Is the Five Category Budget “Just Right” for You?

The Five Category budget

Keep your budget simple with this budgeting strategy

Do you remember the story of Goldilocks? She was always searching for something that was “just right” in the middle. Raccoon Valley Bank believes that Goldilocks can teach us something about budgeting too.

Some people feel like a detailed line-item budget is too complicated or restricting for them. Others find some budgets, like the 80/20 rule are too broad. If you are looking for something in between the two that offers a general overview of your spending, the Five Category Budget may be what is “just right” for you.

  1. Housing – 35% of take home income

This category includes your mortgage or rent, home repairs as well as maintenance, annual property taxes, utilities, and homeowner’s or renter’s insurance. Simply put, you should include all of your housing-related expenses.


  1. Transportation – 15% of take home income

Not only does this section include gas, parking permits, tolls, and the cost of public transportation tickets but also the cost of your car payments, car insurance and repairs and maintenance.


  1. Other living expenses – 25% of take home income

These are primarily discretionary expenses such as dining out at restaurants, concert and sporting event tickets, new clothes, and vacations.


  1. Savings – 10% of take home income

Start by building up your emergency fund. This savings account should have enough money to cover three months’ worth of living expenses. Once you feel secure with your emergency fund, start contributing to your retirement fund.


  1. Debt Payoff – 15% of take home income

This should include credit card debt and student loans. This category does not include your minimum mortgage or car payment because those are listed housing and transportation. If you are paying more than the minimum, include that extra payment cost in the debt payoff category.

If you are trying to start a budget and want a middle-of-the-road commitment, the Five Category Budget may be the solution. If you need more advice about saving and budgeting, stop by one of our Raccoon Valley Bank locations.

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