Earlier last month, I shared a post about the 50/30/20 rule and how I planned to apply it to my own budget. As a quick refresher, the 50/30/20 rule is a budgeting guideline that suggests allocating:
- 50% of take-home pay to essential expenses (needs),
- 30% to discretionary spending (wants), and
- 20% to savings and debt repayment.
February was the first month I fully applied this framework to my finances, and hereโs how my actual budget broke down:
- Savings: 30% ($480)
- Needs: 42% ($672)
- Wants: 28% ($448)
Below is a chart that breaksdown into specific categories of how much each expense was as a percentage of my budget:
I will be breaking down each category from largest to smallest and how I plan to either grow or shrink the respective category.
Breaking Down My Spending Categories
1. Insurance โ 23.2% of Income
My largest expense by far was auto insurance, which accounted for 23.2% of my total income. This spike was due to budgeting for two insurance payments in one month. Since my insurance is due on the 1st of the month (coinciding with payday), I wanted to ensure I had enough funds set aside in case of any paycheck delays.
Additionally, I recently learned that my insurance premium is expected to increase by 30% in April, which is why Iโve been actively negotiating my contract and shopping for better rates. Hopefully, I can secure a lower premium to reduce this expense.
2. Roth IRA Contributions โ $275
My second-largest allocation was to my Roth IRA, where I contributed $275. Since my annual contribution limit is $7,000, I would need to invest $583 per month to max it out. My goal for March is to increase my contributions beyond $275, ideally reaching at least $300.
3. Emergency Savings โ $200 (12.5% of Income)
I also allocated $200 to my emergency fund, a priority for me since unexpected expenses can drain savings quickly. As my fund grows, I plan to divide my savings into sinking funds for anticipated costs such as school expenses and car maintenance. For March, I aim to maintain or increase this savings category.
4. Spending on My Girlfriend โ $200
February included Valentineโs Day, so I spent $200 on gifts and outings. I feel the value was well worth it, but moving forward, Iโd like to reduce this category while still ensuring meaningful experiences.
5. Gasoline โ 10% of Income
I own two carsโone is fuel-efficient, while the other is a gas guzzler that I love driving. I recently got a new job that is twice the distance from home as my previous job, so I do expect my fuel expenses to increase significantly moving forward.
6. Self-Indulgences & Groceries โ 11% Combined
- 7% on self-indulgences, including solo outings and personal care items like deodorant.
- 4% on groceriesโI live with my parents, so my only grocery expense is protein shakes.
I expect these categories to stay the same or increase slightly next month.
Lessons Learned from Budgeting
1. Daily Budget Check-Ins = Peace of Mind
I developed the habit of checking my budget every morning, which gave me clarity and peace of mind throughout the day. For example, if I had $20 left for discretionary spending, I could confidently decide between two $10 meals or a meal plus an experienceโwithout stressing about overspending.
2. The Power of Knowing Your Budget
One specific moment stood out: I went Goodwill shopping with my sister with no intention of buying anything. Then, I remembered I had $60 allocated for discretionary spendingโwhich gave me the freedom to shop stress-free! I only spent $3, but the knowledge that I could spend more if I wanted to was incredibly empowering.
3. Planning Ahead for Big Expenses
Having a budget allowed me to set aside money for my car insurance payments in advance. As soon as my second paycheck hit, I calculated my upcoming expenses and adjusted my spending accordingly. This proactive approach kept me within budget while preparing for future costs.
Final Thoughts
Budgeting isnโt about restrictionโitโs about gaining control. Tracking my expenses and making adjustments as needed has given me a greater sense of financial security and flexibility. Iโm excited to continue refining my budget and learning from my spending habits.
I hope this breakdown inspires you to take control of your finances, too! If youโre not already budgeting, now is the perfect time to start. Whatโs one budgeting challenge youโve faced recently? Drop a comment below!
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