Save. Spend. Splurge.

How to budget, what to put and some methods including categories (and mine!)

Some people start off hating the idea of a budget, and end up loving it because they realize they don’t need to stress about money any more and they have a PLAN for every paycheque or dollar.


Look at your net income. The problem people run into, is looking at their gross salary, like “Oh I make $60K a year so that’s $5000 a month“.

No. You have to look at what you TAKE HOME in your bank account each paycheque because that’s what you can actually save or spend.


You can either do a budget by month, or by year, or do it by paycheque. It’s up to you. Some people like doing it by paycheque because they see their cash come into the bank account.

I personally plan it by year, but then track it by month with my wealth building tool.

Why? Because I set spending goals for the year ($30K-ish), and then I sort of try to stay within those bounds from month to month (tracking by month) to give myself a sense of structure to know when I am over or under from one month to the next.


All a budget does, is plan your money, and reflect your priorities. You say you want to save for a house? Great, your budget should reflect that. That’s it. If it doesn’t, and you are spending more on eating out than you are on saving for a home down payment, then you aren’t in line with what you say your priorities are.


These percentages we are looking at, are all up to you. You can borrow from one category to put in another, like scrimp on Toiletries and put more towards Eating Out. It’s all up to you, it’s YOUR budget. NO ONE IS TELLING YOU you cannot spend all of your fun money on clothes. You can decide to do that, but you can’t do that AND do massages AND do facials AND eat out daily.


If we take the umbrella up higher, you have three main buckets to think of: SPENDING, SAVING and INVESTING. Most people are great at bucket #1, the spending part is so easy. The parts that people do not prioritize over spending, is Saving and Investing. This is where a money can help you.


What do I mean by that? I mean whatever you take home net, should equal what you spend, save and invest, net. If you bring home $3000, that $3000 should be allocated into any of those 3 buckets: Spend, Save, Invest.


Method #1: Keep it simple

*Please note how I refrained from calling it KISS and left out the last “S”

This method is pretty simple. You look at your needs, allocate 50% of what you take home towards that, 30% towards wants, and 20% towards debt and/or savings and investments.

I mean there’s not much here. Honestly, I feel like if you have debt, the Debt/Savings pie should be bigger at 30%, and you take 10% from Wants to help that along. But as everyone’s budget is different, you have to decide on your own what you want to do.

How it works:

$3000 = Net take home pay per month

  • $3000 x 0.50 (50%) = $1500 for rent, groceries, gas, medical, transportation, utilities.
  • $3000 x 0.30 (30%) = $900 for shopping, eating out, travel, fun
  • $3000 x 0.20 (20%) = $600 for paying down your debt or savings

You may be giving me the side eye right now saying: Are you kidding me? My rent is already $1500 and that eats the entire Needs budget. Yes, that may be the case. This means you need to steal from the other portions like Wants, and have it so your Needs budget is sufficient. The LAST section you should consider digging into, is your Debt/Savings one. Prioritize that one after NEEDS, and cut back on WANTS.

If you cannot do that, you have two other options:

  1. Make more money – you simply don’t make enough to live
  2. Cut back somewhere – find somewhere cheaper to live

Neither of those two items are easy. Making more money doesn’t necessarily mean working more or taking on a second job, it can mean negotiating more money where you work, or hopping to another job.

Cutting back doesn’t mean just finding somewhere cheaper to live (though that would make the biggest impact); it could mean negotiating your cellphone, TV, and other bills, removing subscriptions like Amazon Prime, or whatever else.

Method #2: Get detailed

Maybe the first method is too loose for you, you’d rather have percentages for each part of your life. Here’s another example of a budget you could come up with.

  • Housing: 25% (condo fees, mortgage, home maintenance)
  • Savings/Debt: 25% (includes investing, not just savings)
  • Insurance: 15% (home, car, rental, medical insurance)
  • Food: 10% (groceries, eating out)
  • Entertainment: 10% (whatever you choose, could also be eating out)
  • Transportation: 5% (gas, bus passes)
  • Personal: 5% (shopping, spa, books, music, movies)
  • Utilities: 5% (electricity, gas, water)

It breaks things down a bit more so that your Needs budget from Method #1 is more laid out. Now with this, you could go through what you spend in each category, and do the same math exercise to figure out if it matches.

How it works

Let’s take a $3000 again and work out the percentages:

  • Housing: 25% = $750
  • Savings/Debt: 25% = $750
  • Insurance: 15% = $450
  • Entertainment: 10% = $300
  • Food: 10% = $300
  • Transportation: 5% = $150
  • Personal: 5% = $150
  • Utilities: 5% = $150

Now if we continue with the example from above that you spend $1500 on rent, and that’s already 50% of your budget, which means your Housing is 25% higher than it “should” be based on this budget (you can always tweak).

The 25% for the Housing should mean your rent should ideally be $750. You could now ask yourself: Can I get that $1500 down? Take a roommate? Move somewhere cheaper?

…and repeat these questions for each of the categories until they “fit”. Then you could decide some areas are too tight “No I love where I live, I want to cut back on Personal and Entertainment to take some money there to afford my $1500 apartment“, and go from there.

A budget is a living, working, breathing, flexible document. It doesn’t care if you are over or under, it is just a map to get you to where you want to go, financially speaking.

Method #3: The No Budget

This one is quite similar to Method #1 where the buckets were big, but the difference here is that 50% goes to only FIXED bills you KNOW you have to pay the exact amount of such as:

  • Rent
  • Mortgage
  • Utilities* (I mean, more or less)
  • Insurance
  • Subscriptions (Netflix, Amazon)

And 25% goes into “all the rest” which includes all variable spending like:

  • Groceries
  • Eating Out
  • Travel
  • Gas
  • Shopping
  • Toiletries
  • Entertainment

And the final 25% into debt/savings/investments.

Now for my budget!

Remember when I said it was a working budget? Here’s mine:

I set my budget by putting a dollar amount for the year that is reasonable, and not linked to my paycheque or income in any way. I do this because my income is so variable that I need to set a structure of what I can spend, stick to it, and not worry about income coming in or out if it’s a big amount and then famine for 2 years. I have to keep my budget stable and consistent, and everything above or under that in terms of income, is put right into savings/investments for those leaner income years.

So when I say that, I mean I set my yearly amount of what I want to spend for the year as let’s say $30K, I divide it by 12 months ($2500), and then work out the percentages based on that monthly amount. More often than not, I am finding myself more in the $36K a year budget, to give me comfortable room to breathe at $3000 a month instead.

  • Housing: 25%
  • Groceries: 25%
  • Personal: 25%
  • Entertainment: 10%
  • Household: 5%
  • Transportation: 5%
  • Other: 5%

I clearly prioritize almost everything above Household, but here is what is included in each of my categories:

  • Housing: Condo fees, home insurance, utilities, internet, telephone
  • Groceries: Just groceries, not eating out
  • Personal: Eating out, Shopping, Travel, Toiletries
  • Entertainment: Stuff for Little Bun, Books, Upcycling projects
  • Household: Soap, Tissue Paper, Toilet Paper, Printer paper, Printer Ink, Office
  • Transportation: Gas, Metro passes, etc
  • Other: Fees.. hated fees

As mentioned earlier, I set budget amounts for the year, I start with a $30K spending base and I usually allocate all of my fixed expenses in the budget first. I know my housing, so that goes in first – condo fees, insurance, utilities (for the most part, they change sometimes), internet and telephone, so it’s easy to see what is left.

After that, I have a good idea of what we spend on groceries, household and transportation, in a year (I have been tracking my money with this wealth building tool for over a decade), so I take the higher end of that budget and put that as the yearly amount.

I then set some sort of contingency amount for other which includes fees that do crop up but I hate to pay, tax software, that sort of thing.

The last 2 categories left are personal and entertainment. These are my very last two that I allocate because they’re really not as necessary, but they tend to be the highest (and the most smashed every year.. haha).

If I go over in a month, I try to see what I can do for the next month to bring my overall yearly spend down. Sometimes it is out of my control like one-time fees for the home like installing a new electric outlet, or whatever else may crop up.

Other times, it’s just because I justified wanting something that was pricey, and I decided to buy it because I could, even though it was on impulse and not planned. I generally try to stay under the $40K budget for the year to keep things calm, and I aim for the aggressive $30K a year spend instead, hoping to land somewhat in the middle at $36K.

Another way I look at my spending is in relative % to my income. I try to keep it pretty low in terms of what I manage to bring in as income, and I have been pretty good in this regard, with a 30% savings rate (meaning I spent only about 70% or less in recent years).

Do I love budgeting? Yes. I love it. A lot. You can tell because I am kind of a money nerd and a stats nerd to boot.

How do you budget?

1 Comment

  • Allana Miles

    I really like using apps when budgeting. They’re easy and actually fun to use since I’m always on my phone anyway

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