Wouldn’t budgeting be simple if there was one formula that fits every person in every situation? Unfortunately, money management is not one-size-fits-all. Of course, there are formulas out there that you can try to follow. For example, here is one commonly accepted way to allocate your spending:

• Housing (20-35%)
• Personal Care (2-4%)
• Food (15-30%)
• Insurance (4-6%)
• Personal Debt (20% max)
• Health (2-8%)
• Transportation (6-20%)
• Utilities (4-7%)
• Clothing (3-10%)
• Misc. Items (1-4%)
• Savings (10% min)

If you follow this formula exactly, you might be practicing sound money management techniques.  However, I don’t necessarily recommend that you try to shove your square peg into this round hole—that just isn’t the way life works.

Consider an example from a different (though surprisingly similar in many ways) industry.  In 2005, the USDA replaced their horizontally-orientated Food Pyramid with the MyPyramid food guidance system. The system provides options to help people make smart choices. According to the USDA Website, each person has a unique Pyramid that is right for them based on their situation.

I think the USDA’s approach also works for money management. Consumers need to make their own unique smart choices. For help, they can look to guidelines rather than hard-and-fast rules. And so, I offer you the Financial Pyramid as a guideline on how to allocate your spending.  

You might be wondering what's at the top of the pyramid to make it worth running up all those stairs.  Well, that's up to you too.  What are you working toward?

I’ve always thought that comparing yourself to the Joneses is a bad thing; however, reports by Opower prove that this is not always the case. Consumers who are able to compare their energy use to their neighbors’ reduce their energy use an average of 2% to 3%. This impressive result is based on Opower’s research that proves that communicating what is standard or “the norm” can cause behavior change.

This research made me think about what consumers perceive as “normal” in the world of personal finance. I get a lot of letters from consumers who clearly want to normalize their circumstances. Letters often start with phrases like “I’m sure you hear this all the time…” and “just like everyone else, I find myself….” I understand the need for people to feel as though they are not alone (and certainly, they are not); however, I am concerned that normalizing high levels of debt and low levels of savings is doing us all an injustice.

Perhaps I am partly to blame. As a communicator, I often use startling statistics to make my point and attract attention. Yet for every statistic there is another that counters it.  I'm not saying that the personal finance world is full of sunshine and roses, but maybe it is worth the time to stop and consider things from a different perspective. Consider some of these “norms” from CreditCards.com:

• As of 2007, the majority of U.S. households had no credit card debt. (Source: Federal Reserve Board survey of consumer finances, February 2009)
• The ratio of credit card borrowers delinquent on one or more of their credit cards is [only] 1%. (Source: TransUnion, June 2008)
• 27% of U.S. families had no credit cards in 2007. (Source: Federal Reserve Board Survey of Consumer Finances, February 2009)
• Among the 35% of college students with credit cards that do not pay their balances in full every month, the average balance is $452. This is down 19% from 2007. (Source: Student Monitor annual financial services study, 2008)
• Total U.S. consumer revolving debt fell to $963.5 billion in December 2008. (Source: Federal Reserve's G.19 report, February 2009)
• About 40% of credit cardholders carry a balance of less than $1,000. (Source: myfico.com)
• On average, today's consumers are paying their bills on time. (Source: myfico.com)
• Credit card usage fell dramatically from 2007 to 2008. (Source: Javelin, "Credit Card Spending Declines" study, March 2009)
• 37% of consumers say they are using their credit cards less. (Source: Javelin Strategy & Research, "Credit Card Issuer Profitability in a Difficult Economy," July 2008)
• 45% of credit card users do not keep a balance on their credit card. (Source: ComScore, September 2008)
• An estimated 88 percent of consumers surveyed admitted to immediately shredding or simply throwing out credit card offers they receive in the mail. (Source: CreditCards.com survey, June 2007)

Imagine what might happen if we were to normalize positive financial behaviors. Who knows, maybe the Joneses are people worth comparing ourselves to.