Income Size / Budget

[DisneyATlast]

I like Gail Vax-Oxlade's way of budgeting.

10% Savings

15% Transportation - Car payment, gas, car repairs, car insurance, AAA membership and the like.

15% Debt repayment - CC, personal and other loans except for car an home. It there is no debt, then you can increase your savings and other categories.

25% Life - Food, health insurance, life insurance, vacations, movies, medicines, Dr. visits and the like.

35% Housing - Mortgage, home insurance, property taxes, electric bill, heating bill, water bill and the like.



If you are too high in one category then you need to reduce another category, except savings or debt repayment, or reduce your spending in your category. The reduction could be selling your car and taking the bus, cutting out cable or whatever it takes to get within your category.

As you can see, your income does not pay into the percentages. You pick where you live based on your income and not on what you feel you deserve.

That sounds like a good plan. I don't have a mortgage so I'm pretty sure I don't spend 35% on housing, and I don't have a car payment either so I probably don't spend that much on transportation....although I do have a long commute to work, my car is good on gas, but still quite an expense.

I just downloaded an app for my phone called best budget so I can keep track of my spending and devise a budget plan.

When people hear I have no car payment or mortgage they are quick to say, "Lucky!" Um, no. I drive a 2002 small car. By no means is it my dream car or even a car I WANT....it's just a very cheap, dependable means of transport. Same with the house. It's not "nice" by most standards, but it was built by my grandfather's hands himself and it's nice to ME! I could probably afford to get a nice house in a subdivision if I wanted to put up 30+ percent of my income and live inches away from neighbors with a house just like mine. No thanks!

I got not one, but TWO bachelor's degrees partly due to the economy so I already feel behind on my savings, but I'm pretty confident if I keep my old car and stay in my house that I can save for retirement in one year what it takes some people several years to put back. Yeah, it's only 1% in retirement at the moment, but this is all very new and that was just to get the account open. Besides, my company only matches 1%. If I put in 10%, they would still only match 1%.

Savings is important, but the LIFE category is near the top of the list for me right now as well. I spent several years getting an education (which is an investment in the future itself) and while I do want to have $$$ for later, I don't want to spend every moment (or penny) on the future and forget about today. I could get hit by a bus today or find out tomorrow that I have a terminal illness. Your kids are only kids one time....you have to seize the moment every now and then. I feel like people's priorities change over time as well.

 

[ColoradoDisneyFreaks]

That sounds like a good plan. I don't have a mortgage so I'm pretty sure I don't spend 35% on housing, and I don't have a car payment either so I probably don't spend that much on transportation....although I do have a long commute to work, my car is good on gas, but still quite an expense.

I just downloaded an app for my phone called best budget so I can keep track of my spending and devise a budget plan.

When people hear I have no car payment or mortgage they are quick to say, "Lucky!" Um, no. I drive a 2002 small car. By no means is it my dream car or even a car I WANT....it's just a very cheap, dependable means of transport. Same with the house. It's not "nice" by most standards, but it was built by my grandfather's hands himself and it's nice to ME! I could probably afford to get a nice house in a subdivision if I wanted to put up 30+ percent of my income and live inches away from neighbors with a house just like mine. No thanks!

I got not one, but TWO bachelor's degrees partly due to the economy so I already feel behind on my savings, but I'm pretty confident if I keep my old car and stay in my house that I can save for retirement in one year what it takes some people several years to put back. Yeah, it's only 1% in retirement at the moment, but this is all very new and that was just to get the account open. Besides, my company only matches 1%. If I put in 10%, they would still only match 1%.

Savings is important, but the LIFE category is near the top of the list for me right now as well. I spent several years getting an education (which is an investment in the future itself) and while I do want to have $$$ for later, I don't want to spend every moment (or penny) on the future and forget about today. I could get hit by a bus today or find out tomorrow that I have a terminal illness. Your kids are only kids one time....you have to seize the moment every now and then. I feel like people's priorities change over time as well.

Personally, I think your plan is a pretty decent plan. You're getting the full company match on your 401K, so you're not leaving money on the table. You have a plan to get your budget set up including items that are going to enrich your lives, and you also plan to stay in the house you currently own, and drive your car until the wheels fall off (I do that too!).

This is your opportunity to take a deep breath, and relax for a little bit, and it sounds like you've got enough of a handle on things so that your not going to find yourself at the bottom of a deep hole after your relaxation, more power to you!

 

[crisi]

There is a magic calculator, but it takes work to get it to kick in. The magic calculator is compound interest, and after 20 years of frugality, I tend to make more in interest/dividends and growth in a year than I saved starting out. Heck, I made more in interest/dividends in gains this year than I made in SALARY starting out, and I'm not even counting my husband's investments. But:

1) I was a "super saver" from a young age. I'd maxed out 401k contributions at 24 or something. I owned a house and was building equity at 21.

2) To do #1, meant that with the whole $21k I made at 21, ($24k by 24 though!) I had to be super frugal.

There are some mental tricks you can sometimes play to keep "budgeting" from being "I can't have."

1) Delay what you see and want for 1 week (unless its on the clearance rack for less than half price).

2) Delay what you "need" (not read needs like gas or a dozen eggs, but new shoes), for at least one week.

Lets say you are the type of person who feels they need a new pair of jeans four times a year - if you can push that out ONE month between purchases, you've saved yourself an entire pair of jeans over the course of the year.

If you can push out everything like that, a few days, a week, a month - you can save a lot over the year and not feel the denial of a budget - you'll still get new shoes, just next month instead of this month (unless they actually have holes in the soles - and then my work shoes have a hole in the sole - since they are indoor only at this point, one Dr. Scholls insert later and they'll last me six more months.)

Where it doesn't matter, by the cheaper version. Whether its generic groceries or a purse that lacks a "logo." Sometimes it matters, but it doesn't have to matter all the time.

As was said above - pay yourself first. And pay yourself second. When you find yourself passing on something that you ALMOST bought, put that money towards savings or debt, don't leave it there to tempt you tomorrow.

Collect something that gains value - like stock. I view each stock I purchase as part of my collection. Its a way more profitable hobby than collecting handbags or shoes. And once I started treating it as a collection, it became a lot more fun than when I treated it as investments.

 

[Irin997]

Thanks for the advice, but I already mentioned that I started it at 1% just to have an account so that I can increase it later.

You don't know enough about my life or anyone else's to be telling people what their priorities should be.

My kids have gotten up at 5am for several years, spent years in daycare, and sacrificed sports among other things while I got an education. It is MY priority to take them on a vacation now that we're at the end of the road.

I'm obviously not flippant about savings or I wouldn't have opened an account, but I have my finances under control. Thanks!

No need to be nasty about my "suggestion" as that's all it was. I've actually walked down the exact same road as you.

 

[preschoolmom]

There is a magic calculator, but it takes work to get it to kick in. The magic calculator is compound interest, and after 20 years of frugality, I tend to make more in interest/dividends and growth in a year than I saved starting out. Heck, I made more in interest/dividends in gains this year than I made in SALARY starting out, and I'm not even counting my husband's investments. But:

1) I was a "super saver" from a young age. I'd maxed out 401k contributions at 24 or something. I owned a house and was building equity at 21.

2) To do #1, meant that with the whole $21k I made at 21, ($24k by 24 though!) I had to be super frugal.

There are some mental tricks you can sometimes play to keep "budgeting" from being "I can't have."

1) Delay what you see and want for 1 week (unless its on the clearance rack for less than half price).

2) Delay what you "need" (not read needs like gas or a dozen eggs, but new shoes), for at least one week.

Lets say you are the type of person who feels they need a new pair of jeans four times a year - if you can push that out ONE month between purchases, you've saved yourself an entire pair of jeans over the course of the year.

If you can push out everything like that, a few days, a week, a month - you can save a lot over the year and not feel the denial of a budget - you'll still get new shoes, just next month instead of this month (unless they actually have holes in the soles - and then my work shoes have a hole in the sole - since they are indoor only at this point, one Dr. Scholls insert later and they'll last me six more months.)

Where it doesn't matter, by the cheaper version. Whether its generic groceries or a purse that lacks a "logo." Sometimes it matters, but it doesn't have to matter all the time.

As was said above - pay yourself first. And pay yourself second. When you find yourself passing on something that you ALMOST bought, put that money towards savings or debt, don't leave it there to tempt you tomorrow.

Collect something that gains value - like stock. I view each stock I purchase as part of my collection. Its a way more profitable hobby than collecting handbags or shoes. And once I started treating it as a collection, it became a lot more fun than when I treated it as investments.

I love this post!

 

[preschoolmom]

I like Gail Vax-Oxlade's way of budgeting.

10% Savings

15% Transportation - Car payment, gas, car repairs, car insurance, AAA membership and the like.

15% Debt repayment - CC, personal and other loans except for car an home. It there is no debt, then you can increase your savings and other categories.

25% Life - Food, health insurance, life insurance, vacations, movies, medicines, Dr. visits and the like.

35% Housing - Mortgage, home insurance, property taxes, electric bill, heating bill, water bill and the like.



If you are too high in one category then you need to reduce another category, except savings or debt repayment, or reduce your spending in your category. The reduction could be selling your car and taking the bus, cutting out cable or whatever it takes to get within your category.

As you can see, your income does not pay into the percentages. You pick where you live based on your income and not on what you feel you deserve.

Another great post! I love reading budgeting posts - This is a good one!

 

[DisneyATlast]

No need to be nasty about my "suggestion" as that's all it was. I've actually walked down the exact same road as you.

"You should make that your priority before your vacation savings" was more of a judgment than simply a suggestion.

You're right that saving for retirement is (or should be) a priority in general, but I'm pretty sure most 20 somethings who I see on vacation don't have their entire retirement fund set aside. Actually, financial advisors suggest that by age 35 you should have one year's salary in a retirement account in order to be "on track" and I'm fully capable of having that (at least) and going on vacation too.

I wasn't trying to be "nasty," but I found your comment insulting. Anyway...it doesn't matter.