Budgeting glossary
Plain definitions of common budgeting terms, each with a short example in round numbers. Every term links to a guide or tool that covers it in more depth.
50/30/20 rule
A rule of thumb for dividing take-home pay: 50% for needs such as rent, utilities, groceries and minimum loan payments, 30% for wants such as eating out and hobbies, and 20% for savings and extra debt repayment. On $3,000 a month, that is $1,500 for needs, $900 for wants and $600 for savings. Where rent is high, needs can take more than half, so the split is often adjusted.
Related: The 50/30/20 rule and a daily budget
Budget recap
A regular look back at spending over a day, a week or a month, set against the plan. The point is to spot a pattern while you can still act on it. With a $30 daily budget, a week's plan is $210; a recap showing $245 spent means $35 over, and if most of it went on eating out, that is the place to adjust next week. My Money shows daily, weekly and monthly recaps compared with the budget.
Related: Student monthly budget
Buffer
A small amount kept aside inside a budget for minor surprises that don't deserve their own plan: a late-night taxi, a forgotten bill, a pharmacy visit. It is sometimes called an emergency buffer. An emergency fund is different: a larger savings reserve for major events such as losing a job. For example, a traveler with $640 of on-trip money keeps $80 as a buffer and spreads the other $560 over 7 days, which is $80 a day.
Related: Daily travel budget
Carry-over (rollover)
Moving unspent budget into the next day or period, or taking an overspend out of it. With a $30 daily budget, spending $22 today leaves $8 to carry over, so tomorrow starts at $38. Spending $45 means tomorrow starts at $15. A cap keeps a quiet week from turning into one oversized day. My Money caps carry-over at five days' worth of the daily allowance.
Related: The daily budget method
Daily budget
The amount you can spend on everyday things in one day. Take monthly take-home pay, subtract fixed costs and savings, and divide what is left by the days in the month: $900 of spending money over 30 days is $30 a day. It usually covers flexible spending such as food, coffee, taxis and small purchases, not rent or bills. My Money shows it as one number on the Home screen: how much you can still spend today.
Related: The daily budget method · Daily budget calculator
Discretionary spending
Spending you choose to make and could reduce without breaking a commitment: eating out, delivery, entertainment, hobbies, non-essential shopping. It is the opposite of essential spending such as rent or insurance. Small amounts add up: a $12 lunch out on 20 workdays is $240 a month.
Related: Food delivery spending
Emergency fund
Savings kept for large, unexpected events: losing a job, a medical bill, an urgent car or home repair. It is usually held in an account you can reach quickly and is not part of monthly spending money. A commonly cited target is three to six months of essential expenses; if essentials cost $2,000 a month, that is $6,000 to $12,000. It differs from a buffer, which is a small cushion inside the monthly budget.
Related: Budgeting on irregular income
Envelope budgeting
A method that gives each spending category a fixed amount, traditionally as cash in labeled envelopes, now often as separate accounts or app categories. When an envelope is empty, spending in that category stops unless you move money from another one. For example: $400 for groceries, $150 for eating out and $100 for transport. A daily budget works like a single envelope for all discretionary spending, topped up a little every day.
Related: The daily budget method
Fixed costs
Expenses that are about the same every month and hard to change in the short term: rent or mortgage, insurance, loan payments, phone and internet plans, subscriptions. Rent of $1,200, a $40 phone plan, $50 internet and $60 insurance add up to $1,350 of fixed costs a month. Taking them out first leaves the money you can actually decide about.
Related: Daily budget calculator
Irregular income
Income that changes from month to month, as with freelance work, commission, tips, gig work or seasonal jobs. A cautious way to budget it is to plan on a figure below the recent average. If the last three months brought $2,400, $3,600 and $3,000, the average is $3,000, and 75% of that is $2,250. My Money's budget assessment budgets irregular income at 75% of the recent average.
Related: Budgeting on irregular income
Net spending
What you spent minus money that came back in over the same period: refunds, friends paying you back, or income you choose to count against spending. If you spent $300 this week and a friend paid you back $40 for concert tickets, net spending is $260. In My Money, income entries offset spending in the budget.
Related: Daily travel budget
No-spend challenge
A set period, such as a day, a weekend or a month, in which you buy nothing beyond essentials you listed in advance. Rent, bills, planned groceries and transport to work still get paid; takeout, shopping and nights out stop. If a typical weekend costs $120 in eating out and shopping, a no-spend weekend keeps that $120.
Related: No-spend challenge
Overspending
Spending more than the amount budgeted for a day, a category or a period. With a $30 daily budget, a $45 day is a $15 overspend. In a daily budget with carry-over, the $15 comes out of the following days: tomorrow starts at $15, or you spread it as $5 less on each of the next three days. One overspend is normal; a pattern of them means the budget or the habits need a change.
Related: The daily budget method
Pay yourself first
Moving money to savings as soon as income arrives, before paying for day-to-day spending, instead of saving whatever is left at the end of the month. On $3,000 of take-home pay, moving $300 (10%) to savings on payday leaves $2,700 for bills and spending. An automatic transfer on payday makes it hard to forget.
Related: Daily budget calculator
Savings rate
The share of income you save, usually as a percentage of take-home pay. Saving $600 out of $3,000 take-home is a 20% savings rate. Some people calculate it on pre-tax income, so compare like with like. My Money's budget assessment offers plans that save about 30% (Saver), 20% (Balanced) or 10% (Flexible) of income.
Related: Daily budget calculator
Sinking fund
Money set aside a little each month for a known future cost, so the cost doesn't land on a single month. A $600 insurance renewal due in 12 months needs $50 a month; a $1,200 trip in 8 months needs $150 a month. Unlike an emergency fund, a sinking fund is for costs you know are coming.
Related: Student monthly budget · Daily travel budget
Take-home pay
The pay that actually reaches your account after income tax, social contributions and other deductions such as pension or health plan payments. Also called net pay. A $4,000 gross monthly salary with $800 in deductions is $3,200 take-home. Budgets start from take-home pay because it is the money you can actually spend or save.
Related: The daily budget method
Variable costs
Expenses whose amount changes from month to month: groceries, fuel, usage-based utilities, eating out. Some are needs and some are wants; either way, the amount moves. A recent average makes a fair budget figure: grocery bills of $320, $410 and $365 over three months average $365.
Related: Food delivery spending
Zero-based budgeting
A method in which every unit of income is given a job (bills, spending, savings or debt) until income minus everything assigned equals zero. With $3,000 take-home: rent $1,200, bills $350, savings $600, sinking funds $150 and everyday spending $700 add up to $3,000, leaving $0 unassigned. Zero means nothing is unplanned, not that the account is empty.
Related: The 50/30/20 rule and a daily budget
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