Personal expenses are broadly categorised in three expenditure elements:
- Basic needs: Food, shelter clothing etc
- Safety needs: Emergency fund, savings, investments, insurance, medical cover etc.
- Desired needs: this is where you want to be. It can be now or in 5, 10 or more years. (This is where your dream car, dream house, dream phone etc lies and the strategy to achieve it.
Best practice guidance is that basic needs should be within (50-70) % of your net income, safety needs in the range of (10-20) % and desired needs taking (10-30) % depending on individual circumstances, ambition and risk tolerance levels.
You are strongly advised to learn the distinction between the above words (basic, safety and desired) needs, then categorise your expenses in these three areas. It will not be easy at the start, but with practice and any required support, you will gradually learn and apply it.