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Budget by Percentage: Create a Minimalist Budget

If you struggle with budgeting (like most of us), you may want to consider a minimalistic percentage-based budget. I used to love complicated zero-based budgets, but once I got married and had kids, my free time dropped significantly.

I’m sure you are like me and don’t have time to create detailed spreadsheets that account for every variable. If you are reading this post you want a minimalist budget that is easy to set-up and maintain. The most simple, the better budgets work.

When creating a budget by percentage all household expenses are broken down into three categories:

Needs
Wants
Saving

It is literally that simple.

Each of the three areas is then allocated a percentage of your net income. This type of budget is often called the 50/30/20 percent budget since these are often the suggested monthly budget percentages:

50% of your net income is allocated to Needs
30% of your net income is allocated to Wants
20% of your net income is allocated to Savings

To get started please download my Free Percentage Based Budgeting Form.

1. Monthly Net Income

Your monthly net income is how much money you bring home every month.

Many people have deductions already removed from their check, including retirement contributions, HSA funding, and medical insurance. You can either base your budget on the actual amount you receive each month, or add the extra’s back in.

Either way will work, but I believe you get a more accurate picture when you add the numbers back in.

So for example:

Let’s assume my take-home pay is $4,000 per month, after all of my deductions.

My current deductions could be:

Medical and dental insurance – $800
HSA Funding – $100
401K Funding – $600

So my true take-home pay would be $5,500

This amount goes at the top of your sheet and is the basis of your minimalist budget.

2. Monthly Needs:

Determining your monthly needs is a critical part of your household budgeting process. I recommend reviewing your last few months of spending to get an accurate picture of what you have spent.

Don’t just estimate; trust me, when I say you won’t get it right. Pretty much everyone underestimates how much they spend.

For example, no one wants to admit to themselves how much they are really spending on dining out.

Your monthly needs are the must have’s in your life. They are the basics like food and shelter. This would also include stuff like utilities, insurance, car payments, credit card payments.

Needs include all of the stuff that must get paid to keep your life going.

The major caution in this area is to separate your wants from your needs. You may need some new clothing, but that doesn’t mean you need to be buying clothing at Niemen Marcus.

I have to have a home internet connection since I work from home, but I have friends who consider the internet a luxury.

Everyone’s wants and needs are different. What matter is that you are honest with yourself regarding your real needs.

These are items I include in my Need portion of the budget:

Needs – 50% of Income – $2,750

Fixed Expenses (Items with a set monthly payment)

Mortgage Payment/Rent	$800
Insurance – Car/Medical/Life/Home/Renters	$600
Water/Trash/Electricity/Phone/Internet	$350
Car Payment	$250
Credit Card Payment	$100

Semi-Discretionary Spending Items (Items that may vary slightly month to month):

Groceries	$400
Gas	$225
Basic Clothing	$25

Depending on your needs you may also include some of the following items in your minimalist budget:

School fees and other child-related expenses
Vehicle or home maintenance
Charitable Giving

Total of all of your needs: $2,750

Depending on your needs, you may have to allocate a larger percentage of your budget to this portion.

These percentages are perfect world numbers. Very few people can actually make these percentages work when they first get started.

The goal is to work on your budget until these percentages actually work. You may need to pay off debt or change your percentage allocations in the beginning.

If you are struggling to cut your spending check out my class How to Find and Eliminate Spending Leaks In Your Budget. I’m biased, but I think it is a great class and I promise that it will save you money.

Want Portion of the Budget:

Wants – 30% of Budget – $1,650

Entertainment	$150
Cable/Non-Basic Phone	$150
Dining Out	$100
Vacation Funding	$200
Fashionable Clothing	$100
Extra Food	$100
New Gear for Hobbies	$100
Savings for Various Extra’s	$300
Miscellaneous Expenses	$450

Total of All Your Wants: $1,650

Everyone’s wants are different, but this is the area with a high amount of discretion. The main goal in this area is not to go above your allocated percentage and dip into your savings.

For example, notice how high the miscellaneous expenses category is. With the percentage system, you don’t need to be tracking every little expense.

It is okay to throw your random expenses in one category as long as you stay within your percentage guidelines. That is the best part of creating a budget by percentage and why a minimalist budget can be so easy to manage.

Savings portion of the budget

Saving – 20% of Budget – $1,100

Depending on your current financial situation I have different recommendations for this area.

If you are in consumer debt and actively working to pay it off, I recommend having an emergency fund of $1,000 and then putting the rest of your money towards debt reduction.
Once you are out of debt, I highly recommend creating an emergency fund, which should be 3-6 months worth of expenses.
Now for the fun stuff. Once you have paid off your debt and created an emergency fund, having 20% of your income going towards savings is the best thing ever.

Depending on your situation you could have any of the following items in your Savings bucket:

Debt Reduction	$700
Emergency Savings	$200
Other Saving Goals (Home, Car, College)	$200

If you were out of debt this may be how your Savings bucket will look:

Emergency Savings	$200
Other Saving Goals (Home, Car, College)	$200
Retirement Savings	$700

Total Saving: $1,100

Saving money is the most important key to financial success. Once you learn to delay gratification and put yourself first in the spending equation you’ll have an easier time getting ahead.

On a side note, if you are struggling to save money, I highly recommend trying out Digit. It is my absolutely favorite cheater savings program. You can read about it in my review here: How to Automate Your Savings Plan in 5 Minutes.

Keep Your Minimalist Budget Simple, Simple, Simple

Creating a budget by percentage system works because of its simplicity. When you keep everything simple and minimalistic you’ll have a significantly easier time managing your budget.

Remember too that these are suggested monthly budget percentages. Based on your financial situation, you may need to adjust the percentages to fit your needs.

Even though it is a simple budget to manage, you still need to hold yourself accountable for hitting your percentages.

When budgeting by percentage it is easier to overspend since you aren’t watching every penny. Don’t fall into bad spending habits because of your budgeting system.

Good luck with your budget!

If you want to create a Budget by Percentage system that actually works, don’t forget to download my Free Percentage Based Budgeting Forms.

Percentage Based Budgeting Worksheet

Free Downloadable PDF - Percentage Based Budgeting Worksheet

How to Create a Minimalist Budget