Most adults aspire to not live paycheck to paycheck, maintain the ability to save, and be comfortable enough to cover unexpected expenses. Unfortunately, there are many people who are not able to do so – or at least they think that’s the case. You can achieve all of these things by partaking in a simple exercise and sticking to it. I’m talking about budgeting, money management, a game plan, or a spending plan – whatever you want to call it you need to have something in place to get spending under control and to increase your saving. This blog highlights a few systems for keeping track of your expenses so you can confidently take control of your finances.

50/30/20 Rule

The 50/30/20 rule is probably the simplest budget out there, but it’s a good way to see how your spending stacks up. If you are under spending in the living or personal categories, you’re in good shape! If you find your spending is creeping out of the guidelines of this budget, it may be time to reevaluate how you spend.

Living Expenses

Living expenses are the 50% in the 50/30/20 budget. These expenses take up the biggest slice of the pie – for good reason. The things that fall into this category are the expenses you can not live without. They are housing, utilities, food, and transportation. By carving out half your monthly income for living expenses, you maintain flexibility, but put a cap on how much you should spend. If your housing has a high rent cost, you more likely live in a city and could walk to work. Thus, your transportation costs would be low. Similarly, you can keep your utility costs down by being conscious of energy use and installing fixtures that conserve water and electricity.

Personal Expenses

Personal expenses make up 30% of your monthly income. Personal expenses cover all unnecessary spending or bills that you have control over. For instance, if you are looking to cut down in this area, you can change cell phone plans, reduce cable costs, and eat at home more. This category has the most flexibility because it all comes down to your lifestyle and spending habits. Putting a 30% cap on your personal spending will give you a hard number to stay under. Just a heads up, when you begin to employ the 50/30/20 budget you very well receive a rude wake up call. Most people grossly overspend in this category. Don’t panic! Now that you are aware, you can make necessary changes.


Your saving should cover the final 20% of your income per month. Saving can also translate to “getting ahead.” You can use this money to either stow away or pay off additional debt. Either way, this money should be used to improve your financial footing. This number is also the most flexible. If you end up spending less in one or both of the categories above, then you should add the extra cash into this category. There’s nothing wrong with saving more than you’ve allotted. It may even come in handy a month you go over in another area.

Spending Plan

If a budget like the 50/30/20 plan doesn’t suit you, a spending plan can give you enough freedom to make decisions on a monthly basis. A spending plan is an alternative to the traditional budget. Budgets tend to employ a one size fits all mentality. Every month is devoted to the same budget. That method does not work for everyone.

Disclaimer: a spending plan requires a bit more work and tenacity. You need to monitor your spending closer than you would in a cap expense budget like the 50/30/20 system.

To get started, you’ll need to determine your monthly take home pay. This is what you have to work with every month, so it’s a good place to start.

Next, move on to the meat of your spending. These are your fixed monthly costs. You know, the bills you have to pay every month in order to live in your house and have everything you need. Some of these expenses will be the same month over month, but others can fluctuate. No matter what, you are going to shell out something for these items every month. Some examples of fixed monthly costs are:

  • Rent/Mortgage
  • Insurance (health & auto)
  • Internet
  • Cell phone
  • Utilities
  • Savings/Retirement

Now that you have your fixed costs for the month, subtract that from your take-home pay. The money left over is what you can spend the rest of the month. This should go without saying, but you don’t have to spend it all! If you want to save for a larger purchase, increase your emergency fund, or put money aside for a vacation, then go ahead!

The beauty of a spending plan is the simple fact that you now have juxtaposed what you need to spend with what you want to spend. You make come to some realizations because of this. You may notice that you have very little left over after the fixed costs come out. This can signal a few things for readjustment:

  1. Your fixed costs may need a little tweaking. Do you want to have more spending money? Then you may need to get rid of cable or lower your package. Maybe you don’t need as much data on your cell phone plan. Whatever the case may be, you have identified the issue and can make changes accordingly.
  2. The reason you can’t seem to get ahead with credit card bills or can’t save as much as you like is simply because you were spending more than what you should be. This can be a rude wake up call for some people, but with some work you’ll get where you want.

No matter what plan of action you adopt, set realistic expectations and be honest with yourself. Your financial goals will be the motivator between how much you spend and how much you get to bank away at the end of the month. With careful planning, a closer look, and financial adjustments, you will find yourself on better financial ground in no time.