My 10/20/3040 blog post outlines my budget philosophy. In it, I describe the best way to manage your money with round numbers and an easy-to-follow system:

10% of your after-tax monthly income goes to giving.

20% of your after-tax monthly income goes toward savings.

30% of your after-tax monthly income goes toward debt repayment.

40% of your after-tax monthly income remains to be spent on everything else – what you want and what you need.

Now, that’s a lot of wiggle room. Making smart spending decisions can make that 40% seem like more than you could ever spend – or like it’ll never be enough. The fact is that you should be able to comfortably fit all your expenses within that 40% of your after-tax salary. So how do you do it? And how do you do it so that you still get to splurge every occasionally, on a dinner out or a family movie night?


The first step in organizing your spending is to make a list of what you’re currently spending money on and divide it into two categories: “needs” and “wants.” Here are a few things that you need:

  • Having a roof over your head is a big deal – and it’s non-negotiable.
  • You’ll need to budget out enough of your spending money to adequately feed you and whoever’s in your family.
  • Having a home and food is hardly enough if you don’t have running water and electricity. Utilities are a must.
  • Getting to and from work, where you go to make your income, is a need. Granted, you can get creative with how you get around. You could buy an inexpensive used car (and pay cash) rather than a brand new one that would require a loan. If it’s feasible, you could bike to the office. Public transportation is also a flexible option for some people.

Wants are a little different. Some wants might feel like needs, and I get it. But if we’re completely honest with ourselves, we don’t need an HBO subscription to keep up with all the latest episodes of Game of Thrones. The key when you make your list of “wants” is to prioritize them.


I recommend you begin looking at your spending habits through the lens of “marginal benefit.” Most people think of spending as a money thing, but in this case it also applies to your time. If I spend time and/or money on ___ does it add satisfaction to my life? Does it positively impact my life and those around me? Does this “thing” provide enough marginal benefit for it to be worth it, or should I spend my time and hard-earned cash elsewhere?

This is more complicated than it seems at first glance. There are several questions to consider when deciding what to prioritize. After all – it’s your money. You’re completely in control of what you spend it on. As a result, you’re also in control of what your life looks like. Money can’t buy happiness, but you can choose to spend money on things or experiences that ultimately will lead to a more fulfilling life. When you’re making a prioritized list of the “wants” you’ll be spending your money on, ask yourself these things:


This question will likely help you to include things like internet, cable or TV subscriptions, a 30 GB data plan on your phone, a repeating bar and/or dinner tab, a gym membership (side note: get your tale to the gym, it’ll save you money on expensive health issues in the long run), etc. If you use something that you spend money on often, it’s probably in your life for a reason.


You may spend money on a gym membership regularly. That is something that impacts your life positively both now and in the future. You’re working on your physical health, your mental wellbeing, and you’re taking time and money to invest back into yourself. Other expenditures probably don’t have a positive impact that you’d like to see last. Maybe youg et fast food for lunch every day instead of packing one from home. Maybe you find yourself mindlessly spending money on clothes that gather dust in your closet. Honestly ask yourself if your spending decisions are bringing positivity into your days – and work to eliminate the ones that don’t.


What would you love to do more of? Do you want to spend more time mountain biking? Going to the zoo with your kids? Taking your significant other out to exciting new restaurants? Getting out on a Sunday morning for a round of golf more often than you already do?

When you evaluate what you want out of your life, your spending decisions can quickly fall into place. Maybe you can skip the daily Starbucks run, or skip the fantasy football league that you put money into to save for the things that matter to you. Freeing up small amounts of cash flow by eliminating these unimportant expenditures can help you focus your money on what you love.


This is the biggest question, so I’ve saved it for last. At the start of all client relationships, I walk my clients through a values exercise. Clients come to me for financial advice, but how can I possibly give good advice if I don’t understand what they value and why?

Every dollar you spend should be going toward something that maters to you.

Of course, this isn’t always possible. Sometimes you’re running late and you snag a McDonald’s breakfast sandwich instead of eating your usual bowl of cereal. Things happen.

But when you look at the big picture, you’ll be more fulfilled when you spend most of your “wants” money on things that contribute to the things that matter to you. Make a separate list of the most important things in your life. For some it’s family and friends, health, or hobbies. Make a list of 4-6 of them and then compare them against the list of things you want that you’re currently spending money on. What doesn’t directly relate? What can you see yourself being happier without?

Your money is just that – yours. You’re in the driver’s seat when it comes to your spending, and by weighing the pros and cons of each spending decision, you can work toward living a happier, healthier, and more fulfilled existence. Who doesn’t want that? So far, we’ve gone through the 10% giving, 20% spending, and 30% debt repayment. Those concepts probably feel like the real financial planning piece of your budget, but determining your spending is truly where you have control over how you live your life.

This portion of your financial planning can be emotionally draining. It can also be incredibly rewarding. This is where you get to see real, actionable steps you’re taking to better your financial situation and your lifestyle. It’s an exciting step, but be ready to be flexible. Your life goals and the things that make you happy are likely to change. And you’re likely to slip up and make spending mistakes occasionally – nobody’s perfect! Reevaluate your spending regularly, forgive any errors, and adjust where it’s necessary. Then keep pushing forward. You’re well on your way to changing your life for the better!