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What's your spending/saving ratio?

March 23rd, 2014 at 06:45 am

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.

5 Responses to “What's your spending/saving ratio?”

  1. creditcardfree Says:

    Awesome savings rate!! I'm sure ours is near 25%, maybe more.

  2. snafu Says:

    I really like 'Pay myself first' concept and take 20% off the top of any income, no matter the source as 'savings.' The last Tuesday of every month savings + leftover/unallocated $$ left in checking goes to buy a pre determined investment product.

    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,' .

  3. Buendia Says:

    We are right at 50-20-30. One of our discretionary items is tuition for my daughter; this will continue for the next 14 years or so (need to get her through college!).

  4. rob62521 Says:

    Fabulous savings rate!I don't think I'm as high as you, but I know we are higher than the averages listed...like you, our mortgage is paid off.

  5. CB in the City Says:

    I've tried to do this before (this ratio has been around a while; I think it originated from a book by Elizabeth Warren). I'm always defeated by what is essential, and what is discretionary. For instance, having pets is discretionary, but once you own them, the cost of maintaining is essential -- you can't just give up spending on pet food and let them starve. A certain amount of grocery shopping is essential, but buying high-end, prepared and or/organic food is discretionary. You need clothing, but when does clothing cease to be essential and begin to be decorative? I guess you just draw the lines where it feels right.

    That said, I think I've always come out a little higher on the essentials than is recommended.

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