The Real Budgeting Question

Ask anyone what a budget should contain, and they’ll probably tell you to allocate a certain percentage of your money to a variety of different categories. These categories will probably including housing, transportation, food, savings, entertainment, debt servicing, etc.

That makes sense on the surface, but the problem is that it’s generic advice aimed at “most people” — which means that it doesn’t apply specifically to your situation. Percentage-based budgets often make very little sense if you’re on either end of the income spectrum. People often try to make them fit though, which is a mistake.

The thing is, “What should a budget contain?” is the wrong question to begin with — because the answer to that question is “whatever you want, so long as you’re spending less than you earn.” There is no real “should” about it, because everyone’s life and priorities are different.

A better question might be, “What’s reasonable to spend on various things based on my situation?”

And you’re the only one who can really answer that.

To do so, take a look at where your life is right now and where you want to be in the coming months and years. What are your goals, and what is your current financial situation like? Are you bringing in enough money to meet them, or do you need to cut your budget somewhere or make other adjustments? What will your financial situation will be like in the future if you stay on your current path?

Once you’ve done some thinking, prioritize and go from there in creating your budget.


  • Rob

    Spot on. We all have different circumstances and priorities. Besides, we’re all adults and have the ability to think it through on our own. I’ve found that most budgeting advice has more to do with the bias of the person giving the advice. The things that one person chooses to spend their money on would make another person go crazy.

    It’s why I’m a big proponent of passive budgeting. Just put some money out of reach each paycheck and the budget will take care of itself.

  • Excellent point here. I met with a new client just the other day who expressed this same misconception about budgets. She’s in her 50’s and had avoided doing a budget her whole life in part because she didn’t know what the “correct” percentages were. This is a very real challenge for people.

    When I explained that a budget is simply spending your money on paper before the month begins, she was surprised… and relaxed. Just knowing she could be in complete control removed a large piece of the stress she had been facing.

  • Percentage budgets work better for corporations.
    A personal budget starts with a list of monthly expenses.

    • That is a good starting place, especially since most people already have a bunch of expenses before they sit down to budget.

  • I love how future forward this blog post is. Most people budget for where they are right now instead of where they really want to be in the future (unless its to save up for something big or get out of debt). But for people in the middle this is a great way to grow with your finances as you learn more about your spending/saving habits. Thanks for making us ponder.

    • I’m glad you liked it. I always figure that if you don’t start thinking about the future now, you won’t end up where you want to be when it arrives.

  • I start with my goal. To me, a budget is the structure to help me achieve my goal. I look over my history of spending to get a trend and then I see if I can change the trend. If I have control of my expenses, the budget just falls into place.