A recent Businessweek story suggested that you should split your take home pay into 3 major categories:
50% towards Essentials, like housing, transportation, utilities and groceries.
20% towards Savings, like retirement accounts, emergency funds, or debt payments.
30% towards Lifestyle Choices, which are basically whatever discretionary purchases you wish to make, like eating out, shopping, entertainment, etc.
So the goal should be 50/20/30
Since I already track all my spending each month, I thought it would be fun to see how my numbers stack up.
My numbers For the month of February look like this:
Essential spending: 33%
Savings: 64%
Discretionary: 3%
One big reason why I can do this is because I paid off my mortgage, so my total expenses for February, for example, were just $1559. I also don't have children.
My teeny bit of discretionary spending in February included a few things for the house, some clothing and eating lunch out a few times.
I'm saving a lot now, which is great, but I know I will be needing to spend a fair amount to make the various upgrades I feel are needed before I put my house on the market.
I'm finding myself really reluctant to spend the money as I prefer to boost my retirement savings, but I'm taking my "to do" list one slow step at a time, and trying to save some bucks by cajoling friends to help me with certain things. Like, last fall I bought a new shiny brass door handle for my storm door at front entry; the old one was an eyesore. But there are a LOT of little parts to it and I feel it's beyond my capabilities. Haven't done anything with it because it got too chilly outdoors. So I plan to ask my friend Dave for help and bribe him with another home-cooked meal. I think he'd do it even without the home-cooked meal, but at least this way I feel he's getting something in exchange.
I want to wait til it's a little warmer outside before asking him. If I had to pay a handyman to do it, they'd probably charge at least $50 to do it.
What's your spending/saving ratio?
March 23rd, 2014 at 01:45 pm
March 23rd, 2014 at 01:55 pm 1395582935
March 23rd, 2014 at 04:00 pm 1395590459
It's a teeny bit complicated to operate Zero based budgeting but it's familiar to DH whose eyes glaze over whenever I try to talk about money. Each month is a fresh start. $ 1K remains in checking as a 'float,' .
March 23rd, 2014 at 05:18 pm 1395595097
March 23rd, 2014 at 07:07 pm 1395601656
March 23rd, 2014 at 08:46 pm 1395607596
That said, I think I've always come out a little higher on the essentials than is recommended.