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Budgeting 101: What to Include In Your Budget 
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Budgeting 101: What to Include In Your Budget 

Do you ever find yourself longing for financial control? The ability to balance your income and expenses, save money for the future, and steer clear of debt? It's a desire shared by many, and the key to achieving it is creating a well-structured budget. 

A well-structured budget is orderly, efficient, and personalised for your financial situation and needs. Creating and maintaining a budget is the key to taking charge of your finances and ensuring a healthy financial future. However, before diving into the world of budgeting, it's important to understand its fundamental elements, i.e., what to include in your budget. 

When you include all the necessary elements in your budget, you gain a clear understanding of your overall financial situation. This clarity can help you make informed decisions and ensures you write a budget that mirrors that situation. 

So, what should you include in your budget?

There are four things to include in your budget: Your income, your savings, your expenses, and your debt payments. This article will explore these elements and how they can empower you to create a realistic budget. 

Read Also: How to Budget and Save a Lot of Money As an Employee


The first thing to consider when creating your budget is your income; the amount of money you make monthly. If employed, this refers to your net income, the amount you take home after taxes and other deductibles. If you are self-employed, your income is the money you pay yourself monthly

Your income can come from various sources, such as your primary job, part-time work, investments, or even alimony. If you're married, and you and your partner have combined your finances, you should factor in your spouse's salary. However, it's important to consider only your regular and reliable sources of income to maintain an accurate budget. 

Your budget should be based on your income, not expected or irregular payments. For example, if you're supposed to receive child support but it doesn't come in consistently, it's best not to include it in your budget calculations. Or, if you have investments that don't generate income regularly, you shouldn't include them. 

When writing a budget, ensure that your total expenses don't exceed your income and you are living within your means. This will prevent you from experiencing a budget deficit and having to dip into your savings or borrowing to finance your lifestyle. 

Your income should sufficiently cover your living expenses and debt repayments and, importantly, allow you to save. If it doesn't, you should look for ways to lower your expenses or increase your income. 

Read Also: 7 Ideas to Diversify Your Sources of Income 


Savings represents the amount of money that is allocated for future use. It can be funds designated for emergencies, large purchases, and investments toward buying a home and planning for retirement. Setting aside a percentage of your income as savings is essential for achieving your financial goals. 

A budget plays a valuable role in determining the necessary monthly savings to reach these goals and how to allocate the funds accordingly. How much you save will depend on various factors, including income level, financial responsibilities, and long-term objectives. As a rule of thumb, you should save 10% to 20% of your monthly income.

You should treat savings as your first expense when you receive your payslip. This can be achieved by adopting a savings strategy known as "paying yourself first." It involves directing a percentage of your income to your savings or investment account and budgeting for the remainder. This strategy will ensure you save money every month and stay on track to achieve your goals. Automating your savings can further solidify this approach.

You will probably be saving for multiple goals and purchases at any given time. As such, you should strive to separate your savings account. For instance, your savings for a home downpayment should be separate from your saving to buy a washing machine. This will help you track each goal separately and ensures your stay on track to achieve each independently. To separate your savings consider using sinking funds

Read Also: 9 Common Expenses You Can Cut to Save More Money in 2023 

Debt Repayment

The only way to ensure you pay down any debt you might have is by accounting for it in your budget. This includes any outstanding loan or credit card balances you must pay monthly, HELB, car loan, and any type of loan you might be servicing, with the exemption of a mortgage loan. Unless you aren't living in the house you took a mortgage on; mortgage repayments should be considered a fixed expense that substitutes rent. 

Knowing how much debt you need pay each month will help you determine how much money you will save for future goals and how much you will spend on living expenses. Additionally, calculate exactly how much interest and principal needs to be paid off with each payment so there won't be any surprises when reviewing your budget down the line. 

To manage your debts, ensure you have a debt repayment plan. You can consider paying off smaller debts first before moving on to those larger ones, or you can prioritize high-interest loans. 

Finally, to ensure you don't stress your budget, pay close attention to your debt-to-income ratio (DTI). DTI is the percentage of your income that goes to debt repayment each month. You should keep your DTI below 35% so you have money left over for saving and living expenses. Also, consider avoiding more debt if your DTI is high.

Read Also: What is Your Debt-to-Income Ratio, and How Can You Improve It 

Living Expenses 

These are all the bills you must pay each month or the money you spend to finance your lifestyle. Living expenses can be classified into two; fixed and variable expenses. 

Fixed expenses typically consist of the necessities such as rent (or mortgage) and groceries if you have a fixed budget for that. It can also include monthly insurance premiums not deducted from your gross salary, electricity, internet, and water utilities, and subscriptions such as Netflix or gym. 

It is important that you budget for these fixed expenses first so that you know how much you have left for other spending. Your budget for fixed expenses can fluctuate especially if prices go up. Therefore, ensure your budget is flexible enough to adapt to such changes.

Variable expenses refer to things that you want but don’t necessarily need. They typically consist of expenses that might change every other month, such as miscellaneous discretionary spending (e.g., buying a new pair of shoes), charitable donations, entertainment/recreation, and emergency expenses, such as vehicle maintenance and repairs. Variable expenses are flexible, and you can easily lower or eliminate them. 

Living expenses will typically take a considerable chunk of your income. As such, you should strive to keep them manageable so that you don’t end up exhausting your budget before the month ends. The best way to do this is constantly tracking your spending and ensuring you live within your means. 

Once in a while, emergencies will present themself, and you might end up exhausting your living expense allocation. You should plan for this by building a rainy day fund you can fall back on during such times. In other months, you will have a budget surplus with money left from living expenses. If this happens, consider directing the extra money to your emergency savings.

Read Also: How to Plan and Create Your 2023 Annual Budget

How the 50/30/20 Budget Rule Can Help You (Include all these in your budget)

Now that you know what to include in your budget, you will need a budgeting method that allows you to factor in all four elements. The 50/30/20 budget can help you do that. 

The 50/30/20 is a percentage-based budget rule that allocates your monthly net income into three components: 50% for needs, 30% for wants, and 20% for savings and debt payments. 

Needs are essential living expenses, encompassing housing, utilities, food, transportation, healthcare, and childcare. 

Wants are typically the variable expenses in your budget, but these expenses allow you to personalize your budget. They include everything from discretionary and entertainment spending and emergency expenses. 30% on wants might seem extravagant, so you will need to personalise your budget. 

Depending on how much you earn, your responsibilities, and your debt, the 30% allocation might include black tax, insurance payments, and some debt repayment. 

The final 20% will cover savings and debt repayment. How you allocate will depend on your financial situation. Savings can encompass retirement contributions, an emergency fund, or specific goals such as homeownership or vacation. If you are debt-free or your only debt is a mortgage, consider allocating the entire 20% to savings. Savings can also substitute investments. 

However, if you have debts, you will need to determine how to divide your 20% to cover savings and debt repayments. How you do it will primarily be dictated by your goals. Nonetheless, you should prioritise retirement savings and paying down high-interest loans.

Read Also: “Testing the 50/30/20 Rule on My Ksh80k Salary for 5 Months” 


When creating a budget, remember to be realistic. Your budget should enable you to live a comfortable life without compromising your future. Importantly, it should be able to account for all your income. To ensure that, constantly review your budget.

Your budget should also be flexible. Life events, such as changes in income or expenses, can significantly impact your budget, so it's important to make adjustments accordingly. Remember that every month is unique, and life is unpredictable, so budgets should be able to adapt to various circumstances.

When allocating your income, prioritize the most crucial category first, your savings. Building a solid savings foundation will provide a safety net for the future and help you achieve your financial goals.

If you struggle to balance your income and expenses, don't hesitate to adjust and trim your budget. It's better to make small sacrifices now to maintain financial stability in the long run. Finally, remember to keep in mind that budgeting is an ongoing process. Stay disciplined, track your spending, and make conscious choices that align with your financial objectives.

Read Also: The 7 Types of Personal Budgets and How to Choose

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Farah Nurow is an experienced Content Writer who enjoys writing creative and educative articles meant to provoke readers' thoughts. He loves sunny weather and thick books. You can connect with him on LinkedIn.

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