In this episode, we break down the main budget categories Debt, Miscellaneous, and Recreation, and identify what expenses you should include in these three areas of your budget.  We'll also share simple yet powerful tips on how to save money and manage each of these expenses so you can budget more successfully.

Show Notes:

The 60% Rule

Food, Housing, and Transportation can take up to 60% of a budget, but no more.

  • 10 categories in a normal budget.
  • If, 3 categories take up 60% of the budget,
  • Then, 40% is available for the other 7, which average 5% - 6% each.

Main Category – Debt - 0% of Net Income

Revolving Credit Card Debt

  • Not recommended as an ongoing budget expense.

  • Use debt snowball plan to eliminate - Debt Payoff Plan @leosabo.com.
  • One credit card + debit card(s) for checking account is sufficient - easier to manage.

Credit card use is fine if:

  • You pay for budgeted items.
  • You pay them off in full every month.
  • Caution:
    • Multiple studies prove more is spent when multiple credit cards and higher credit availability exists.
    • Instant gratification more likely with access to multiple credit cards.
    • 12-18% more spent when using credit cards vs cash.
    • Make an agreement to cut up credit cards if you can’t pay them off every month.

Credit cards with rewards/points

  • Consider cost vs rewards - if there’s a hefty yearly fee it may not be worth it.
  • Will having a reward card encourage you to spend more to gain the points or rewards?
  • Will you need to spend extra money to get and use the rewards?


Main Category - Miscellaneous - Average of 5-7% of Net Income

  • Subscriptions.
  • Dry cleaning.
  • Kid’s allowances.
  • Other miscellaneous items – “ keep this low” – under $100/mo.
  • Gifts (birthdays, anniversaries, etc.).
  • Christmas gifts.
    • Should be separate from other gifts.
    • Consider opening a Christmas fund in January and add to it every month.
  • Make each expense that occurs 4 or more times per year its own subcategory and fund it monthly.

Main Category - Recreation - Average of 5-7% of Net Income

  • Cash
    • Spending money for:
      • Buying a friend lunch.
      • Coffee with your spouse or significant other.
      • Fund a hobby.
  • Entertainment
    • Date night
    • Movies
    • Shows – plays
    • Activities
  • Vacation
    • Must allocate an amount to avoid overspending.
    • Plan for it and set money aside each month.
    • Doesn’t need to be expensive.
    • Spend according to ability.

Caution: Having categories without some money allocated to them is a good way to wreck your budget!



You can access these and other resources on my Resource page.

Budget Forms and Tutorials
Spending Guidelines
Debt Payoff Plan
Gift Planning Tool