About those Numbers in Your Budget

If you’ve spent any time trying to work out exactly how much to put in each of your budget categories, you’ve realized at one point or another that you don’t really know how much to put down in the first place.

While you could spend time on the internet searching for the amount you should be putting for each of your budget categories, you’ll realize that there may be no valuable examples to follow for a family your size, where you live, in your situation, making the amount of money you make. 

So as nice as it would be to be able to just do a quick google search for how much you should be budgeting to be normal, this information just doesn’t exist. Even a ChatGPT search resulted in a range and then proceeded to tell me it would be based on several different factors. 

The truth is, there is just no normal for a situation that’s so incredibly unique as yours. 

Even saying you should spend a certain percentage of your income wouldn’t be helpful here. Saying that since I’ve budgeted 11% of my budget to go to groceries for my family of five in Houston, you should too isn’t helpful. 

In fact, someone who isn’t making as much as us but still has five mouths to feed would likely need to increase the percentage of their take home pay to go to groceries. Groceries will naturally need to be a bigger part of their world. 

Likewise, a trip to Starbucks really is more of a special occasion for us, whereas it might not even be a drop in the bucket for someone earning more.

Instead, to land on the right amount of spending for your family, you’ll need to use historical data to guide where you start. And if you’re creating a budget for the first time? You’ll just have to guess until you gather the data. 

Then, you need a set of guiding principles to help you decide how you’ll spend your dollars.

That was my goal with the Money Chain. A hierarchy of importance for your dollars so that you’re spending them not just in ways that matter most to you, but in a way that aligns with what goal you’re trying to reach. 

So how should you be spending your limited dollars so you’re allocating them in the best possible way for your unique situation?

Using the Money Chain, prioritize how you budget your money like this:

• Retirement Investing- Set aside your “future money” so that over the course of your working life, you invest enough to create an income for yourself in your retirement years. Work to set 10-15% each month.
• Savings- The big ticket items that are most important to you. The dream trip, decorating your home, saving up for a new car. If you don’t have enough money to save here, it’s likely that too much is tied up down the chain. 
• Expenses- The categories that make up how much is costs to run your life. Housing, monthly bills, groceries and other needs. This is your biggest category group. If you aren’t saving as much as you’d like above, is your lifestyle too inflated in your expenses category? 
• Debt- Try to extinguish the cycle of debt and work to take on no more. However, if you have debt, how much of your budget does it take up? The goal is to not take on any more debt or payments so that it doesn’t eat up investing, spending, or your monthly lifestyle. 
• Lastly, you have your monthly spending. The amount of money you have left over to spend how you want after all of the above category groups have been funded to your liking. However, your monthly spending category matters too because it’s where you can live a little. Having money for impulse purchases, spending money on things you enjoy, going out, and injecting novelty into your life are all important. If you don’t have enough to spend here, you need to look up the chain to see what may be overinflated and taking up more space than it should. 

So in the end, instead of looking for advice on what you should be doing, first, gather evidence that shows how you’ve been doing, and then use the guiding principles from the Money Chain to help make informed decisions on where your money needs to go. Then, as long as your priorities are aligned with how you spend your money, it doesn’t matter how much you spend.