Budget Basics

in All Posts

2014 is my Get Organized Year.  One area that I’m really trying to organize is my finances – I want to save more money for important things and really fun things (like travel) instead of wasting funds on stuff that doesn’t matter to me, and I want to do it through budgeting.  Edited to clarify:  So I am excited to share this guest post from Ashley, a 25 year old who writes about her passion for beginning to budget when you’re young at Saving Money in Your Twenties (she has a newsletter, too).  It was a good reminder for me to stick with my budget goals in the midnight hour of my late 20s.  Hah. Read on for her guest post!



It can be hard to stick to your resolutions.  It can be even harder to stick to resolutions that you’re not really excited about.  And for most people, budgeting is one of those not-so-exciting resolutions.


At the end of December, Caitlin shared with us her 2014 resolutions. One of them was to get her finances in order and stick to a budget. As someone who is obsessed with budgeting and personal finances, I was so excited about that resolution.


But I know that I’m kinda weird, and you might not share my budgeting excitement. So for you resolution-makers who have been procrastinating on this one, I’m here to show you how easy (seriously!) it is to get started budgeting.


Have you heard of the 50-30-20 rule?


Start by figuring out your monthly take-home pay. Your take-home pay is the amount of your paycheck after taxes are taken out. (if you have retirement contributions or health insurance automatically taken out, be sure to add those amounts back in!)

1- How much can you spend

The 50-30-20 rule says that…


50% of that take home pay should go to “Must Haves”– shelter; food; necessary utilities like water, electric, and gas; gasoline to get to work; health insurance; etc


30% of your take home pay can go to “Wants”– restaurants; shopping sprees; cable subscription; froyo; etc


20% of your take home pay should go to savings– paying off student loans; building an emergency fund; 401k contributions; etc


What kinds of expenses do you have?


Now you need to figure out which category each of your monthly expenses falls into.

2- Where do your expenses fall

Remember that anything that is not an absolute necessity should go under “Wants”. Yeah, I know you needed your Netflix subscription… but it probably belongs in the “Want” section 🙂


Time to Budget!


Once you’ve decided where each expense belongs, you can start to build your budgets.

3- budget it

Take the 50/30/20 amount for “Must Haves”, “Wants”, and “Savings” and start assigning budgets to each expense that falls within those categories.


If you’ve never tracked or budgeted your money before, this step can be tough. It’s hard to figure out how much you should spend on each expense! If you can, use old credit card statements or receipts to estimate your average expenses. Just give it your best shot and remember that you can tweak the numbers after the first month if you find a problem with them.


Remember to keep your “Must Haves” under 50% of your take-home pay and your “Wants” under 30%. That “Wants” category is usually the toughest to keep under control 🙂


If you’re really far off in any category, you might need to reconsider your expenses. Can you cut out one of your weekly restaurant meals? Can you cancel your BirchBox subscription or pause your pricey gym membership? Do whatever you can to get your “Wants” down below 30%, and your savings rate to at least 20%.


Keep up with it!


This final step might be the hardest- but you’ve come so far, you can’t slack off now! Sign up for an online tool like Mint.com to help keep track of your budget. Mint (and many other free online services!) makes it super easy to monitor your expenses and ensure you’re sticking to your budget.


Remember that budgeting is a process- there’s going to be trial and error until you figure out what numbers work best for you. Don’t get discouraged if you go over budget one month- there’s always next month! And remember, the simple act of creating a budget often subconsciously makes you spend less… so pat yourself on the back for just taking the first step!


Got any questions for Ashley?  Ask away in the comments section!



  • A February 13, 2014, 10:34 am

    Why do you consider student loans savings – they are not. They are an expense and paying them, while necessary, does nothing to build savings or an emergency fund.

    • Ashley February 13, 2014, 12:14 pm

      Good question! People definitely classify debt (student loans, mortgages, etc) differently, and you might prefer to put it under expenses.

      I like to count it as “savings” because you’re technically not “spending” the money- you borrowed money and now you’re paying it back. It will be a zero-sum gain in the end*.

      It really does come down to personal preference… do whatever makes the most sense to you! 🙂

      *To get specific, I DO count the interest portion of the loan repayment as a “must have” expense. In that case, you are paying an actual expense for borrowing the money. It can get kind of tricky separating out the portion that you’re repaying to the principal vs. the interest, though, but I would absolutely do that to keep things straight in my budget.

      • A February 13, 2014, 1:13 pm

        That still doesn’t make sense. Money borrowed is still an expense, just a delayed expense, because I have already spent what I borrowed, for a “necessary expense”. For many of us, student loans are a significant monthly expense and classifying them as anything else will do a disservice to your budget and saving efforts.

        • Marin February 13, 2014, 2:27 pm

          Then , following your logic, wouldn’t your credit card debt each month be a ‘savings’? Student loans are borrowed and then repaid with interest. Credit cards allow you to ‘borrow’ credit upfront and then you repay (sometimes with interest)…
          I would never put my monthly credit card bill as a ‘savings’. And I’d never put a student loan repayment as a savings. I think that could get very confusing

        • Ashley February 13, 2014, 3:09 pm

          I know that it’s a confusing concept- I probably should have left it off the chart, ha ha! In my mind, it makes sense that getting myself out of debt counts as “savings”, so that’s how I do it and that’s how I recommend my clients do it.

          BUT… do whatever makes sense to you! This is a huge debate in the personal finance world- there are strong supporters for both methods! 🙂

          • CaitlinHTP February 13, 2014, 3:24 pm

            I see our student loans as a long-term expense, much like my mortgage. But I can understand what Ashley is saying… that some people want to prioritize paying off that loan ASAP above other forms of saving accounts (especially when you’re young and in your 20s). It may be do-able, depending on your loan amount. It would be so nice to not have it hanging over your head throughout your 30s. I know some friends who had loans under $15,000 and successfully paid them off in their 20s. Pretty sweeeet!

          • Courtney February 15, 2014, 11:19 am

            We categorize any debt we might have in with our savings, because that is the category we’re throwing all of our “extra” money into at the end of the month, if we’ve used less than 80% on must-haves and wants. [We don’t use the 50-30-20 system, but definitely split our budget into similar categories to keep track of spending — including using percentages to keep ourselves on track.] If there is money left in the expense categories at the end of the month, we put it into the savings category, but instead of actually putting that money into a savings account, we would throw it onto debt. If debt were listed as an expense, I can see myself putting $X towards it at the beginning of the month, but any money left at the end I would always think to put towards savings. This way, I’m thinking about debt as something I need to pay into, not only as an initial “expense” at the beginning of the month, but also as the number one place to throw any excess at the end of the month. By thinking of debt this way, we were able to pay off my husband’s $47,000 student loan three years after his 2010 graduation — and mostly on one income as I’ve been home with our daughter since she was born in July 2012! Obviously we’ve been careful with every aspect of our budget as well, but this way of thinking about debt really DOES work!

  • Samantha D February 13, 2014, 10:38 am

    These figures always scare me. My must haves are way over 50% of my budget due to living in a somewhat expensive area. I could spend less on rent, but that may mean moving to a less safe or less comfortable place which I’m not willing to do. It makes me feel kind of like a failure when I look at things like this. I do have a 401k that I save in to, and a small emergency fund, and have never missed a payment on student loans or any bills so I feel like I’m doing ok. My credit is great for my age.

    Maybe this is good and makes sense for the type of people who overspend on frivolous things, but it’s important to keep in mind that everyone is different.

    • Ashley February 13, 2014, 12:23 pm

      Totally understand your point, Samantha! I used to live in the DC area and oh my gosh, housing was ridiculous, so I feel your pain. In your case, I’d try to keep the “wants” spending a little lower than 30% so that you can still try to put 20% into spending!

      But oh man don’t let this make you feel like a failure! That was not the goal!!! 🙁

      It sounds like you are doing a great job with your finances if you have a 401k, an emergency fund, and never missed a payment on anything else! Keep on doing your thing 🙂

  • Sara @ LovingOnTheRun February 13, 2014, 10:42 am

    Budgeting is something that we are REALLY focusing on right now. I lost my job in August and money is TIGHT! We have a whole new view of a budget and even though it is really tight right now we are learning so much about the importance of saving and cutting what we really don’t need.

    • Ashley February 13, 2014, 12:24 pm

      So sorry to hear about your job, Sara 🙁 It sounds like you’re really looking on the bright side of things- this is a great time to figure out what your priorities really are!!! Please let me know if you ever have any questions or if you need any guidance budgeting- I would love to help 🙂

  • Logan @ Mountains and Miles February 13, 2014, 10:43 am

    I love this idea, but sticking to 50% of gross pay for needs isn’t always realistic in more expensive areas. I live in DC and my rent (utilities included) costs 54% of my paycheck alone – and we have a killer deal on our apt. How would you suggest breaking down your budget for situations like this?

    • Ashley February 13, 2014, 12:31 pm

      Hey Logan! No way- I just moved out of the DC area! You are so right- housing is insane. ugh.

      In your case, I’d try reeeeeally hard to keep your “wants” less than 30% to balance out the higher “must haves”! The ultimate goal is to get your savings as high as you can (preferably 20%, but I know that is tough sometimes!) However you split the rest of the budget is definitely negotiable 🙂

  • Sarah February 13, 2014, 11:20 am

    Sorry, but a student loan payment is not savings! It is a bill!

    • Ashley February 13, 2014, 12:36 pm

      Hey Sarah! Good point- I didn’t really explain that one in the post and it can be a little confusing 🙂

      I think that repayment of the principal (the actual money you were loaned) is “savings” because technically, you borrowed money and now you’re paying it back- it’s coming out to zero in the end.

      I DO, however, count the interest portion of the loan repayment as an “expense”. You are paying for the loan itself- that is most definitely an expense!

      It can be tough to split the repayment into principal vs interest but I really believe that they are technically two different expenses.

      Sorry for the confusion- I should have added the “interest” portion under “Must Haves”! 🙂

      • Ari February 13, 2014, 1:20 pm

        The definition of savings, though, is putting money aside that you can access at a later date. An emergency fund can be accessed in an emergency. A retirement fund is for retirement. Vacation savings are for a vacation. When you pay off a student loan, you are not saving because you are taking the cash you put toward your student loan off your personal balance sheet — i.e. you no longer have access to it. Not to mention, when you lump them together you fail to recognize that most federal student loans carry lower interest rates than you would earn in the market, which means if you have the choice between investing and paying off your student loans early, simple math tells you to invest. All debt should be considered this way, and when you lump it into savings, you’re not making that distinction. Would you consider your mortgage payment savings? You should, by your definition. But no one would.

        • Ashley February 13, 2014, 1:54 pm

          It really is a tricky area. I think part of the confusion is how I classify “savings”– it’s not only traditional savings (as you defined- money you can access at a later date) but also paying down debts. (but NOT paying down things like credit card debt, because in that case you actually did spend money that you must pay off)

          A better example is definitely a mortgage. And yes, I do classify mortgage principal repayment as savings, also! In the case of a mortgage, you’re creating an asset for yourself, so I absolutely count that as Savings.

          Budgeting is such personal project- if you want to put loan repayment completely under expenses, that is totally fine! I whole heartedly believe that whatever makes sense to YOU is the right answer 🙂

          • Sarah February 13, 2014, 3:21 pm

            Sure, in the case of a home loan you are creating equity for yourself in the future. But that is not the case with an educational loan. Taking out the educational loan will perhaps guarantee you a larger salary in the future, but it is not actual equity that you can spend on another education in the future. Just like a car loan is just that – a payment on a loan where the money has already been spent. Even with a car I may be able to sell it in the future and apply that equity towards another car purchase, but nothing is guaranteed. Also I consider this money a “must have” because if I don’t pay my education/car/house loan on a monthly basis, it can be hugely damaging towards my credit score and potentially cause me to lose my house or my car.

          • Haley February 13, 2014, 9:43 pm

            Money spent on an education is still money spent, though – just like credit card debt! There’s not a difference between putting a textbook on your credit card vs. putting the actual class on your student loan bill – both have to be paid back in the end 🙂

          • Ari February 14, 2014, 3:17 pm

            You’re creating an asset for yourself with a mortgage, yes, but you’re still not saving that money. Paying off debt is NOT SAVING. And prioritizing a (low-interest) student loan over saving in a 401(k) or IRA is just wrong — it’s simple math, and paying off a (again, low interest) student loan over time makes much more sense because the interest rate on that debt — and thus the return on your investment — is much lower than the interest you’re likely to see if you’re wisely invested in a retirement account. And so, when you classify a student loan as savings, you’re telling people that they could pay that off as a substitute for saving money. That is not sound advice.

            I work in personal finance, and have for seven years, and I can tell you there is not a financial planner in the world who would agree with your logic. It simply doesn’t make financial sense.

  • clare @ fitting it all in February 13, 2014, 11:29 am

    how cool that you have your own business about this! I am 26 and on student loans for school and am JUST NOW (because i had a paying job before!) realizing how much I need to budget and be careful!! What you’re doing is so useful:)

    • Ashley February 13, 2014, 12:39 pm

      Thanks so much, Clare!!! You are ahead of the game if you’re only 26 and realizing how important budgeting is! I’m on a mission to make sure everyone in our age range realizes it, too 🙂

  • Ashley February 13, 2014, 11:39 am

    What if you have debt you’re trying to pay down? Would that be part of the “needs” or cut into the “wants”??

    • Ashley February 13, 2014, 12:47 pm

      Hi Ashley! (awesome name, btw 😉 ) Debt is tricky because there are so many categories!

      If you’re talking credit card debt- I would count your minimum payment as a “Must Have”. If you didn’t pay that, your credit score would suffer, so I count it as a Must Have. Any amount extra that you pay towards the bill, I would count under “wants”.

      If you’re talking student loans or car loans or something like that- I count repayment of the PRINCIPAL of the loan (the actual amount that you borrowed- not including interest) as “savings”. I think of it this way because technically you borrowed money and now you’re paying it back- it adds up to zero in the end, so it’s not really an “expense”!

      However… I do count the INTEREST portion of the loan repayment as an expense under either “must haves” or “wants”, again depending on whether it is part of a minimum payment due (and if you didn’t pay it your credit score would suffer) or if you’re paying above and beyond the minimum payment.

      I hope that makes sense- let me know if I can clarify anything for ya!

  • Melissa @ Mel's Miles February 13, 2014, 11:58 am

    Saving Money in your Twenties ROCKS! Ashley is full of awesome tips and really knows how to save 🙂 Thank you for featuring Ashley on your blog, Caitlin!

    • Ashley February 13, 2014, 12:47 pm

      Ahhh hahaha thanks girl 🙂

  • Aishah @ Coffee, Love, Health February 13, 2014, 12:06 pm

    This is awesome, I wish I learned about budgeting at an earlier age. I must say though, my student loan is now a monthly bill and it isn’t fun 🙁 It actually stresses me out lol I went out-of-state for my Master’s and that made my loan much higher. I wish education was cheaper altogether honestly, I think it would encourage many more to continue getting theirs. The loans tend to be a big source of fear and stress for many looking to go further education-wise.

    • Ashley February 13, 2014, 12:52 pm

      Ugh, totally agree with you Aishah- the cost of education is insane. Please don’t let it stress you out, though- money is something you can totally get under control! I hated the feeling of being overwhelmed by money and that’s why I got so into personal finance!

      Seriously, if you set up an budget or a loan repayment plan and can see how well you’re progressing (every payment is a little victory!), it might make you feel less worried 🙂 Good luck!!!

  • Jillian February 13, 2014, 12:17 pm

    Hi Ashley! Great post – thank you!

    I have never set or stuck to a strict budget (bad, I know!) — but I’ve always been aware of my spending and fixed costs and didn’t put much on credit cards. It’s been on my mind, and your post inspired me to plug in my numbers.

    I had to adjust my fixed costs / must haves to be 60%, and 20% for both of the others. Between a mortgage, car payment, insurance, etc., I can’t change it. Is that ok? Any tips or thoughts about that?

    • Ashley February 13, 2014, 12:57 pm

      Hi Jillian, thanks so much!!! 🙂

      Haha, no worries- not many people stick to budgets. Just being aware of your spending is LIGHT YEARS ahead of many other people 🙂

      I absolutely think that however you need to tweak the numbers is fine. As long as you can get your savings to 20%, you’re doing great!!

      I’ve written this in response to a few comments above (mostly in regards to student loans) and this might make you feel better- I count repayment of the PRINCIPAL portion of loans, like mortgages, as savings!

      So if you want to get super technical, look at how much you’re paying towards the principal of your loan vs how much is interest every month. Throw the principal portion under savings and the interest portion under must haves. Voila- your “must haves” probably just shrunk a ton!

      I do this because technically, repaying the principal of the loan isn’t really an expense. You borrowed the money and now you’re giving it back. It all comes out to zero in the end (minus the interest, of course).

      Hope that helps! It sounds like you’re doing a great job, keep it up!!! 🙂

  • Janelle February 13, 2014, 12:25 pm

    Thanks for this post! My husband and I are currently in the process of job transitions, so I was just going to sit down to budget – perfect timing. I haven’t heard of the 50 – 30 – 20 rule, but I like the idea of aiming for that. It seems like if you can have 30% of your budget for “wants,” you are doing pretty well… but it doesn’t seem like a failure not to reach that either. Thanks for providing this guideline as a starting point.

    • Ashley February 13, 2014, 12:59 pm

      Hey Janelle- so glad to help!! You’re absolutely right- it’s not a failure to reach that point, just a really good goal to aim for. Good luck with your job transitions and your budgeting- let me know if you have any questions!! 🙂

  • Rachel February 13, 2014, 12:25 pm

    I can’t get my “must haves” under the 50%. That’s really hard. Fortunately, we do have some savings. For example, we have a savings for Christmas because we have three children and family that “has” to exchange gifts. We also have an emergency savings and vacation savings. I’m concerned because my husband and is 31 and self-employed with no retirement savings. Should that be a priority?

    • CaitlinHTP February 13, 2014, 12:27 pm

      Hi Rachel 🙂 I will weigh in too. I wanted to let you know that we are both self-employed (obviously) and we JUST started to save for retirement when we were 29. Our financial adviser told us to make it a priority so we are trying really hard. It’s just so challenging. Now real advice but I did want to say that I know how it feels!

      • Katie @ Pick Any Two February 13, 2014, 12:48 pm

        I’ll add that there are some great retirement calculators online that can help you determine exactly what you should save to help you “catch up,” if you will.

    • Ashley February 13, 2014, 1:12 pm

      Hey Rachel! I totally understand- it can be really hard to get spending on “must haves” lower. In that case, try to keep your “wants” a little lower than 30% so that your savings can get as close to 20% as possible!

      But it sounds like you are on the right track with money if you were able to set up a Christmas fund AND you have an emergency fund and vacation fund. Pat yourself on the back because not nearly enough people have an emergency fund!! 🙂

      As for the retirement, I think it should definitely be a priority. The self-employment world is crazy (as I’m now learning) so I totally understand how hard it is to free up that extra cash to put towards retirement. BUT, if it is important enough to you, you’ve got to prioritize that in your spending.

      Try budgeting your money for a few months and see if there are any big categories where you could cut your spending (common places are restaurants, entertainment, cable…). That might free up some cash you could throw towards retirement.

      And remember, it’s totally allowed to start reeeeeally small with your retirement savings (every little bit counts!) but eventually you’ll get into a habit and hopefully can free up some more cash to save more and more!

    • Mary February 13, 2014, 1:17 pm

      If you don’t mind my two cents, yes, retirement savings should be a priority. There are special IRAs that self-employed individuals can open (google SEP IRA) and they possibly could be tax deductible . The earlier you can start saving for retirement ( even a small amount) the longer the money has to grow and compound.

  • Megan February 13, 2014, 12:32 pm

    I love this idea, but between our bills & student loans, our necessary payments every month equal about 3/4 of our monthly income. We are so stuck in debt, it’s so hard to scrape ourselves out. My husband and I, along with our almost2 year old daughter, plus a baby on the way, live with my parents, so we don’t even have the typical bills of someone one their own (rent/mortgage, electric, trash, water, etc.). Any advice on our situation?

    • Ashley February 13, 2014, 1:22 pm

      Hey Megan! I think in your situation it is so important to a) track your money like a hawk and b) prioritize.

      If you haven’t done this already, sign up for Mint.com and pull all your financial accounts in. And then log in every single day (SERIOUSLY) and make sure you know where your money is going! Every penny of it! With a lot of debt, it is SO important that every single dollar you spend is going to the best possible use. You might think that you’re putting as much money towards debt as you can, but by using Mint religiously, you might catch things that you previously didn’t notice. (For example, you might think you aren’t spending much on your daily starbucks run, then you log on to Mint and see that it’s cost you $100 in the last month– and I miiiiiight be speaking from experience here 😉 ) Cut out those spending leaks and throw any extra money at the debt you can!

      Also, PRIORITIZING is one of the biggest suggestions I can give you. Come up with your top 3 financial goals (getting out of debt, buying a house, whatever) and visualize them ALL.THE.TIME. Every time you walk into a store and pull your wallet out, visualize your goals and ask if what you’re about to buy is worth it- it’s just going to put you farther from getting out of debt!

      It sounds kinda hokey to do visualization like that but it’s so so SO important to keep things in perspective. Constantly reminding yourself of your goals will help you to achieve them!

      PLEASE let me know if you have any other questions- I would love to help!! And congrats on the baby on the way 🙂

  • Anna February 13, 2014, 1:16 pm

    Great tips. At 25, I am definitely starting to pay attention to budgeting. I pay $550/month for student loans so those alone cost more than 20% of my income. Luckily I can keep my “wants” lower to work it out. It’s definitely hard to start saving thought when you’re paying off expensive loans. Since the interest on my loans is fairly high, I am trying to pay them off as soon as possible. Unfortunately though this means I am not putting as much into my IRAs. I’m trying though! My best tip is to limit eating out (and limit going out to drink!). I bring my lunch to work every day and typically only go out to eat 1x week. It is not always fun, but having a secure financial future is more important to me!

    • Ashley February 13, 2014, 2:00 pm

      Hey Anna! That is awesome that you’re already taking your loan repayment seriously! You’ll be done with your loans before many of our peers even realize that they should start taking it seriously.. haha 🙂

      LOVE the tips- and I totally agree with you. Bringing my own lunch to work every day saved me soooo much money. It’s really great that you’re already realizing the importance of your finances- I really wish more people our age would do the same!! 🙂

  • Megan @ The Skinny-Life February 13, 2014, 1:22 pm

    How did you come up with the idea to start a business based on savings? What inspired you? By the way, you are a great inspiration! It’s not often you see young people with well established financial goals.

    • Ashley February 13, 2014, 2:06 pm

      Thanks so much Megan! A few years ago I realized that I was pretty good with my money, and about a year ago I started realizing how many people my age were being SO foolish with their money! It made me sad to realize how many of my peers were setting themselves up for financial difficulties in the future…

      So I started doing this as a way to teach people about their finances! I hate the fact that money is such a scary thing to so many people. I want to help as many people as I can take charge of their financial future so that no one ever feels scared/overwhelmed by bills/loans/budgets again 🙂

  • Marci February 13, 2014, 1:26 pm

    I would add a part about philanthropy. I started a spreadsheet where I keep track of each organization I donate money to, the amount, if I received a letter, who asked me for money, etc. I found myself giving blindly where I’d rather have a budget and give more to organizations I care about more.

    • Ashley February 13, 2014, 2:09 pm

      Marci, awesome point! I love that. I’m a big fan of spreadsheets and that sounds like a great way to prioritize your charity! Thanks so much for the idea!

  • Kim February 13, 2014, 1:44 pm

    I think the comments here indicate that the 50/30/20 rule is not really realistic. A lot of people cannot afford to spend 30% of their paycheck these days on wants.

    You forgot to note that, if someone is lucky enough to have matching 401k contributions from their employer that they should throw as much money as they can at it to max the match.

    • Caitlin February 13, 2014, 1:51 pm

      I think the 50-30-20 rule is a pretty good milestone for getting budgets under control. Sure, it’s not going to work for everyone. Nothing ever does – so much of budgeting depends on how much you’re making, spending priorities, what your student loans cost, whether you are paying out of pocket for health insurance, etc etc etc.

    • Ashley February 13, 2014, 2:14 pm

      You’re absolutely right, Kim. Caitlin summed it up really well- 50/30/20 is a good milestone but it might not work for everyone. Finances take a long time to perfect, so I like the idea of giving people something to work towards! If someone uses this breakdown and realizes that they are only saving 3% of their paycheck, perhaps this will motivate them to cut some expenses (if possible) and increase that number 🙂

      Good point about the 401k!!! I do believe that is one of the BEST things you can do- it’s an automatic 100% return (or 50%, whatever your employer’s case may be)! Thanks for the reminder 🙂

  • LMN February 13, 2014, 2:06 pm

    I think you provided a great basic outline of a budget. It’s so interesting how defensive ppl are about money. My husband and I minimized our wants budget and now are debt-free. You’re on point about it being a matter of priorities. We waited for a lot of the fun stuff, but can now purchase it with no worries 🙂 If everyone thinks we are poor because we don’t have smartphones, so what? Our savings makes us feel great about that decision.

    • Ashley February 13, 2014, 2:22 pm

      I LOOOOVE this comment! Hearing stories like that makes me all warm and fuzzy inside. Congrats on being debt-free!!! 🙂

      As for the smart phone thing, that made me laugh out loud! My bf doesn’t have one either and I’m pretty sure people assume it’s because he can’t afford one. Nope, he just doesn’t want it!

  • Brittney February 13, 2014, 2:14 pm

    I have never heard of the 50/30/20 rule, but as someone that is trying to pay down debt as fast as possible, I don’t think this rule works. My husband and I follow the Dave Ramsey plan (essentially paying off your smallest debt first and then snowballing to pay the rest). We have given up a lot of our “wants” temporarily to be able to be debt free in a matter of two years (1 year down, woohoo!).

    Being a year down, I must say his method has completely changed our lives for the better. We are in a much more comfortable position financially and it is totally freeing. With working his plan, our budget spreadsheet every month is a MUST. I don’t know how we lived without it before.

    For those looking to pay down debt quickly (and I’m talking ALL debt, even school loans) I would definitely recommend checking out Dave Ramsey.

    • Caitlin February 13, 2014, 2:15 pm

      So awesome that you will be debt free in two years. Congrats!!!!!!!!!

    • Ashley February 13, 2014, 2:28 pm

      Brittney, great suggestion! Dave Ramsey has an awesome method- I’m so glad to hear it is working for you!!! Congrats on being so close to debt free!!

    • LMN February 13, 2014, 2:39 pm

      This is basically what we used. Our only difference was that we still saved for retirement because I would lose my company’s match and we had a emergency fund to prevent further debt… Everything else worked great and we aren’t even 30 yet

    • leatitia February 13, 2014, 4:13 pm

      I did the snowball effect to pay off over 30 000$ of debt in 2-3 years, saving every penny. I’ve been debt free for over 3 years now and it’s amazing.

      • Brittney February 13, 2014, 4:23 pm

        I can’t wait for that feeling!!

    • Julie February 13, 2014, 5:24 pm

      We used Dave Ramsey’s plan too, and paid off over $50k in credit card/student loan debt in a little over 2 years. You really have to budget and dedicate all of your extra dollars to making higher payments, but it’s so worth it. We’ve been debt free for 4 years now (besides our mortgage), and I cannot recommend his philosophy enough. I also do not believe the 50/30/20 rule works, because almost zero principles of finance state that paying off student loan debt or credit card debt is savings. You borrowed money that you now have to pay back to someone – that is NOT savings. If that principle held true, the United States would not be 4 trillion dollars in debt. We’d be $4T in the black (which we clearly are not)!

    • Meredith February 13, 2014, 10:35 pm

      I was going to suggest Dave Ramsey too! Everyone thinks it’s “normal” to have debt (student loans, credit cards, cars, whatever), but it doesn’t need to be!

      I’ll also say with prioritizing charity/giving, if you don’t budget for it, you’ll end up giving just leftovers when you feel guilty (that’s what happens to me!). It’s important to make helping others a priority at the beginning of the month. 🙂

  • Carina February 13, 2014, 2:54 pm

    Is it just me or is this sample really just saving 10%? If a student loan repayment is “savings,” then it seems a mortgage or car payment would be “savings” too — in which case wow, most people are then saving 40% or something! Heck, even some credit card debt repayment (not the interest though) would be “savings” too; I guess you could resell a Gucci person or something you bought on credit. I’d think a better goal is 20% into legit savings — emergency fund, money market accounts, 401k, 529 plan for kids’ college, etc.

    • Ashley February 13, 2014, 5:02 pm

      Carina, I probably should have explained that section better! I use “savings” as kind of a joint savings/debt repayment area. Some people don’t count “loan repayment” as savings- and that’s fine! The important part is that you’re paying it down- however you want to classify the payments is up to you! 🙂

  • Michelle @ A Healthy Mrs February 13, 2014, 3:23 pm

    Great tips! I really should re-evaluate my spending habits — just to keep track!

    • Ashley February 13, 2014, 5:03 pm

      Thanks, Michelle! It’s always good to review and make sure you are spending on the things that matter most to you! 🙂

  • Sarah February 13, 2014, 3:53 pm

    Perhaps a better way to approach it:

    -If you’re living paycheck-to-paycheck: obviously prioritize bills and minimize those necessary expenses as much as possible (generic brands, learning to cook cheaply), and eliminate most of the “wants” (canceling Netflix and gym and trying to use library or workout DVDs instead, canceling ANY subscription or automatic renewal item). Try as hard as you can to put even $25 a month into emergency savings.

    -If you’re living slightly above paycheck-to-paycheck: try to stay as frugal as possible and don’t allow for much “lifestyle inflation” as you start to make more money. If you get $100/mo pay raise, try to put as much of that as possible towards debt repayment or emergency savings. I’m not going to fault you if you splurge every once in a while now that you have a little more breathing room in each paycheck.

    -If you’re doing pretty well: try to start paying down debts faster. If you’re considering a major purchase (such as a car or house), start putting away an estimated payment each month to “test” yourself to see if you can afford it. (For example, about 18 months before buying a car, I started saving $400/mo, which was my estimated payment + insurance.) The money you save will serve as your down payment for the major item. Continue building an emergency fund (3-6 months income), paying down debt, and start a Roth IRA or other retirement savings (or contributing more to your employer sponsored plan).

    This was my experience from my mid-late 20’s – while still in graduate school, making a bit more money at my first job, and finally landing a “real” job. Once out of graduate school and making a bit more money in my first job, I focused on debt repayment and saving for a car (I had a bit of credit card debt and a student loan that I paid more than the minimum on once I had more wiggle room in my budget).

    • Caitlin February 13, 2014, 3:56 pm

      This is an awesome plan. Thank you for sharing your experience! As I’m reading your comment, I’m simultaneously writing down things to do in my planner. 🙂 I love your idea about testing expenses before you ACTUALLY make the purchase. We did that when we were renting and hoping to buy a home; it made me so much more confident in our final offer because I knew it’d be fine.

      • Sarah February 13, 2014, 4:06 pm

        I have CapitalOne360 account (formerly ING) and in there I have a bunch of sub-accounts where I divvy up my money each month. The biggest is “Retirement Test” where I put $5500/12 away each month ($460). Then, once per year I make a lump deposit into my Roth. If you can’t afford to make the max Roth contribution, you can always start with $100/mo or whatever you can afford. This also makes me feel better in case I need that money for an absolute emergency at some point during the year. If you can’t be trusted to leave it alone, you can always set up automatic contributions once per month 🙂

        • leatitia February 13, 2014, 4:21 pm

          That’s SUCH a great idea. Have the money available in case of emergency and still contributing. It’s still important to have an real emergency fund. I was able to get mine high enough to cover 6 months of expenses. But I love the way you contribute. You also get interests from this money while having it available. Thanks for sharing!

          • Sarah February 14, 2014, 11:44 am

            Yep, I also have an actual emergency fund, where I put $100-200 a month. I occasionally dip into it if I have a large but not entirely unexpected expense, but I like to keep it at or above a certain level. So for me it’s more emergency/large purchase slush fund/don’t have to go into credit card debt fund. This year I also started contributing to a “Christmas” fund so I can amortize my holiday spending over the year (I spend A LOT of ingredients for tons and tons of Christmas cookies, in addition to gifts and other stuff. 🙂 )

  • Jane T. February 13, 2014, 4:19 pm

    Just out of curiosity – where would people put exercise? I mean, running road races and expensive gym memberships are obviously closer to wants, but… where does the “need” come in? It’s super important, and even if you aren’t going to join a gym you need some things – even just sneakers and a sports bra!

    • Caitlin February 13, 2014, 6:35 pm

      I think it’s a want. Well, it is for me in my budget. Running and racing comes out of my freebie money, like concert tickets.

  • Kerry February 13, 2014, 4:58 pm

    This was really helpful for me! I just started my first full-time job in January and have had no idea how much I’m saving/spending. Up until last month I was flying by the seat of my pants and regularly burning through my savings account. Adding everything up, my monthly expenses are pretty on-par with the 50-30-20 rule and make me think I might be able to afford a big splurge item I have been hoping for!

    The problem is, I feel like I should be saving more than 20% of my income every month. I’m contributing about $125 to a retirement account, but only saving $300 per month isn’t going to get me very far, at least that’s what it feels like when I’m staring at an empty savings account!

    • Ashley February 13, 2014, 8:16 pm

      Kerry- you are an ADVANCED budgeting student 😉 I wrote this as more of an “intro” post for people who are trying to get their spending under control. You are doing AMAZINGLY well if you are ready to save more than 20%! The more you can save the better!

  • Ali February 13, 2014, 5:29 pm

    This is really timely for me. I’m just out of my twenties and own a condo that I love, but I am leaving my job to go back for my PhD. I’m so worried about money because, although I received funding so I don’t have to pay tuition or health insurance, I do have to pay student fees/books out of pocket and I’m only going to be bringing in about 1/5 of what I’m making now a month. It’s barely going to cover rent + about 1/4 of the essentials. I’m also worried about my condo not selling before I move. Any words on advise on this one? How do I go from where I am now to where I’m going? What do I do if I still own my condo (I can’t rent it out b/c of the HOA rules)?

    • Caitlin February 13, 2014, 6:35 pm

      That sucks that you can’t rent it out. If I were in that position, I would try save as much as I could the cushion the blow when I moved. But that’s easier said that done.

    • Ashley February 13, 2014, 8:23 pm

      Ali, that is such a tough situation. I agree with Caitlin, I would just go into extreme money-saving mode to build up the biggest amount of savings before making the switch! Unfortunately I don’t know what to tell you about the condo situation 🙁

  • kath February 13, 2014, 5:48 pm

    Love talking about budgets. Great post! And love the blog redesign!

  • Claire February 13, 2014, 6:02 pm

    I just turned 30 and am seeing the light regarding my monetary indiscretions during my early/mid 20s. I recently paid off both my college loans and my car. I still keep both of those payments in my budget, however, and actually do put that money into my savings account every month to offset future car/grad school costs (resisting the strong urge to think “Oh yay hundreds of extra dollars a month! Time to hit the mall!”). That’s the ONLY way student loans should count as savings. Otherwise, it’s a bill that must be paid – a “need” – as stated by many commenters above.

    Truly the best thing that works for ME is by forcing myself to write down every penny I spend every day and put it into a budget or spreadsheet. Itemize, itemize, itemize. You’d be shocked by how much you spend on useless, worthless crap that you “omg must have right now!” I’d advise talking to an expert (like a certified financial advisor) or at least someone with many, many years worth of experience to help you set up this budget- for me, this was my mom (who was one of the most financially responsible people on the planet). She taught me so much, like to take out a set amount of spending cash at the beginning of the month and only use that for shopping, dinners out, drinks at the bar, etc. When the cash is gone, you’re done with the “fun” stuff for the month (if you have to use a credit card, take the cash out of the pile and put it right into your checking account). Yes it’s brutal at times but you’ll be thanking yourself when you’re a few years older and infinitely wiser.

    Also, if you can, pay off the credit card in full each month. By paying interest, you are giving your hard earned money to the credit card companies for absolutely nothing. You are letting them win! If you are living well within your means this shouldn’t be an issue, and if you can’t afford to do this then chances are you are spending way too much money on stuff you do not need. I know I was! Target got me multiple times every month (another money saving tip – avoid target, or only take exactly as much cash as you need).

    Like a diet and exercise regime, budgeting and saving money takes an extreme amount of sacrifice, discipline, honesty, experience, patience, trial, error, and persistence. There’s no “quick fix” or immediate gratification involved…slow and steady wins the race here. It’s not easy but it’s definitely worth it.

    • Caitlin February 13, 2014, 6:33 pm

      What awesome advice. I love it. I work with a financial planner and she has changed our life!

    • Sarah February 14, 2014, 11:50 am

      Yep, I need to remind myself that once my $100/mo student loan payment goes away (in the next few months!), I need to start putting that money towards my car or into emergency savings (instead of spending it!) 🙂

      I could definitely be more frugal about grocery shopping and eating out. When I was in grad school I was EXTREMELY frugal, and now that I can afford to eat out on a regular basis, I certainly take advantage of it. It’s expensive and not healthy! (but so awesome auuuugh I love eating out…)

  • Kate @ Coffee with Kate February 13, 2014, 7:58 pm

    Love Ashley’s post and blog! Great tips. Thanks for featuring her, Caitlin 🙂

  • Traci February 13, 2014, 10:28 pm

    My biggest expense is just paying off debts–student loans, primarily. I can’t wait to be out of my 20’s and a little further into paying them off. I see the benefit of thinking like this, but I can’t justify breaking my income into these percentages.

  • Kim February 14, 2014, 11:57 am

    Why is student loan in the savings category?

  • Kristen February 14, 2014, 12:45 pm

    This example might help explain the student loans as savings – when I was first out of undergrad and creating a budget I designated an amount that I wanted to put into my savings account every month as a undisputable amount (just like rent). Any extra money that I had at the end of the month went towards my student loans as the interest rate was higher than any savings account. Thus by paying off more towards my loans I saved money that I would have payed in interest. My undergrad loans ($15000…I was very lucky!!) were paid off by the time I was 25. In paying them off early I saved myself over $8k in interest payments had I just paid the minimun every month.

  • Sweta February 14, 2014, 3:30 pm

    Great post, Ashley!

    Caitlin, please feature Ashley again.

  • Laura February 14, 2014, 8:24 pm


    I’ve kept and Excel spreadsheet since graduating college. I’d like to try your 50-30-20 rule in order to save more money but my monthly income can vary quite a bit each month. Do you have any tips?

    • Ashley February 16, 2014, 9:01 pm

      Hey Laura! That’s so awesome that you’ve kept a spreadsheet since graduating college!!

      Fluctuating income is so tricky. I would suggest creating your budget based on your lowest income month. It might be a bit of work to get your expenses down that low, but if you can manage the 50/30/20 at that level, you’ll be able to save SO much in the months that you bring in a higher income!

      Another way I’ve heard of doing it is to live off last month’s income- if you made $1,000 in January, use that as your February budget and so on!

  • NWS February 15, 2014, 5:58 am

    Debt repayment as savings?? That’s contrived logic if I ever heard it. I mean… Your electricity bill should then be classified as savings, since the power company let you “borrow” the electricity all month before requiring repayment. Every bill is savings by this logic. There is no “debate” about this in the finance world.

Previous post:

Next post:

Healthy Tipping Point