Written by: Jennifer Pieson, FPQP™


Woman budgeting, holding phone with open computer in background.Budgeting is a lot like dieting; people groan when you bring up the topic (just kidding – kind of). To be effective, both budgets and diets take discipline, a long-term outlook, and, possibly, a bit of a lifestyle change. Both are endlessly customizable, so while some people opt (or need) to use very specific plans (counting every calorie or dollar), others choose to keep an eye on their choices from a bit of a distance. Whatever your situation, some basic guidelines will allow you to get a handle on where your dollars are going and where you have room to make changes.


Reviewing your budget at least quarterly is an essential part of personal finance. Whether you’re working your first job or you’re hoping to retire soon, if you’re not paying attention to where your dollars are going, some of them will get away from you. For me and my family, it’s either dinners out or trips to Home Depot that ratchet our expenses up. These are the areas where, if we don’t pay close attention, we overspend. For others, it might be buying lunch every day or subscription services that you no longer use. In any case, occasionally reviewing your budget will show you where you can tighten up so that you can save or spend more in other areas. When organizing your financial life, it’s important to focus on the following categories: current lifestyle needs, emergency savings, retirement savings, and wants.


Current Lifestyle Needs

You should aim to spend less than 36% of your net income on housing. Your housing figure should include all expenses related to your home – rent or mortgage, insurance, property taxes, and renovations. Groceries usually clock in at around 10% of your net income, but shouldn’t go above 14%. Transportation, similarly, can fall around 12%, but shouldn’t be more than 15%. Make sure you have enough set aside for recurring expenses like car insurance, life insurance, holidays, etc. When I have the choice to pay for something in installments or in full, I almost always opt for paying in full (which usually includes a discount). I save monthly in a high-yield online savings account so that I can pay large annual expenses in full.


Emergency Savings

The standard advice is “Save between three and six months’ worth of expenses.” Toward that end, my personal target is four and a half months’ of expenses (Can’t decide? Split the difference!). Keep this money in a high-yield online savings account to maximize the amount of interest you earn. There are several good choices out there (ask your financial strategist for recommendations). My current favorite is Capital One, which has an easy-to-use website, a simple and effective app, and great customer service.


Retirement Savings

Look at retirement savings from two coordinating viewpoints. (1) Aim to save more than 10% of your GROSS salary (and, of course, the earlier you start saving, the better!). If you can save more than 10%, do so (15% is better!). Contribute *at least* enough to your workplace retirement program to receive any match (a rare case of “free money”). (2) Ideally, you should have at least 1x salary saved by age 35, 2x salary saved by age 40 and 6x salary saved by age 50. This is a good way to check in on your progress and make sure you’re on track.



Once you have the first three topics mastered, it’s time to think about having fun with your money. I am a huge proponent of targeted savings accounts. Everyone has dreams; saving even a small amount toward your dream is still progress. Baby steps are infinitely better than no steps at all. Have you always dreamed about going to Hawaii? Start a savings account and start contributing $20 per month. When you can, bump it to $30. Keep going, always keeping an eye out for a little flexibility in the budget, and before you know it, you’ll have a solid start, and over time, your dream will have morphed into reality.


Budgeting is rarely fun to talk about, but it is surprisingly empowering in practice. There’s a security that comes with knowing that you’re putting your dollars to work for you. Once you know that all of your needs are met, the fun money that’s left over somehow actually feels more fun. It’s the same feeling you get when you splurge on a banana split after eating healthfully for a week. You know you’ve met your goal, so it’s time for some guilt-free fun.


If you’d like some additional support in your budgeting efforts, two apps that are well-reviewed and user-friendly are You Need A Budget (YNAB) and Mint. YNAB is a paid app that offers a free trial and Mint is a free app.


Agili helps clients with personal budgeting every day. For more information on the financial planning services Agili offers to clients, please review the “Our Services” page of our website – and scroll down to “Financial Planning.”