Updated: May 25, 2023

How to Allocate Your Finances for the Year

People who are unsure how to allocate their money are going to want to read this article to get an insight on budgeting strategies.
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To calculate your monthly expenses, add up how much you spend on rent, food, gas, utilities, and the overall cost of living. Multiply that number by 12 and you should have a rough estimate for how much money you will spend annually on the cost of living. You can then figure out how to budget your money to use for savings, travel, and other areas related to your finances.

Here is an example, using 'Sam Saver'

Sam Saver makes a total of $50,000 after taxes, annually. He wants to figure out how to reach all of his financial goals for the year, so he calculates his income, expenses, and debt. Once he is done, he determines how to budget his money for the remainder of the year.

Living expenses

The first thing Sam should do is calculate how much he spends on the cost of living. He adds up the amount he spends on major categories associated with living, and spends a total of $700 a month on rent, $400 on food, and $400 on gas, utilities, and other essential living expenses. His calculation shows he spends an average of $1,500 a month, or $18,000 throughout the entire year on living expenses.


Sam learned to always put away 20 percent of his check straight into his savings as soon as it arrives. Since he makes $50,000 a year, he takes home about $3,333 a month. So every month he puts $833 into his savings. Sam puts away about $10,000 a year.



Sam loves to travel and prides himself on going on at least one trip a year. He plans on traveling within his means until he makes more and can afford to travel internationally.

This year he plans on venturing to Canada with his friends, and he estimates the total cost of airfare and hotel for the week will be $1,250. Although he knows he probably won't waste all of his spending money, he still likes to have more than he needs, just in case. It brings the grand total of his trip to $2,000.

He decides he will save $750 to use as spending money for the week (he will put the money he doesn't spend into his savings). He plans on saving $250 every month until he takes his trip in September. So he will save $250 a month for eight months.

Debt management

Sam prides himself in managing his debt properly. Currently, he owes $40,000 in debt. His debt is a combination of $10,000 in credit cards, an auto loan for $15,000, and student loans totaling $15,000. Sam plans on paying an extra $50 to $100 each month on all of his debts.

At this rate, Sam hopes to pay off his credit card debt in less than three years.


Sam has a 401k retirement plan through his work place. He decides with his budget he can afford to put away $450 a month to use towards retirement. He knows the maximum contribution he can make in 2020 and 2021 is $19,500, but he is fine with settling for $5,400 for the year. Once he has more breathing room, he plans on putting more money away for retirement.

Leisure spending

After all of his obligations are paid, Sam can finally allocate the rest of his money for whatever he wishes. There is no sense in living life if you cannot have fun with friends, family, and coworkers.

Sam likes to go out a couple of days of the week, and on the weekends. He also likes to shop, and explore restaurants around town. He figured out that he has $334 a month to use on these types of expenses.

Don't forget the holidays

After saving for his trip to Canada, Sam decides to create a holiday budget, socking away about $1,000, or $250 for four months.

This is an example of how you can establish a budget for the year. You will need to make adjustments, depending on your lifestyle and income.

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