailed: 47 categories guarantees failure. Keep it simple.
- Monthly only: Review weekly until the habit sticks
- No buffer: Life happens. Build slack into the system.
Measurable Outcomes (KPIs)
- Staying within budget limits each month (expenses ≤ income).
- Savings rate (e.g. % of income saved) at target level.
- Reduction in “impulse” or unplanned spending (track count of off-budget purchases).
- Ultimately, growing bank balance or fewer instances of paycheck-to-paycheck shortfalls.
A budget tells your money where to go instead of wondering where it went.