“Mastering Your Finances: How to Budget Your Money with Percentages – Cedi Plan Formula”
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“You must gain control over your money or the lack of it will forever control you.”

-Dave Ramsey

The previous article “A-Step-Step Guide to Creating your Personal Budget” highlighted the guidelines on how to create a good budget. One of the hardest things when learning how to budget money better is figuring out what is a good budget breakdown. Budgeting your money with percentages can be a useful way to create a financial plan that helps you prioritize your spending and achieve your financial goals. To help make things easier, you must develop what I call the Cedi Plan Formula. It is a guideline on what percentage of your income should go to what. A common budgeting rule is the 50/30/20 rule, which recommends allocating 50% of your income to necessities, 30% to discretionary spending, and 20% to savings and debt repayment. The Cedi Plan Formula makes up 5 budgeting categories:

  • Save – 20%
  • Basic Expenses – 50%
  • Give – 10%
  • Fun Spending – 20%
  • Debt – 0%

So, we are going to take the 50/20/30 traditional budget rule one step further and create the 20-50-10-20-0 budget rule. That is the best way to ensure success with budgeting over the long term when you use spend save give percentages. 

NB: The formula can change to suit your level of income and expenses in terms of the percentage allocation.

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Recommended Save Percentage – 20%

Save is listed first for a reason. One of the key principles of personal finance is to “pay yourself first.” This means that you should pay your own savings and investment accounts first. You are “paying” your future self by saving for your long-term needs and expenses. Types of items to save for:

  • Emergency fund
  • Rainy day fund (or 3-6 months of expenses)
  • Retirement savings
  • Paying off debts

Save for goal-oriented items, such as:

  • Car
  • Wedding
  • Vacation
  • School fees
  • Baby care
  • Home improvement
  • Must Needed Bank Accounts etc.

“Financially smart people 


AND THEN plan the spending budget. 

Are you financially smart?” – Nita Menezes

Recommended Basic Expenses Percentage – 50%

Some people call it mandatory expenses. Either way, it is the basic needs we need to survive – shelter, food, clothing, and a mode of transportation.

Examples of Basic Expenses:

  • Mortgage / Rent
  • Utilities
  • Gas
  • Clothing
  • Medicals
  • Insurance
  • Groceries
  • Auto repair
  • Child care

These expenses DO NOT qualify as Basic Expenses:

  • Coffee lounge
  • Eating out
  • Housecleaner
  • Hair salon
  • Home improvement
  • Gifts
  • Dry cleaning

Spending more than 50% on basic expenses would stretch your money situation and leave you stressed out. Remember, we are focusing on the bare necessities. The goal with basic expenses is to stay under 50% of take-home pay. Then, cash is freed up to be used in another category. This is the same as the 50/20/30 budget rule. A raise in salary does not justify a higher mortgage or a fancier car. Be wary of lifestyle creep when a paycheck increase happens.

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Beware of little expenses; a small leak will sink great ship. – Benjamin Franklin

Recommended Give Percentage – 10%

Giving happens in many ways…with your time, your money, or your talents. It is your choice on how you choose to give and how much to give. Give money is set aside for random acts of kindness or planned giving. Many people are overwhelmed with the idea of giving when they are straddled in debt. Start small with one percent of your income. As you pay off your debt and your personal finance situation improves, keep increasing the giving percentage.

Recommended Fun Spending Percentage – 20%

Fun spending (AKA discretionary spending) is exactly what it is labeled – fun spending! This is the space in our life that feeds our hearts. It is why we work hard to have fun spending money in our lives. Spend your money where your heart desires.

Examples of Fun Spending:

  • Entertainment
  • Eating out
  • Kid activities
  • Gifts
  • Date nights
  • Vacation
  • Latest iPhone or other technology gadget
  • Anything FUN!
  • And my personal favorite…Slush money – spending money you can spend any way you want without any questions.
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Recommended Debt Percentage – 0%

Yes, debt is part of the Cedi Plan Formula. The goal is ZERO debt. Debt is the cash flow killer in your budget. With debt, it is impossible to do many of the above categories. Don’t fret…it is possible to get out of debt! It takes a dedicated plan.

Now, take what you learned about the Cedi Plan Formula and turn it into the Cedi Plan (AKA Budget). This is YOUR Cedi Plan. Not a budget.  You decide where you want to spend your money. Enjoy Freedom with the Cedi Plan.  A budget is too constricting. Do not hesitate to contact me should you require further assistance on this.

Learn to enjoy your life with money. Get out of debt. Save money.  Live life.

                               Do Your Cedi Plan Now.


Grace Quaye (PhD)

The writer is the Chief Marketing Officer (CMO), Ashfield Investment Managers and Investment Advisor. She can be reached on +233246152750, E-mail graciellaquaye@gmail.com

Queen Xorlali

By Queen Xorlali

Xorlali.com is a news, entertainment and travel blog

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