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    Percentage Budgeting: A Flexible Budget Alternative

    1. Shannon @ Financially Blonde

      June 3rd, 2014 at 9:07 am

      Percentage budgeting is an awesome approach, especially for freelancers. I have clients who are married and both freelance, so we agreed to the percent budgeting for them. It is stressful when the freelance income is low; however, they can’t change what is coming in, so as long as we set the percentages right, everything will get paid.

    2. Stefanie

      June 4th, 2014 at 4:56 pm

      The only time the percentage budget fails for me is when income is too low. But that’s exactly the kick in the pants I need to seek out extra income sources.

    3. Retired by 40

      June 3rd, 2014 at 9:12 am

      I have been toying with doing this, but didn’t really know how to go about it. Also, I’m nervous about doing it with such a locked down budget, But really, it should be ok, because our income stays relatively stable. I love how using a percentage budget really forces you to live within your means….as in, you will never budget over your income 😉

    4. Stefanie

      June 4th, 2014 at 4:55 pm

      SUCH an important point. You can only spend what you bring in with a percentage system.

    5. Layla

      June 3rd, 2014 at 9:13 am

      It makes perfect sense to think of your budgets in percentages. This is definitely a system I need to adopt going forward. I tend to keep my food and petrol separate to required expenses as these are areas I can spend less if needed. I think 50-60 is probably reasonable to cover essential expenses..

    6. Stefanie

      June 4th, 2014 at 4:54 pm

      That’s what I like about the percentages, you can break them up however much or little as you like. It’s totally flexible and customizable!

    7. Abigail

      June 3rd, 2014 at 9:18 am

      Its a pretty cool approach. Our budget probably works out to something similar to your breakdown, except that we still haven’t increased our IRA contributions this year. Gotta get on that. Then it’ll be about a tenth of our income.

      Like you said, I think percentages would make things more flexible for people who can’t determine how much should go in each category.

    8. Stefanie

      June 4th, 2014 at 4:53 pm

      That’s why I’m a big percentage fan. I love having that flexibility in my spending. It’s a guideline without dictating too much.

    9. John @ Wise Dollar

      June 3rd, 2014 at 9:36 am

      I think this is a great approach to budgeting! We’ve done this in the past especially as our income was much more variable. It has evened out a little bit for us lately, but still somewhat variable so we tend to stick to a percentage based model, especially when we get a bigger chunk of money so we can manage it properly.

    10. Stefanie

      June 4th, 2014 at 4:52 pm

      Great point. I think percentages are especially useful for windfalls. They ensure you don’t splurge ALL of it.

    11. Brian@ Debt Discipline

      June 3rd, 2014 at 9:54 am

      I have never used a percentage based budget. Defiantly could be use with a varied income or a useful tool as we become debt free. Adds a level of flexibility beyond the strict dollar amount guide lines.

    12. Stefanie

      June 4th, 2014 at 4:41 pm

      I’m all about having flexibility with my spending, and my earnings are always changing, so percentages are my best option personally. But as you know, it’s personal finance, and what works best for me isn’t best for everyone.

    13. Tonya@Budget and the Beach

      June 3rd, 2014 at 9:55 am

      I do a bit of both. I use actual number, but apply percentages to each check to savings buckets and taxes.

    14. Stefanie

      June 4th, 2014 at 4:40 pm

      I love a good hybrid approach.Sounds like a good strategy to me 🙂

    15. Dee @ Color Me Frugal

      June 3rd, 2014 at 10:28 am

      Our income is fairly consistent so I’ve never used a percentage budgeting system, but I can see how it would be a lifesaver for those on variable incomes! Great post, I love how you added the info from different theorists on percentage budgeting.

    16. Stefanie

      June 4th, 2014 at 4:38 pm

      At the end of the day, all the theorists include three things- needs, wants, and savings. I think as long as you’ve incorporated those three things into your own budget, regardless of how you do it- percentages, fixed, or otherwise, you’re golden.

    17. Melanie@Dear Debt

      June 3rd, 2014 at 11:00 am

      This is really helpful and interesting! I am putting mostly everything to debt, but once I can have a balanced budget I think I’d like to try this.

    18. Stefanie

      June 4th, 2014 at 4:36 pm

      The fact that you’re putting so much towards debt is totally rockstar. I think the percentages are a great way to figure your balanced budget post debt.

    19. Josh R @ CNAFinance.com

      June 3rd, 2014 at 11:34 am

      Personally, I’ve never tried percentage budgeting. I use hard dollar amounts on my bottom line income, anything over goes into savings. However, I can see how percentage budgeting can really help some people, thanks for bringing up the idea.

    20. Stefanie

      June 4th, 2014 at 4:35 pm

      I wonder if my income ever becomes more fixed if I’ll switch over to hard dollar amounts.

    21. Will

      June 3rd, 2014 at 12:49 pm

      Hmmm I don’t use the percentage method but if I up my fanciness (expensiveness) in one area of my life, I like to cut down in another. One can only handle so much fanciness. 🙂

    22. Stefanie

      June 4th, 2014 at 4:34 pm

      Haha, as long as you maintain your fancy balance, you should be in good shape 🙂

    23. Aldo @ Million Dollar Ninja

      June 3rd, 2014 at 1:45 pm

      Since my budget is pretty consistent from month to month I take a specific dollar amount approach, but I see how this could be useful for some people. This approach is good for people with irregular income and those that are good enough budgeting without needing an actual dollar amount.

    24. Stefanie

      June 4th, 2014 at 4:33 pm

      The percentages have served me well with my constantly changing income. The only time they don’t really work is when income is zero.

    25. Shannon @ The Heavy Purse

      June 3rd, 2014 at 1:53 pm

      What I love about budgeting is that it is not one size fits all, which too many people think it needs to be. It’s figuring out what works best for you – like percentage budgeting – and sticking with it. I use a bit of both percentage and hard numbers. Percentage to the extent that we set aside X% in this category and then I might refine the actual numbers at that point if I do sub-categories. I love numbers so sub-categories don’t give me a migraine, although I can certainly see how it might for others!

    26. Stefanie

      June 4th, 2014 at 4:32 pm

      There are so many options for budgets, and I think that choosing whatever you can stick with is your best bet. Just like dieting.

    27. Brian @ Luke1428

      June 3rd, 2014 at 1:55 pm

      I don’t begin with the percentages when we do our budget but I track them as the spending occurs during the month. This gives me a good idea if I’m overspending in one area or not. I have a simple spreadsheet in Excel that allows me to keep track of it all.

    28. Stefanie

      June 4th, 2014 at 4:31 pm

      I like the idea of looking at percentages in retrospect to make sure you’re on track. It’s kind of like how I like to look at the percentages on my investment accounts.

    29. Tre

      June 3rd, 2014 at 2:43 pm

      I track the percentages of our actual spending over the year. When I do our tax planning I use those percentages to estimate our annual budget.

    30. Stefanie

      June 4th, 2014 at 4:29 pm

      Another reason I love percentages- they’re such a great guideline for past, present, and future.

    31. Debt Busting Chick

      June 3rd, 2014 at 4:35 pm

      I love the idea of working with percentages. I’m currently using 55% on expenses and the rest all goes on debt. Can’t wait for the finish line.

    32. Stefanie

      June 4th, 2014 at 4:28 pm

      Wow, good for you. You are definitely busting your debt full force!

    33. Lauren

      June 3rd, 2014 at 10:57 pm

      I’ve never tried this type of budgeting. We set amounts for each category, and just try to stick to those numbers. If we go over or under, it just rolls over to the next month. I can see how it would be really helpful with a variable income, though.

    34. Stefanie

      June 4th, 2014 at 4:27 pm

      Honestly, as long as you have SOME kind of budget in place, you’re a lot better off than most people 🙂

    35. debs@debtdebs

      June 3rd, 2014 at 11:05 pm

      I budget fixed amounts but based on a rule of thumb for different categories based on %’s. I also check that the actual %’s line up to what I target, after the month is done. The rule-of-thumb I use comes from Gail Vaz-Oxlade and is 35% housing 15% transportation 25% living – then 10% savings and 15% for debt. If one category is under i.e. housing or transportation, then you can afford to put more into savings and debt. However, the only time to increase living or housing or transport is if you have no debt.

      So I guess with the rules you follow, if you have a low income month (variable income), and 60% doesn’t cover your required expenses – rent, food, utilities, car payments, what do you do? I guess wants and savings would go to zero and any shortfall would come out of Emergency Fund.

    36. Stefanie

      June 4th, 2014 at 4:27 pm

      What I like about the percentage budget is that I can adjust when necessary. When I have a low income month, I can pull from other categories, it let’s me know that I don’t have money to “play” with or “educate” with that month.

    37. Your Financial Roadmap AKA Your Budget | Financially BlondeFinancially Blonde

      June 4th, 2014 at 6:02 am

      […] good friend Stefanie just shared the fact that she uses a percentage budget approach, which is great for people who have fluctuating […]

    38. DC @ Young Adult Money

      June 4th, 2014 at 7:26 am

      While I think percentage budgets make sense for some people, I think the percentages have to be driven by how much income you have versus some generic percentage approach. My student loan payments are variable so while it would be nice to think of some random percentage to pay towards them, it’s going to be the same as a regular ‘dollar’ budget because it’s not going to change month-over-month. I guess what I’m saying is this could work if you have a lot of variable spending, but some people (like myself) have almost all fixed costs and little variable spending in their budget.

    39. Stefanie

      June 4th, 2014 at 4:19 pm

      I think if you have fixed costs and fixed income, then a fixed budget might work better. But for someone like myself with variable everything, percentages make the most sense.

    40. Holly@ClubThrifty

      June 4th, 2014 at 8:05 am

      We use a zero-sum budget which requires that we “spend” all of our money on paper at the beginning of each month. However, it seems like the balanced money formula (or something similar) is a hit with a lot of people- especially with those whose income does not fluctuate.

    41. Stefanie

      June 4th, 2014 at 4:18 pm

      I love the idea of the zero sum budget to ensure you fund all your categories, including paying yourself. I just never know what my income will be in a given month.

    42. Broke Millennial

      June 4th, 2014 at 1:57 pm

      I’m a percentage budgeter too. Just works better for my lifestyle and helps me always pay myself first! Do you think you’d change your strategy if/when you had someone else to add to the equation (be it a spouse or kids)? I debate back and forth about whether or not I’d get more neurotic about tracking everything.

    43. Stefanie

      June 4th, 2014 at 4:15 pm

      I really don’t know what’s going to happen when I make all those life changes, I’m just so not ready for any of it :/

    44. Stefanie

      June 4th, 2014 at 4:29 pm

      Any kind of budget plan is better than no budget plan, and I agree with you, what works best for you will depend on your circumstances and priorities.

    45. Suburban Finance

      June 5th, 2014 at 2:41 am

      I think you’re right, for someone with variable income it’s easier to use percentage budgeting because of the inconsistent nature of your income. Our income is pretty consistent, and so far we use dollar amounts to set up our budget. Nevertheless, I don’t put strict and rigid dollar amount but rather a looser budget to be prepared for the unexpected.

    46. The Friday Five > Million Dollar Ninja

      June 6th, 2014 at 8:32 am

      […]  Stefanie O’Connell at The Broke and Beautiful Life writes, Percentage Budgeting: A Flexible Alternative.  I like budgeting specific money amounts, but percentage budgeting has its […]

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    48. Debby

      June 7th, 2014 at 11:20 am

      I never thought about setting percentage goals, but I might give that a shot, although my income will move to a fairly fix one. It feels a little more flexible.

    49. femmefrugality

      June 7th, 2014 at 12:52 pm

      I love this system. Like you said, you need to be mindful of how much you make vs your expenses. If we were at 2k a month, 55% wouldn’t be enough to cover the bills. So you might have to adjust those percentages as you work to build your income.

    50. Emily @ evolvingPF

      June 13th, 2014 at 7:02 pm

      We used percentage-based budgeting to some extent… Whenever we have non-paycheck income, we set aside a certain percentage for taxes, IRA contributions, and charitable giving before using the rest on something fun. I think the percentage-based budgets are great to reference when you are moving or making some other big change in your recurring expenses, when you have a significant change in income, or when you are considering how much to save or devote to debt repayment. I don’t think they are super useful in the day to day because there is very little you can change on the fly. I think before we buy a house we’ll really spend time examining what we want our budget to be, percentage-wise, and base the mortgage size we want on those calculations.

    51. Stefanie

      June 15th, 2014 at 8:59 am

      I think it totally depends on your lifestyle. For me, every month is completely different- income and expense wise, so percentages are really the only thing that work until I develop a more stable way of living at least 🙂

    52. Weekly Money Roundup #28 - Color Me Frugal

      October 29th, 2014 at 3:31 pm

      […] at The Broke and Beautiful Life writes, Percentage Budgeting:  A Flexible Alternative.  Even though we don’t use a percentage budgeting system, I think this is a great post […]

    53. Beginner Financial Planning: Where Do I Start?

      July 2nd, 2015 at 5:33 pm

      […] a budget that works for you- a zero sum budget, a percentage budget, a cash only budget- the only requirement is that you remain above the make or break number- make […]

    54. How Grief Has Shattered My Budget

      July 6th, 2015 at 7:28 am

      […] but far from deprived lifestyle. My budget has been loosely based on Elizabeth Warren’s popular 50-30-20 breakdown, which allocates 50% of income for needs, 30% for wants and 20% for savings. I say “loosely” […]

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      […] Percentage Budgeting: A Flexible Alternative […]

    56. Should I Invest In Myself or Myself? My Present or My Future?

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      […] my answer is both- present and future. I’m a big fan of percentage budgeting which forces you into funding all goals at all times, but I’ve got some pretty major professional […]

    57. Aparna @ Elementum Money

      November 22nd, 2017 at 8:38 am

      It’s an interesting approach to budgeting. What might help for someone completely clueless about what they are spending their money on is to track their money for 2-3 months and then be able to allocate their incomes accordingly. I am currently in the process of discovering what and how much do I spend on the important categories to then be able to freeze on a category-wise budget.

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