There's a 50/20/30 rule to budgeting.
Of your after-tax income, you should spend approximately:
If you get paid irregularly, budgeting monthly is still your best bet. You need to figure out how much money you have for the month - your 'average monthly income'.
When you're a student, it's okay to treat your student debt money as income in your budget. In all other circumstances, debt is not income.
Make sure you're working with after-tax income. How to do that? Coming soon...
‘MUST' SPEND - 50%
It's your budget. Your must/fun-spends may differ from someone else's.
Ongoing expenses, big or small, occur regularly. Irregular expenses are infrequent and can be big items.
‘FUN’ SPEND - 30%
FINANCIAL GOALS - 20%
You can easily adapt our sample budgets to your needs. Once you make changes in our excel spreadsheets, you can save them on your computer.
Once you start working full time, your income and expenses become more regular.
If you're freelancing or working part-time, you may have to budget differently.
How did financial planners come up with the 50/30/20 rule?
If you get paid regularly, figure out how much you earn each month.
Monthly makes sense (even if you're paid bi-weekly) because most of your big expenses, like rent, are monthly.
If you live in an expensive city, a 70/15/15 rule is more realistic (mostly due to increased rent / housing costs). There may be periods in your life when you aren't saving at all (student / unemployed). That's fine in the short-term, but not sustainable - everyone needs to save for their future. Put aside whatever you can manage.
If you're not sure how much you're spending, look at your transaction history for the previous year (for your chequing account and credit card) and group your purchases into 'must' and 'fun' spend.