While there is no “one size fits all” approach to budgeting, there are various methods that can serve as starting points when getting a budget started. The first step for any method is to take a look at what your income is in order to know the amount of money you have to work with. One budgeting method is the “20/30/50 Method”. With this method, you would distribute your income so that it goes into three different categories of expenses: Needs, Wants, and Savings and Debt. But which expenses fall into each of these categories?

Needs

Needs can also be called essentials or necessities. This section will be the category with the largest percentage, if using the “20/30/50” method, this would take up 50% of your income.  Examples of needs can include but are not limited to:

• Housing (rent)
• Bills (utilities, taxes, etc.)
• Food (groceries)
• Transportation (gas, fees, parking)
• Basic technology (internet, etc.)

Wants

Wants will be costs that are the opposite of the essentials and can be avoided or reduced. This category’s percentage should not exceed your Needs category, if using the “20/30/50” method this category would take up 30% of your income. It may not always be easy to differentiate between the two. Examples of wants can include but are not limited to:

• Eating out (meals, coffee, snacks)
• Subscriptions (apps, streaming, other media)
• Entertainment (movies/concerts)
• Latest Technology

Savings and Debt

This category will ideally be around 20% of your income. This can go towards things such as:

• Paying off credit card or loan debt
• Creating an emergency fund
• Saving for short or long-term goals (travel, large purchases)

Conclusions

It is important to keep in mind that in addition to everyone’s needs being different, everyone’s financial situation is unique as well. While there is no one type of budget that will fit everyone, we can use example budgets or budgeting methods as a starting point to learn about what works and what may need some improvement for our own budgeting plan.

Keep in mind, that we are here to help! Schedule an appointment with an Aggie Blue to Gold peer advisor and we can assist in creating a budget that works for you!