The Budget

Budget Organization

Some time ago I read a book (Name has been lost to me) that aligned how you use your money into five categories. If someone knows where this model came from let me know so I can give the person credit please. These categories fit into how most people could divide up their income.  I used to go overboard and categorize every expense in Quicken. This led to a messy budget I never adhered to. Last month I decided to start putting all expenses into one of these categories. That would be my budget going forward and hopefully help me save more. Let's take a look at each one and then I will share with you my target for each category.


These are your needs. Certain essential items such as food, clothing, utilities and a roof over your head. I will go into more detail later on that roof piece. That is always a hot topic between my wife and I on our housing choices over the years. I even place things like diapers and basic necessities into this category. In other words I have to have this to perform some function in my life. I don't buy it to solely get enjoyment out of it. Believe me I even tried to save a buck and be green with cotton diapers on my first kid. I did not enjoy that and neither did the baby who got poked with those safety pins. So yes I do consider disposable diapers a need.

Long Term Investment

This is where this blog comes in. As an investor in quality stocks that will pay me a dividend, I budget so that I can invest monthly. This is the tough part because I am not doing so well here. When I show you what it takes to support a family of six these days you may choke a little and decide to keep the propagation of the human race in check at your house.


This is where short term cash goes. It includes things like your emergency fund. Savings for needs that are paid quarterly or longer intervals (think home insurance). If you are older it could be for living expenses that are held as cash. This is also where I stash cash until I invest it. I get a better rate than my money market fund. Both are in Capital One ShareBuilder accounts.

Guilt Free Spending Money

Some of the money you earn should go towards things you enjoy. This is a flexible area but whatever you choose to spend it on there should be no guilt associated with it. If you enjoy investing it could go there. If you enjoy dining out (especially on those nights you are too tired to cook after a long day of work) spend it there. Gifts for family and friends also come from this category. If money is short this is where you start to turn on the frugal side of your brain.


Why would I have a budget category for charity? You don't see that too often in most budgets. I live in one of the wealthiest counties in the world. What little I give to those goes towards their needs. This sharing of wealth teaches others to share and makes it a place worth living in. Charity doesn't mean just giving to the needy or your religion. I also give to causes I have a passion for (like The Nature Conservancy) and other charitable events at work and for family. This is probably the toughest one for me to stick to. I have to pay myself and the bills first. What is left gets split (unevenly) between GFSM (Guilt Free Spending Money) and this category. When I am older and pulling in more in dividends than I need to live off of I plan on catching up in this area. I am not perfect and neither is my budget. It is a guideline to try to live by.

The Breakdown

This is the breakdown from the book I read. I think it is geared towards the young and not someone older who needs to catch up on saving. This is applied to net income (after taxes and other deductions in my paycheck like health & life insurance.)

Fixed = 60%
Investment = 10% (I do not include pre-tax 401k in this 10%. This is in addition to my 401k)
Savings = 10 %
Guilt Free Spending Money = 15%
Charity = 5 %

Does this seem like an even split?  Is there too much in GFSM? 

Image courtesy of   Stuart Miles /


  1. I'm surprised the fixed expenses are so low given the family and one income. Nice job!

    1. Thanks for reading Living At Home,
      Don't give me a "nice job" yet. I will post May shortly and see how I did against this. :-)

  2. I arrived at pretty much the same high-level categories as you.

    The method I settled on is to set my Living Expenses and Savings as fixed amounts that don't change from month to month (I review them every 6 months). So for now I always pay $3975 into my Expenses checking account and I always pay $1052.25 into my Savings account. Any extra money goes into my Investing accounts. Of the $3975 expenses, $755 of that is discretionary (or guilt-free). Charity and other gifts comes out of discretionary.

    I use sub-categories within Living Expenses in order to forecast what the expense budget needs to be for the year and to identify areas to reduce. I've posted my current budget at if you're interested to see the categories.

    Best wishes on your financial freedom journey!

    1. Thank you Dividend Life. I like how you have embedded spreadsheets on your blog. I will have to learn how to do that vs. taking screenshots of mine. Your budget is very similar to mine. I do break things down under each category and will share that as well.

    2. Using embedded spreadsheets does save a lot of time - you can use either Google Docs or Microsoft Excel for this.

      I use Excel and once you've included the HTML code for the chart or cell range in your blog post, you just update the spreadsheet file as normal and it magically gets updated in the blog post.


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This webpage is provided for general information only and nothing contained in the material constitutes a recommendation for the purchase or sale of any security. If you have any questions please feel free to contact me at dividendfamilyguy at gmail dot com.