Your essentials typically encompass your fundamental living costs and should make up 50% of your after-tax income. These are the non-negotiable items you require for daily living, distinct from your desires, which are things you'd enjoy but aren't essential for survival.
Examples of necessities include:
Utilities
Groceries
Health care
Student loan payments
Rent or mortgage
Transportation expenses
Credit card and other debt repayments
Childcare
Insurance
The amount allocated to necessities may evolve over time. For instance, once you've paid off your student loan, you'll have extra funds in your essentials budget. You could redirect this surplus towards other expenses, such as increasing monthly payments on your vehicle loan or mortgage, thereby accelerating your debt repayment.
Courtesy of Citizens Bank
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