The answer to this question is simple – it depends on how comfortable you want to live.

I am no financial expert but I did find two proposed budget solutions that make sense, and can give you my two cents on them:

The 60% Solution

If you’re all about simplifying your life and budget, then the 60% solution might be the ideal response to your question.

• 60% of your income goes to your monthly expenses such as housing, food, insurance, transportation.
• 10% into retirement such as 401k
• 10% into long term savings or to reduce debt, whichever is most urgent. For long term savings think index funds.
• 10% into short term savings. Think auto repairs, medical expenses, gifts etc…
• 10% spent as fun money on whatever you enjoy doing the most. Think movies, restaurants, toys.

Why I like this budget plan:

It’s simple. As long as you can create a simple spreadsheet to do the math for you (and there is really no need for budgeting software), you can maintain y our game plan without it messing with your game.

The 50/30/20 Budget

If living well within your means and securing your future are your biggest concerns, then the 50/30/20 budget makes a lot of sense. Let’s take a look at what this means:

• 50% “must-have” expenses (from your after-tax income). This expense category includes everything that you absolutely must cover month to month. If the expense can be delayed without immediate consequences, then it does not qualify.
• 30% for your “wants.” This is a very straightforward category including anything that is not an immediate necessity – vacations, fun money, clothing, misc. entertainment expenses etc…
• 20% to save and repay debt. Whatever your immediate priority is, take care of it with this part of your income.

My take on the 50/30/20 budget:

Although this plan seems simple at first, there are could be potential conflicts with how to classify an expense. For me, the headache of trying to figure out whether something I have now is a “want” or a “need” is more trouble than just having a clearly defined plan which makes the distinction.

Also, this type of budget is very difficult to follow. Just like the author suggests, most people don’t come near the 50% mark, especially in this tough economy. Most would have to exercise strong discipline to maintain this boundary and for me this would be a challenge.

I have this gut feeling that most people who are searching for ways to manage their budget and ask “how much should I spend,” are going to have an incredibly difficult time to plan for living on 50% of their income until they trim beyond what they can handle.

Which Budget Would I Choose?

Currently, I am on a single income with expenses for two. Since my bf lost his job (and is still searching for one), it has been impossible to follow any sort of manageable plan. We are fortunate enough to have a little savings nest to cushion the recent blow of job loss, but that won’t last. For me, just staying within the 80% mark of “needed” expenses is a challenge.

Once we get out of our current situation I plan on experimenting with the 60% solution, as it seems pretty simple. This plan narrows down on the definition of which expense falls into what category.  I have been using spreadsheets for some time so it shouldn’t be difficult to adjust my current spreadsheets to follow this budget.

As for you, I suggest trying a budget that makes most sense to you. Adjust for your personal situation and try to get a feel on how comfortable your daily life becomes. If it feels like you’ve got too much spare play money or not enough to pay down current debt, adjust to meet your needs. The 50/30/20 budget sounds like a challenge, but I think it is one worth taking on. This budget creates discipline, and is most likely to set you on the path of debt-free life.

Is your budget working for you with your current income?