Fine Tune Your Finances: Intermediate Budgeting

by | Sep 15, 2023 | Budgeting

Are you looking to level up your budgeting game? Maybe you’ve been using your basic budget for a while and you’re starting to outgrow it. The more places your money is going, the more helpful it is to have a detailed understanding of your finances. Welcome to the world of intermediate budgeting!

First, let’s make sure you’re in the right spot. Here are some scenarios which might show intermediate budgeting is the right fit for you:

  • You’ve got a handle on the basics of budgeting, and you’re ready to get more proactive with your money
  • Your financial circumstances have recently changed, and you need to re-evaluate your financial picture
  • You have a more complex financial picture with things like homeownership costs
  • You’re interested in or comfortable leveraging obscure tax strategies or investments

If this describes you, keep reading. We’ve also got a budget spreadsheet so you can follow along. Download our template and fill it out to help you stay on track!

Not quite you? That’s okay! There is no shame in going back to basics. Take a look at our budgeting for beginners blog!

What Makes a Budget Intermediate Rather than Basic?

With basic budgeting you’re focused on categorizing your expenses and tracking the main buckets of essentials, non-essentials, and savings. Typically, there are two goals with basic budgeting: gaining awareness of where your money is going and not spending more than you’re bringing in.

Intermediate budgeting dives deeper into each category to help you track your finances more granularly within your main budgeting buckets. You may choose to track every purchase, or to tally up your expenses within subcategories and track those. Doing this will help you gain greater insight into how you’re spending, which can help you make adjustments as needed to meet your goals and needs.

The other important consideration is that intermediate budgeting involves being more proactive with your money rather than reactive. Of course, some of any budget will be impacted by things you can’t control (or change without major upheaval), like the cost of utilities or property taxes for your home. With intermediate and advantaged budgeting, you’re allocating money out prior to making purchases so you’re in front of your finances.

Image of a budget document, calculator, highlighter pens with Milli glyphs and a dollar sign icon overlaid

Can Budgets be Changed?

Budgets can – and should – change over time as your financial situation shifts! Over time, you may have fluctuations in the amount of money you earn, and that additional buying power can impact your spending and saving. Maybe your priorities change and you need to adjust to meet certain goals.

Many people also find they need to change their budget as their financial picture gets more complex. For example, when you go from renting to buying property, or navigating the world of combining finances with a partner.

Hopefully, you’re able to build a budget breakdown that accounts for some shifts, like inflation of the cost of things like groceries. But if you experience a more substantial change in your circumstances, know you can always revisit and tweak your budget as needed. It’s there to serve you, not the other way around!

Prep for Budgeting

Before you start reviewing and refining your leveled-up budget, there are a few things you’ll need at the ready. Pull up your paystubs and bank statements and online bill pay accounts, and let’s get going.

Understand your net income

To create your budget, you’ll allocate the money you have after income taxes. But, to paint an accurate picture, don’t only look at your paycheck or direct deposit amount that is deposited to your bank account. Look at your actual paystub.

Visualization of the equation monthly net income = (Paycheck + pre-tax deductions) x Paychecks per month)

You may have automatic deductions from your paycheck like health insurance or retirement contributions. You’ll want to be sure to list those in the appropriate areas of your budget.

Add your net pay (the amount in your bank account each paycheck) and pre-tax deductions to get your true post-tax income and multiply that by the number of paychecks you receive in a month. You’ll use this as your monthly budget.

If the timing or amount of your income is inconsistent, you’ll have to do some math to calculate what an average month looks like for you.

Understand your current expenses

When budgeting, you’ll determine the amount you can spend on different types of purchases based on your income and goals. Even if you’re being proactive with intermediate budgeting, you will still have to work around your current expenses. Come prepared with the exact figures for recurring bills like housing and transportation, and at least a rough estimate of what you’re currently spending for things that fluctuate in cost.

You may be tempted to set a lower spending budget for essentials so you have more room for fun purchases or saving. But be realistic about the cost of things you need, your spending habits, and your ability to save.

It’s all well and good to say you’ll cook almost all of your meals at home so you can bring down the amount you budget for dining out, but will you follow through? Only you know. When budgeting, you can challenge yourself to make financial choices that will help you meet your long-term goals faster. However, be realistic and honest with yourself so you don’t end up blowing apart your budget or need to rework it soon after.

Define your Budgeting Breakdown

Now to get rolling on the new budget! You’ll need to decide how to allocate your budget for three main categories: essentials, non-essentials, and savings. Many financial experts recommend a 50/30/20 budgeting strategy: 50% of your post- tax income for essentials, 30% for non-essential spending, and 20% for savings.

That breakdown is realistic for many people (which is why it’s popular). But if you have more disposable income, you may want to flip the percentages for spending and saving or go with a 50/25/25 breakdown. After all, financial experts recommend saving 15% of your annual gross income for retirement. If you’re only dedicating 20% of your net income to savings, there’s a chance you may not be on track for retirement, or you’re prioritizing retirement at the expense of having liquid money for more immediate goals and life events.

Next, you’ll want to allocate your net income accordingly. Let’s simplify the math for our example. For a household with a household income of $120,000 after taxes with a 50/25/25 framework, that looks like:

  • $5,000 for essentials per month
  • $2,500 for savings per month
  • $2,500 for non-essentials per month

From there, you may be able to quickly check if the breakdown looks feasible based on key bills that you recall off the top of your head. If so, proceed! If not, tweak the percentages as needed.

Pie chart showing a section with 50% for essentials, 25% for non-essentials, 15% for retirement, and 10% for savings

Budget for Essential Categories

The first and most important area of your budget is accounting for the essentials. These are things that you need to live, like food and shelter, but also other obligations like student loan repayments. In the essentials category, allocate enough to maintain a reasonable standard of living that reflects the local cost of living in your area.

  1. Housing: rent or mortgage payments, property taxes, homeowners’ or renters’ insurance, and any maintenance or repair costs.
  2. Utilities: electricity, gas, water, sewer, trash collection, phone, internet, and heating/cooling expenses.
  3. Groceries: food for home-cooked meals, and essential home supplies like cleaning products.
  4. Transportation: vehicle payments, fuel, maintenance, registration, insurance, parking fees, or public transportation and taxis or rideshares.
  5. Healthcare: health insurance premiums, copayments, prescription drugs, and other medical expenses not covered by insurance.
  6. Insurance: life insurance, disability insurance, and other essential insurance coverage you may have.
  7. Debt Payments: credit card payments, student loans, and personal loans.
  8. Childcare/Dependent Care: anything related to childcare, school or extracurricular fees, or other support.
  9. Basic Clothing: necessary clothing purchases like work attire, shoes, and weather-appropriate clothing. Be realistic about whether a clothing purchase is essential or optional!
  10. Personal Care: toiletries, grooming products, and haircuts. Like with clothing, be realistic about how much you need to spend on these items versus optional products or more high-end products than you need.

These subcategories may vary depending on your individual circumstances and living situation, so add or subtract as needed.

Budget for Savings

After budgeting for your necessary purchases, you can challenge yourself to budget for your savings next, rather than non-essential purchases. For an intermediate budget, savings needs to be prioritized – not simply taking in whatever is left over after your spending. You already know saving will help you reach your goals and build financial security. So, for whatever portion of your budget you can dedicate to savings, here are some of the ways you can allocate it.

  1. Emergency fund: covers unexpected expenses like medical emergencies, unexpected home or auto repairs, or job loss. Financial experts recommend saving three to six months’ worth of living expenses in an easily accessible account, like a high-yield savings account.
  2. Retirement savings: accounts like 401(k)s, IRAs, or other pension plans.
  3. Short-term goals: these are things with a near timeline, and usually a specific cost.
  4. Long-term goals: saving for major life events without a specific timeline, like buying or renovating a house, paying for education, starting a business.
  5. Investment savings: money for stocks, bonds, mutual funds, or other investment options to grow wealth over time.
  6. Health savings: the insurance deductible or things that may not be covered by health insurance, such as elective medical procedures.
  7. Tax savings: setting aside money to cover annual tax liabilities or estimated tax payments. This is especially important if you invest in the stock market!

Remember, the specific subcategories for your savings will vary based on your individual financial goals and priorities. However you decide to break it down for your lifestyle, contributing to these subcategories will help you stay on track and prepare for whatever the future holds.

Budget for Non-Essential Spending

Last in the budgeting process is accounting for nonessential purchases. These purchases, though optional, are some the most important. They allow you to pay for things and experiences that bring you joy and give you the motivation to keep working toward your financial goals.

Zac Fuller, a Senior Developer at Milli, says, “Make sure you spend money on things that make you happy. For example, buying gardening supplies may seem like an expense you can cut but if you truly get a lot of enjoyment out of gardening don’t be afraid to spend money on that. While you may not get any financial returns, you will get other ‘returns’ on your mental health and general wellbeing that will have positive effects in all facets of your life.”

Taking the time to carve out cost limitations for these optional purchases can mitigate the risk that they will cause financial strain due to overspending.

  1. Leisure: entertainment, recreation activities, dining out, hobbies, and subscription services you have for enjoyment.
  2. Shopping: things like clothing, electronics, and other discretionary items.
  3. Travel and vacations: trips to visit loved ones and explore the world.
  4. Gifts and celebrations: purchases for birthdays, holidays, weddings, anniversaries, and other special occasions.
  5. Home décor, furnishings, and upgrades: optional items to beautify and enhance your home.
  6. Personal care and beauty: cosmetics, skincare products, salon services, and other personal grooming items.
  7. Donations: any contributions to charity.

Why Budgeting Money is Important

If you’re an intermediate budgeter, budgeting money is important because it helps you be proactive with your money. You’re not just trying to understand where it goes for the sake of knowing. You’re budgeting to understand where it’s going so you can make the most of it. That might look like increasing your retirement savings, investing, or working toward another long-term life or financial goal. If you budget your money, you can assign it a purpose!

Which Budgeting Method is Best?

The best budgeting method is truly the one you can stick to. Some people like using a spreadsheet, some people like using an app, and some people operate best with a pen and paper method. Some like to be more granular in tracking their purchases while others are more general. The key thing is just to use your budget to be intentional with your money and have visibility on where it’s going – so you can make progress toward your own goals!

But – it’s worth saying that at Milli, we see some advantages to letting tech help you make budgeting easier. If you use an app or a spreadsheet, you can automatically do things like tallying up expenses or understanding averages. With a pen and paper, there’s just a little more margin for error if you’re typing your budget into a calculator, and that might cause you stress.


After you’ve divvied up your income into categories and tallied up your current expenses, you’ll be able to see if your budget works with the allocation percentages you chose earlier. Review and refine the budget as needed, working around your essential purchases first and then shaping the other categories.

Need some help making purchase tracking easier? When you use the Milli Visa Spending card, Milli will group your purchases by category, such as Groceries, Health, Transport, Bills, and more. This helps you stay informed about how you’re spending so you can stay on track!

Keep reading on the Milli blog:

How a Savings Account Can Help You Reach Your Financial Goals

Virtual Cards: The Upgrade Digital Payments Have Been Waiting For

How to Cover Unexpected Expenses