If you are looking for a budget that is organized, but not too restrictive, try the Five Category Budget.
We have all heard the story of Goldilocks. She always wanted something that was in the middle or “just right”. But who knew that the Goldilocks rule could apply to budgeting? Budgets like the 50/30/20 budget may be too structured but the 80/20 budget can often feel too broad. If you don’t want a budget that represents a broad overview of overall spending, the Five Category Budget may be “just right” for you.
Housing
This category should comprise of 35 percent of your take home income. It includes mortgage or rent, home repairs and maintenance, property taxes, utilities, and homeowner’s or renter’s insurance. Simply put, include every housing-related expense.
Transportation
This should only take up 15 percent of your take home income. Include car payments, gas, car insurance, repairs and maintenance, parking payments, and public transportation tickets.
Other living expenses
These are primarily discretionary expenses and should take up 25 percent of your income. This category includes eating at restaurants, concert and sporting event tickets, new clothes, and vacations.
Savings
Your savings should consume 10 percent of your budget. Build up an emergency fund with three months’ worth of living expenses first then start saving for retirement.
Debt Payoff
This should include credit card debt and student loans. It does not include your minimum mortgage or car payment because those are listed under the housing and transportation categories. If you are paying more than the minimum, include the extra payment cost in this category. Debt payoff should consume 15 percent of your income.
Milledgeville State Bank always recommends a budget as a map for your finances. But if you don’t think that a detailed line-item budget is right for you, the Five Category Budget may be the solution. For more advice about saving and budgeting, stop by Milledgeville State Bank.
