Few words instill fear and groans among employees and family members like BUDGETING. Setting spending allowances is tedious, disappointing, and controlling; in other words, no fun.

Nevertheless, budgeting is a necessity for running a successful household or business, and should also be one for managing your finances. Here’s why--along with some surprisingly happy news (spoiler alert: creating a personal budget isn’t nearly as tough or annoying as you think.)

Why set up a budget?

Oh, mindless spending … how we fall prey to thee. Whether we’re throwing last-minute items into our virtual or actual shopping carts (“come to think of it, I could use socks and gum”), shopping to cure whatever ails us (“retail therapy” is, after all, a thing) or taking advantage of “great deals,” (“it’s so lucky that you happened to come into our store TODAY”), we all do it all the time. Budgeting, however, forces us to set goals in all aspects of our spending lives by asking us to take a real, thoughtful look at what we can afford. It forces us to examine our current and future wants, needs, and goals, and to resist temptation.

Proportional budgeting: What is it?

Proportional budgeting is perhaps an intimidating term for a simple budgeting strategy. It requires you to consider three elements: Need. Want. Save.

In other words:

  • What do I need to spend money on (food, house, clothes, utilities, gas, car, loans, insurance)?

  • What do I want over and above what I need (impulse buys, a fancier, newer material thing, a great vacation, eating out vs. in)?

  • What do I need to save (retirement, college for my kids, caring for my parents, emergencies, healthcare)?

To answer these budget planning questions, break down your gross income (including a conservative bonus if you usually receive one) into doable proportions or percentages, and stick to those numbers.

Set up a budget by considering your needs wants, and savings.


  • A 50/20/30 budget means 50% goes to needs, 20% to wants, and 30% to savings. This could work for a young or middle-aged family with a fairly healthy income.

  • 70/20/10 may work if your income is less and/or your yearly expenses are high.

  • 40/10/50 may be ideal if savings is your biggest goal and you have your arms around your necessary expenses.

  • For most people, using 50-60% of needs, 20-30% for wants, and 20% for savings can work.

Getting started with your budget

  • Make an honest list of your fixed, annual expenses. Can any of those be negotiated? Cable? Mortgage refinance? Car insurance? If so, make doing that a priority. Whatever numbers you’re left with, add up to your “Need.”

  • Make a list of your savings goals. What do you hope to have stored away, by when (how many years for now), and for what purposes? Divide this up by years before your goal date. What’s one year? This is your “Save.”

  • What’s left? Ideally, this should be your “Want.” If you work hard to keep this number within control, you’ll accomplish the other two, more necessary budget components.

Setting up a budget is a financial must for everyone. Always compare rates on your needs and wants to see where you can save money.