Try This Simple 5-Category Budget

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Suppose you want to create a spending plan, but you don’t want to make an intricately detailed line-item budget or budgeting worksheet. Instead, you're just looking to create a budget that represents a "broad overview."

You might not want to make a budget that's as broad as the 80/20 budget or the 50/30/20 budget. Those examples work with only two or three categories. The 80/20, for example, simply advocates committing 20% of your income to savings and 80% to everything else.

For something a little more specific and structured, there's a happy medium between the two extremes. The following five-category budget allows you to break down your spending into five or six easy categories: not too few, but not too many.

The following budget, presented in five categories, is similar to one that Today Show editor Jean Chatzky unveiled as part of Oprah’s debt diet.


Housing should comprise no more than 35% of your take-home income. That includes the mortgage or rent; all home repairs and maintenance; property taxes; utilities such as electricity, gas, water, and sewer; and homeowners or renters insurance. In short, it includes every housing-related expense.


You might love luxury cars, which is great as long as transportation expenses take up no more than 15% of your take-home income. That includes any car payments you’re making, gasoline, car insurance, all repairs and maintenance, the amount you pay for parking, or—if you ride public transportation—the amount that you pay for train or subway tickets.

Remember, transportation isn't just your car payment. It includes everything: your car payment, your oil changes, your tune-ups, and car repairs such as your new radiator and timing belt.

Other Living Expenses

Other living expenses, which are predominantly discretionary expenses, should take up to 25% of your income. This includes recreational activities such as eating at restaurants, buying concert tickets, buying new clothes, going to sporting events, and taking the family on a nice vacation.


The old saying "pay yourself first" is a good motto. With each paycheck, budget to save 10% of your pay, and you might even set up a separate account that's less accessible, to reduce the temptation to spend this money. Your savings are predominantly for an emergency fund, retirement, and investments such as a new home or the kids' future education.

Debt Payoff

Debt Payoff should consume up to 15% of your income. This includes your credit cards or student loans. It does not include your mortgage payment or car payment, which are listed under "housing" and "transportation." It does include any extra payments you're making toward your mortgage and car loan beyond the minimum.

The 80/20 budget and the 50/30/20 budget both advocate savings rates of 20%, but under these budgets, "savings" included debt pay-down.

In this five-category budget, your savings and debt are listed as two separate categories. With 10% for one and 15% for the other, you’re actually spending 25% (in total) on a combination of savings and debt pay-down.

This is even more aggressive and ambitious than the other two budget models recommend. Use this five-category budget if you would like to create a workable budget that's slightly more detailed and effective, but not overly detailed or complex.