Personal Finance YouTuber Justine Nelson: The Breakdown of a Realistic Budget

Cindy Lamothe

Sun, Feb 4, 2024, 5:00 PM 4 min read

Budgeting can feel like a mystery at times. There are all of these numbers you have to figure out, and it can feel daunting when you’re not entirely sure how much to allocate to each category.

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Thankfully, you don’t have to figure it out alone. Personal finance YouTuber Justine Nelson detailed the percentage breakdown of a realistic budget in one of her recent videos for her show “Debt Free Millennials.”

“I often get asked, ‘What is a percentage I should put toward different things inside of my budget such as housing, transportation, food? What should I be spending or what should I be budgeting for?'”

Below, the money expert delved into her own takeaways for tackling your budget.

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Expenses Will Depend on Where You Live

Nelson shared data from her personal Yearly Glance budget. Currently, she and her husband spend around 30% of their annual budget on their rent in Los Angeles. She also shared that she’s spending over 15% on childcare, which is on par with data on childcare costs in her state.

“Now keep in mind, if you’ve not had a baby or you’re getting ready to, typically, when you are putting infants into childcare, you’re going to be paying the most amount of tuition per month because the child is so young and so small that they require more attention. And typically the teacher-to-baby ratio is a lot smaller.”

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She noted, however, that the cost of childcare has a lot to do with your location and where you live.

When it came to groceries, Nelson noted that she and her family spend 7% of their annual budget on this category. She also said they spend just slightly below what the average American household is spending.

She spends just 1% of her income on utilities in California.

“Keep in mind, utilities are going to vary across the U.S. just because of the climate you might be living in,” she said. “If you’re running your air a lot, then obviously this will be a lot more for you.”

“If you can go into your utilities billing statements and take a look at what you’re averaging and compare it to [Consumer Expenditure Surveys], you might be right on par,” she explained. “You might be living in a really hot place like Miami or Phoenix and the summers are just ridiculous, and you’re spending hundreds and hundreds of dollars per month on your utilities.”

She added that these kinds of reports are a good gauge of whether or not you’re overspending on specific categories.

Allocating for Savings and Retirement

Another area Nelson details inside her Yearly Glance budget is her future savings.

“This includes a little outside investing,” she said. “We currently contribute pre-tax dollars to my husband’s 401(k), to my self IRA because I’m self-employed, and then anything else we’re doing savings wise go towards a down payment and a vacation fund.

“We hear a lot about different financial experts or financial authorities out there saying that you need to be saving and investing your money and a percentage of that. And I’ve found that, too.”

Nelson pointed to data by Investopedia that specified how much you should be saving for retirement. A general rule of thumb most experts recommend is an annual retirement savings goal of 10% to 15% of pretax income.

“I think a better benchmark than this 15% is being able to continue to max out your retirement contributions to the limit,” she said. “If you have a 401(k), start your employer match — work your way up.”

She noted that if you haven’t been able to even touch the employer match, you should work on increasing that percentage rate every single year. For example, if this year, you’re contributing 2%, next year do 3%.

The next time you get a raise or a bonus, she said to increase your contribution.

“And then you can see how you can maximize that,” she said. “Because in my mind, this is the game that I’m playing. And what I’m learning from reading ‘The Psychology of Money‘ by Morgan Housel is that everyone is playing a different game.”

She said she is trying to create a net worth equal to 25 times her annual expenses, “so that my husband can take a backseat from working his 9-to-5 if he wants.”

“That’s the game that I’m playing,” she said. “You may not be playing that game. I’m going to recommend that you work on maxing out those contribution limits or do what makes you sleep at night comfortably.”

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