Reader Request: BUDGET!

Remember a while back I asked if anyone had any questions for us:

Here's the email I got from Nicole:

Maybe how you guys decide how much to budget towards things after the bills are paid. It's hard to do without using actual numbers so maybe a percent? We definitely want to save money every month but also have a night or two to go out and have fun but still have money to get things for the house if needed. We need a good plan to stick to and everything I've found so far doesn't work for us. It's definite trial and error.

 Our philosophy on life is you can't have everything (it sounds grim but it really is true). You have to sacrifice in one category to gain in another, just like you don't have an unlimited supply of time, you don't have an unlimited supply of money.
No one can tell you how to spend because we all have different things that are important to us. If going out to dinner with your friends once a week is super important to you, then steal from another category that isn't as important. I think we get into trouble when we aren't willing to sacrifice in one category for another.

For us having a house is very important so we spend 35% on housing. Having New Cars isn't as important to us so we spend less on transportation.
We've cut back in entertainment to do repairs on the house (for us that's kind of like entertainment).
You can't have everything and do everything and once we figured that out we got out and stayed out of debt.

Here's how WE spend our money:

We're on a pay ourselves first system. We pay the bills (fixed expenses like mortgage etc . . .), then we pay ourselves, meaning we put away a set amount for savings (whether it be an RRSP or just a plain old savings account), then we are free to budget the rest.

On Groceries:
When we first put together our "budget" I had a really hard time deciding what to spend on Groceries. Groceries is one of those expenses that can easily get way out of hand and is super easy to justify the expense (we all gotta eat, right?) So we decided that $500 a month, that's $125 a week, is a good amount to spend. That includes Dinners Out.
 What I did find during my research was that a thrifty family of 4 would spend around $524 a month, and a VERY liberal family of 4 could spend around $1014. 

$100 a month goes to Household expenses like soap, tin foil, cleaning supplies, paper towel, toilet paper, things of that nature.

Entertainment 
is a super variable expense in our house, some months we spend more some months we spend less, it all depends. The months we spend less gets carried over to the months we want to do more, like small trips in the summer. In general we allocate around $100 a month to entertainment. I also use my VISA points for movie tickets and gift cards to restaurants.

Housing:
In the 1960's the average American household spent 13% of their household income on housing, today the average family spends upwards of 34% (I just found that kind of interesting).  Ideally your housing costs should be around 35%, that 35% includes, property tax, utilities and household repairs. We include cable, phone etc. . . under LIVING EXPENSES.

Transportation:
Includes any car payments, insurance, gas, and auto maintenance *. Remember car parts aren't meant to last forever and you'll need to save up for repairs. Soooo many people forget about this part!
We spend $470 a month to run our cars, that includes insurance, repairs and gas . . . OUCH! I didn't realize it was that much! And that's with NO car payments!

So that's how we spend our money, you may be very different and that doesn't make you wrong, and this doesn't make me right.We all have different things that are important to us! Maybe traveling is super important to you, so spend less on housing, we get into trouble when we want the house, the trips, the stuff, everything.
My advice would be, to pay yourself (savings), pay your fixed expenses, then sit down and decide what's important to you, home, travel, shopping, luxury, charity, and divide your "leftover" money accordingly! Paying yourself first, ensures you're SAVING!
I hope that answered your question Nicole!
and if all else fails, refer to the following diagram:

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