sam1000
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What is the optimum percentage of your income you should spend on the following categories.
Housing, Utilities and related housing expenses
Food/Household Supplies
Transportation (incl. gas)
Discretionary
401K/IRA
Non-401K/IRA Savings/Investment
Emergency fund
I know each person's situation is unique but I'm looking at some estimates that are not too conservative but financially intelligent. I'm just trying to understand what the point is between spending on things that make you happy upto the point where it is affordable and frivolous spending.
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Sat Feb 04, 2006 1:38 am |
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rockhound
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Location: West Virginia
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I don't know if there is an "optimal" amount for each of these, and I have a feeling that consumer spending is so out of control that an intelligent allocation would be widely considered as being ridiculously stodgy and conservative. The rule that I used to hear was to divide your net income into quarters. A quarter for rent, a quarter for car payment, a quarter for savings, and a quarter for living expenses. I didn't have a car payment, so I added that "quarter" into a house payment and savings. Now keep in mind that I don't believe in borrowing your way to financial stability, nor do I believe that people in dire financial straits are still entitled to enjoy luxuries and whoop it up. If you don't have the money, you shouldn't be buying it.
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Sat Feb 04, 2006 2:59 am |
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Jaszbo
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pick up a copy of the book "all your worth", they use a balance of:
50% on must haves
30% on fun money
20% on savings/retirement
The book will really probably answer a lot of your questions. I can't say I'm 100% with them, but in their minds if you spend more than 50% on your must haves you are taking away from your fun money and enjoying your life or taking away from your future in your savings.
Baiscally most people either spend too much on their must haves or things that arent' necessary like a cell phone, broad band internet..etc
Basically if you have an automatic savings/investment/retirement and keep to the 20% and then setup 50% for expensies you cannot live without the 30% you don't have to watch. The must haves are basically things that if you lost your job for 6 months would you still continue to do like the premimum channels or television in general is fun money. I liked this book and would recommend for people who aren't really good at budgetting or aren't sure what they can or can't afford.
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Sat Feb 04, 2006 5:47 am |
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efflandt
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Location: Elgin, IL USA
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An enlightening exercise. Not counting my bonus (partially gobbled by auto repair bills) my percentages of regular paychecks after taxes are:
45% mortgage, property taxes, utilities, home & auto insurance, etc.
37% 401k/Roth IRA (over 50)
18% food and everything else
At one time I figured I would have to sock away 1/3rd of my income to retire comfortably (I forget if gross or net), and thought that was insane. But it looks like I should have no worries.
If had a similar 20 yr mortgage on same size home in southern Cal without twice the income, I would be 150%, 0%, 0% respectively (dumpster diving).
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Sat Feb 04, 2006 8:52 pm |
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Jaszbo
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efflandt I do like your ratio
For me it depends as I only like 15 year mortgages and I do biweekly, so it ends up costing me a little bit more maybe 250 dollars more a month, but
I'm more or less around 45% on the must haves.
The calculation on the savings is a little too hard, because of going back and forth between the pretaxed and post taxed dollars.
I max out my Roth IRA each year, do 10% into my 401k plan and then an additional 5% of after tax money in some investments, which after so many years I cash some out and put it in real estate as part of my porfolio.
Personally I only ever want to have a loan out on mortgage and nothing else. I think your 37% is really nice, especially since your must have's are only 45%, becuase if something happened to your job you could first have the exact same life style with a paycheck that's 37% less or since you are getting closer to retirement of course retire and live the same on 37% less without cutting any other corners.
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Sun Feb 05, 2006 7:38 pm |
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