I’m a chronic budgeter.  I categorize and sub-categorize everything.  All of my purchases are meticulously logged in my budget as soon as I make them.

That method, however, is not for everyone.  In fact, it’s not for most people.  I’m in the minority.  Some people, especially freelancers and those with variable income, should create an itemized budget to make sure they cover all their bases.  For those with regular jobs and regular pay, it’s less necessary.

Knowing this, I’ve done some research on simpler budgets, and found an effective way to get a handle on your finances without being a number-crunching weirdo like me.

The 50/30/20 Rule

The 50/30/20 rule, popularized by Arthur Isabella, is the quickest, easiest way to start budgeting.  No software or spreadsheets required!

This super-simple budget is based around percentages of your income.  Here’s the breakdown:

50% for Essentials

Essentials include anything that’s, well, essential: rent, utilities, car payments, insurance, etc.  If you’re spending over 50% of your income on these essential expenses, your the other categories will suffer because of it.  It’s best to try to minimize this as much as possible, but 50% is a good start.

30% for Lifestyle

This is the “fun money” – going to the movies, buying burritos (I buy too many burritos), hobbies, and the like.  Anything that improves your life in non-essential ways fit into this “Lifestyle” section.

20% for Savings, Debt Payment, and Investments

You should definitely, definitely, definitely save at least 20% of your income for savings and debt payment.  Unlike the first two, which have some wiggle room, I recommend staying at or above this 20% line.  The more savings you can afford, the better.  Follow The Simple Flowchart to Financial Independence to see where your money should be going.

Don’t feel bad if you can’t save 20% – you can only do the best you can.  There’s only so much you can do to lower your “Essentials” costs, and I’d never recommend becoming some antisocial, ascetic hermit.  Gotta live life!