Skip to content
United Settlement
  • Manage Your Debt
    • get-startedGet Started
    • settlementDebt Settlement
    • consolidationDebt Consolidation
    • debt-managmentDebt Management
    • bankruptcyBankruptcy
    • credit-cardCredit Card Debt
    • businessBusiness Debt
    • car-loanAuto Loan Debt
    • student-debtStudent Loan
  • Understand Your Debt
    • credit-cardCredit Card
    • business-2Small Business Debt
    • medicalMedical
    • loansLoans
    • umbrellaCredit Card Relief
    • interest-ratesInterest Rates
    • student-debtStudent Debt
  • Tools & Resources
    • faqFAQs
    • credit-cardCredit Guidance
    • calculatorCalculator
    • call-usContact Us
    • contact-usAbout Us
  • More
    • Debt Settlement
    • Debt Consolidation
    • Reviews
    • FAQs
    • About Us
    • Contact Us
    • Blog
    • Sitemap
    • Debt Relief by State
Professional Debt Relief Programs
Logo
United Settlement
phone icon 888-574-5454
client icon Client Log In
  • More
    • About Us
    • Reviews
    • Contact Us
    • Debt Settlement
    • Debt Consolidation
    • Debt Management
    • Business Debt Relief
    • Credit Card Debt Relief
    • Debt Relief by State
    • FAQs
    • Blog
    • Sitemap
Qualify For Debt Relief
Professional Debt Relief Programs
  • Manage Your Debt
    • get-startedGet Started
    • settlementDebt Settlement
    • consolidationDebt Consolidation
    • debt-managmentDebt Management
    • bankruptcyBankruptcy
    • credit-cardCredit Card Debt
    • businessBusiness Debt
    • car-loanAuto Loan Debt
    • student-debtStudent Loan
  • Understand Your Debt
    • credit-cardCredit Card
    • business-2Small Business Debt
    • medicalMedical
    • loansLoans
    • umbrellaCredit Card Relief
    • interest-ratesInterest Rates
    • student-debtStudent Debt
  • Tools & Resources
    • faqFAQs
    • credit-cardCredit Guidance
    • calculatorCalculator
    • call-usContact Us
    • contact-usAbout Us
  • More
    • Debt Settlement
    • Debt Consolidation
    • Reviews
    • FAQs
    • About Us
    • Contact Us
    • Blog
    • Sitemap
    • Debt Relief by State
United Settlement » How To Prioritize Expenses
marcel June 19, 2019

How To Prioritize Expenses

An essential component to maintaining strong personal financial well-being is constructing a monthly budget and operating within its confines. Though it isn’t always exciting or fun to live within the guidelines of a budget, the financial peace of mind that results from doing so is worth the effort.

However, even when we take the time and effort to construct a budget, questions can arise as to which expenses are more important than others. A good budget will show itemized monthly expense lines for all types of expenses, which can range from a necessary obligation such as housing, down to “wants” such as movie tickets and dining out.

The fact is, sometimes even a written budget can be difficult to stick to when expenses suddenly pile up from several different directions. So, how should we prioritize expenses, particularly in the midst of a difficult month? Let’s take a closer look.

Start With The 50/30/20 Rule

A proper monthly budget includes a comprehensive list of individual expenses with a calculated, accurate figure beside each individual expense. Take the necessary time to itemize properly, add everything up, and compare it to your total monthly disposable income. If you’re already beneath your level of disposable income, excellent!

However, for many people, this isn’t the case right away, and this is when the 50/30/20 rule comes into play. The 50/30/20 rule states that 50% of disposable income be allocated to necessary expenses, 30% be allocated to “wants,” and 20% be allocated to debt repayment and savings (including retirement contributions).

And here is where the need to prioritize expenses begins to come into play. Drawing a clear line between necessities and wants is important, as is keeping debt repayment and savings at 20%. This means that when necessities extend beyond 50% of disposable income, the “wants” category isn’t going to be as high as 30% that month – it’s going to be less. Remember debt repayment and savings has to stay at 20%.

Prioritize Your Necessary Expenses

Let’s take a look at the “necessary” expenses category first. These refer to recurring monthly obligations that often relate directly to physical survival. We all would agree that rent or a mortgage payment needs to be paid each month, and on time.

No need to consider this expense as optional. Another necessary monthly obligation for some that can’t be ignored each month relates to child support payments. Utility bills related to electricity and water can’t really be ignored either. Next up come things like groceries and medicine. These are obviously necessary, but differ in that they won’t have specific due dates and therefore offer some degree of purchasing flexibility within a given month.

Though medicines may offer less flexibility than groceries, both can vary by amount and timing. The same can be said for clothing purchases, which though necessary throughout the year, offer even greater flexibility and are prioritized beneath the other necessary expenses.

Recurring monthly expenses that are often considered necessary but can still be reduced include cell phone bills, internet, cable, car payments, insurance, and subscriptions such as Netflix, Hulu and a gym membership. The latter three begin to trend toward the “wants” category, which we will cover shortly.

Debt Repayment and Savings

Let’s jump to this category next, as it is almost as important as necessary expenses related to survival. Remember – according to the 50/30/20 rule, there is zero flexibility in terms of the 20% of monthly disposable income that must be allocated to debt repayment and savings – including retirement savings.

Any outstanding credit card debt needs to be paid off in a timely manner each month, ideally in full, but certainly at a level greater than the minimum monthly payment if economically feasible.

There is no greater short-circuit to financial well-being than carrying an insidious pile of high interest rate credit card debt that accumulates high levels of interest expense on a continual monthly basis. Equally important and often overlooked, is to contribute toward retirement savings.

Some employers offer IRA matching contributions that should absolutely be fully utilized, even if the idea of retirement seems too remote to actually matter. Fact is, the future has a nasty habit of arriving ahead of schedule, and for some people, unexpected health predicaments can force an early retirement.

Better to be prepared than to be caught off guard. Speaking of which, it is also important to save for an emergency fund  – at the minimum $1,000 – $2,500 – though a true emergency fund to cover for a job loss should include three to six months of budgeted living expenses.

Think of an emergency fund as insurance for the unexpected – sudden health expenses or auto/home maintenance repair bills can easily occur – and an emergency fund provides peace of mind along with a cushion that can keep you from relying on a credit card when the unexpected happens.

Wants

The “wants” category expenses are the fun stuff – restaurant meals, movies, concerts, electronics, vacations, etc. Though these are nice to have, that’s exactly how they need to be considered – nice to have.

When all necessary expenses and debt repayment/savings have been allocated, whatever amount of disposable income that remains can be allocated here. For single people – particularly those living in an urban environment where a car may not be necessary – it can be easier to have a generous allocation of wants that meets or even exceeds 30% of disposable income.

Fact is, single people have far fewer necessary expenses. Housing, groceries and transportation for a single person will often be be less than for an individual with, let’s say, two dependents. A married couple with a child and a spouse who may be at home taking care of the child (not working) will have a greater amount of necessary expenses that can cut into the freedom to spend within the wants category.

Housing, transportation, clothing, food, utilities, saving for retirement and a child’s college education…there’s little room for maneuvering here when a small family is involved. But for a single person who likes to go out and doesn’t have to worry about supporting others and providing higher education to a child, there’s far more latitude in the budget for wants.

Regardless, when it comes to prioritizing expenses, “wants” should always be situated at the low end of the totem pole.

Steven-Brachman

About The Author: Steven Brachman

Steven Brachman is the lead content provider for UnitedSettlement.com. A graduate of the University of Michigan with a B.A. in Economics, Steven spent several years as a registered representative in the securities industry before moving on to equity research and trading. He is also an experienced test-prep professional and admissions consultant to aspiring graduate business school students. In his spare time, Steven enjoys writing, reading, travel, music and fantasy sports.

Excellent

Based on 356 reviews.
Overall 4.4 out of 5 stars

View All Reviews

Buddy Ewing

December 28

Time and again, I did not know how to handle my debt

Time and again, I did not know how to handle my debt. Even when I paid my credit cards off, a few months later I was back in the same situation. But this year is different. I contacted United Settlement...

Lianne Finnegan

December 27

Business debt relief is what I needed when I contacted the United Settlement crew

Business debt relief is what I needed when I contacted the United Settlement crew. They are committed to helping people like me who requires more help with business debt problems. I had several loans out...

Wren Herrera

December 26

Student loan debt was the reason that I reached out to United Settlement

Student loan debt was the reason that I reached out to United Settlement. I had about 200K plus in student loan debt for my business degree. I recognized that I had to do something when I struggled to make...

Jardel Shah

December 20

There is nothing worse than falling ill and then having to deal with super expensive medical bills

There is nothing worse than falling ill and then having to deal with super expensive medical bills that you really do not have the patience or experience to handle. I was pleased with my experience with...

Iain Holt

December 14

I took out a few personal credit cards to open my boutique

I took out a few personal credit cards to open my boutique. When than money ran out, I went on to take out more loans for my business. However, this quickly turned into a disaster. Today, I now have a mountain...

Avaya Adkins

December 12

Who knew that auto loans were so negative for your credit lines

Who knew that auto loans were so negative for your credit lines? Especially, if they are not paid off right away. As a married couple, we had vowed to keep auto loan debt at bay. But, we found ourselves...

Lucien Rojas

December 07

I didn’t have a ton of debt when I contacted United Settlement

I didn’t have a ton of debt when I contacted United Settlement, but what I wanted from them was some information about how to handle my debt management. I knew that I needed some more information to get...

Madiha Matthams

December 04

Federal student loans were the reason I ended up at United Settlement

Federal student loans were the reason I ended up at United Settlement. I had about $200K to pay back and I was not quite sure where to tackle that debt once I got out of school. But I reached out to that...

Asim Horner

December 03

Everyone knows how horrible student loans are

Everyone knows how horrible student loans are. For me and my family, they had become more than just an annoying monthly bill. They had taken over our lives. That’s why I decided to take action and find...

Frankie Mckee

December 03

I wanted to be more informed about my own personal and business debt

The number one reason I chose to contact United Settlement was I wanted to be more informed about my own personal and business debt. When you have credit card debt, it can be extremely frustrating. Especially...

Justine O'Ryan

November 29

I cannot believe I was finally able to find a company to actually help me pay off my debt

I cannot believe I was finally able to find a company to actually help me pay off my debt! I thought I would forever be chained to debt. But United Settlement offered me multiple solutions for paying off...

Jerry Conley

November 21

What your money can do for you.

The great reviews that you have thanks.

Cathal Brett

November 19

Dealing with high interest auto loan debt was difficult for me and my wife

Dealing with high interest auto loan debt was difficult for me and my wife. We thought we got a good deal, but it actually was a horrible loan. So, we reached out to United Settlement, and they got to work...

Aliesha Ward

November 12

No one really wants to go bankrupt, and neither did my family

No one really wants to go bankrupt, and neither did my family. But fortunately, we did not have to go that route. It was our last resort, but United Settlement helped us figure out a way around bankruptcy...

Filip Rosas

November 08

I had been through about 5 different credit counseling agencies before I found United Settlement

I had been through about 5 different credit counseling agencies before I found United Settlement. I had read through their reviews and made the decision to move forward with them. I also was so impressed...

Susanna Fasenmyer

November 07

Save time and money

Just what I needed, already had a company I was working with and I switched because I was able to same some money. Brian and Alfred were really nice and helpful

Warren Hutchinson

November 07

As a business facing some unwanted financial difficulties

As a business facing some unwanted financial difficulties, we were at a loss for what to do next when our debt started to soar. We took a closer look at our financial situation by contacting United Settlement....

Bobbi O'Quinn

November 02

I had no clue how to create a debt management plan

I had no clue how to create a debt management plan and in fact, I didn't even know what a debt management plan was. Fortunately, I reached out to United Settlement before I had too much debt to tackle....

Dawn Mercer

October 31

Being burdened by debt is one of the biggest struggles we faced as a family

Being burdened by debt is one of the biggest struggles we faced as a family. But these people at United Settlement were very helpful in deciphering the different debts we had and then coming up with a debt...

Forrest Guest

October 29

Student loan debt was my worst enemy before I ran into United Settlement

Student loan debt was my worst enemy before I ran into United Settlement. I really thought I would just have terrible credit for the rest of my life because I will never get out from underneath it. It was...

Are you in debt? we can help

  • Amount
  • Contact

How much do you owe?

Related:

  • Debt Settlement
  • Tax Debt Relief
  • Can You Negotiate Your Own Debt
  • Debt Consolidation
  • Debt Management
  • Contact Us
  • 241 West 30th Street
    3rd Floor
    New York, NY 10001
  • (888)-574-5454
  • [email protected]
  • Privacy Policy
  • Terms & Conditions
  • Debt Relief Services
  • Debt Settlement
  • Business Debt Relief
  • Credit Card Help
  • Debt Consolidation
  • Debt Management
  • Student Loan Help
Learn more about debt relief


    • facebook
    • Google Plus
    • Twitter
    • YouTube
    • Instagram
    • Linkedin
    • facebook
    • Tools & Resources
    • Contact Us
    • About Us
    • Blog
    • Debt Calculator
    • Frequently Asked Questions
    • Sitemap
    • Reviews
    • Client Login
    Free Savings Estimate
    Apply Here
    Clients who stay according to debt relief program can realize approximate savings of 50% before fees, or 30% including fees, over 12 to 48 months. All claims are based on enrolled debts. Not all debts are eligible for enrollment. Not all clients complete our program for reasons such as: their ability to save sufficient funds. Estimates based on prior results, which will vary based on specific circumstances. We do not guarantee that your debts will be lowered by a specific amount or percentage or that you will be debt-free within a specific period. We do not assume consumer and/or business debt, provide tax, bankruptcy, accounting, legal or credit repair services/ advice. Our program is not available in all states. Please contact a tax professional to discuss tax consequences of settlement. Please consult with a bankruptcy attorney for more information on bankruptcy. If you have any additional questions please contact us.
    Copyright 2020. United Debt Settlement, LLC