I’ve done the budget thing before. Well, okay, I’ve tried to do the budget thing before. About a year ago, I decided to keep track of everything I spent money on, from packs of gum to rent, in hopes of becoming more financially responsible. That lasted all of two months, before I no longer cared to see how much of my money fell into the “Fun Stuff” column. But the main reason I didn’t continue tracking my purchases was that I didn’t do anything with the information—like figure out what I should be spending on entertainment and necessities.
It’s important to keep track of your finances, if only to make sure that you’re not spending more than you’re earning. But to work toward concrete goals, like saving for a vacation or cutting back on impulse purchases, you have to set spending parameters for yourself. That means knowing how much of your salary should go toward rent or mortgage payments, savings, and so forth.
How We Live vs. What We Can Live Without
As it turns out, that answer varies depending on whom you consult, as well as your individual needs. Some financial planners operate around fixed percentages, such as 10 percent of one’s income going into savings or only 30 percent being used to pay bills. But others, like Brandi Bernazzani, a financial planner based in San Francisco, prefer to come up with budgetary proportions on a case-by-case basis. “I don’t use percentages,” she shares. “I do something very specific per client, so that each client gets a comprehensive financial plan.” Aaron Forth, the director of product design for Intuit’s personal-finance group, also agrees that budgeting is a very individualized process. “It’s really difficult to live by guidelines like that,” he responds, when asked whether he recommends fixed percentages for clients. “It’s a good way to benchmark yourself, but it’s not always applicable.”
Both Bernazzani and Forth recommend the same starting point for new budgeters: tracking expenditures to see where the money’s going. That way, clients get an idea of prioritized expenses versus things they can cut back on, such as forgoing organic foods at the grocery store so that they can afford a bigger apartment. “Truthfully, for budgets to work, the places where changes need to be made have to [come from] the client,” Bernazzani explains. If such changes aren’t based on self-defined values, they’re less likely to stick.
