The most widely adopted framework is the 55/25/20 split. It divides your after-tax income into three buckets:
- 55% for essentials: fixed costs you can't easily drop — rent or mortgage, utilities, groceries, transit, and insurance.
- 25% for lifestyle: the discretionary side, including dining out, travel, hobbies, and subscriptions.
- 20% for savings and debt: emergency reserves, retirement contributions, and anything above the minimum on outstanding balances.
If you'd like to pressure-test this against your own numbers, Kestrel can pull the last six months from your Spending view and re-weight the split around your real income and fixed costs.
