I am curious as to what guidelines or advice is out there for how much money to spend on certain things. For instance, what percentage of income should go to housing, groceries, health care, clothing, household goods, entertainment, etc? I am not that well versed in budgeting styles, but I remember seeing here and there that you should only spend such and such percent of your income for rent/mortgage and things like that. I'm sure there are some financially savvy moms out there who can give me a good breakdown. Thanks!
Here is the Dave Ramsey plan:
Charity/tithes 10-15
Saving 5-10
Housing 25-35
Utilities 5-10
Food 5-15
transportation 10-15
clothing 2-7
medical/health 5-10
personal 5-10
recreation 5-10
debts 5-10
A good plan is to do NO more than 25% of your take home pay for housing. And do 15% for saving/investing. Then you can see what you have left over and go from there.
Have you ever seen the show Til Debt Do Us Part? If you haven't, it's pretty good- check it out some time on CNBC
http://www.cnbc.com/id/33421145/
The host of the show has a pie chart that answers your question
Try to get your hands on the Total Money Makeover by Dave Ramsey. He will change your relationship with money which for me was huge. Teaches all about budgeting and doing it month to month. Helped us pay off all our credit cards and start building an emergency fund.
Good Luck!!!!
There is a saying something like never buy a home that is more than a multiplier of your annual income. That one has gone the way of the dinosaurs.
It is not rational to base expenses off percentages of income. You have to eat and that number is nearly static across incomes. Yes you can eat fillets or ramen noodles but you have to eat.
What you have are wants and needs. You must budget your needs first and then look at what is left over. One trap I see people fall into is they think things are needs that are wants. You do not need to go out to dinner. You do not need a family vacation......You don't need expensive clothes.
Start with things like gas, you must have transportation to work. How much gas does it take to go to work? You have to buy groceries, how much gas does it take to get to the grocery store? You can tweak things like, can I pick up groceries on the way home from work, on the way back from school, whatever. Okay so now you have gas.
Do you eat?.....
Oh Dave Ramsey has something like that in the total money makeover.
I also recommend The Total Money makeover book by Dave Ramsay.
I think your housing (rent or mortgage) should be no more than 1/3 of your income after taxes. Then budget the fixed expenses and divvy up the rest between flexible and optional things.
I cannot volunteer that but it used to be make sure you have at least two months worth of home/rental payments saved up in case of job loss. Seriously, that is difficult these days. Anything you save is good.
I just had my personal finance final today. 10% into savings, 70% living expenses, 20 towards debt% This can be adjusted to how you need it to be, but this is the ideal equation.
I would really suggest reading "The Richest Man in Babylon". That was basically what we learned all term, and It seriously has made me start saving. Something I only said I was going to do, but never got around to it. There is a modern version of it too. The original was written in kind of a biblical talk, so in case you aren't into that, you can find the modern version.
We actually made an excel spreadsheet to see how much we spent a month on everything. This made us realize we needed to start finding ways to save money.
The money I save between using coupons and shopping online for all of my cleaners and bathroom necessities is about $100-$150 a month. That money I save their I can use to pay for any bills that happen to pop up or I can put it in a savings account for my kids college fund. If you would like to know more just shoot me an email. ____@____.com
Are these numbers of your gross or net income?
I think a budget that's going to work really depends on your family's size and lifestyle. A family with 4 kids is going to need a different grocery budget than a family with 1 kid. You have to look at your net income, then you start with your constants - your monthly fixed expenses. Ours looks like this:
Fixed Expenses:
- Mortgage
- Property taxes
- Property insurance
- Auto insurance
- Childcare costs
We have a fixed rate on our mortgage, so it's always the same monthly payment amount. I don't escrow my property taxes, so I estimate what they're going to be based on the prior year's taxes, and go about 8% higher (if I have money leftover there at the end of the year then that's just a bonus). Then I break that amount out monthly and that's my property tax budget for the month - it's a constant, but I take it out of my monthly income and physically pull that amount out monthly to a separate savings account so the $ is there at tax time. Same deal with property and car insurance. Childcare I pay automatically via online bill pay. But that's a fixed number too for my son's preschool.
Then it gets trickier for everything else. So I have a budget category for gas. And another one that I call food & dining, but is really a catch-all for everything else - stops to the coffee shop, a trip to Toys R Us, a new pair of shoes, ice cream for the kids, plus all of my grocery trips. Budgeting this way has REALLY helped me to understand where my money is going. I use the website mint.com to track my budget. Basically all of our credit cards and bank accounts are linked on there so that any purchase we make, be it a credit card purchase, debit card, check, or even ATM withdrawal, it shows up on the site. Then we "tag" the purchases by category and they show up in a really easy-to-read graph. I log on every day and check to see how much $ I have left in my food & dining category for the month...if I'm getting too close to the budget amount, I might skip that pedicure for now or cook the rest of the week instead of ordering out one night.
For medical or vet bills I just remove those expenses from the budget and they come out of our savings.
I took Crown Financial Ministries several years ago, and they have the chart you want. In my budget I compare what I spend to that chart and it is updated automatically through Excel. I am now on the Dave Ramsey program (www.daveramsey.com) and there are some difference - Dave says no investing until you are debt free but the house and have an emergency fund in place. also the numbers equal more than 100% because not everyone has every category - for example not everyone is in school.
Category Crown %
Tithe 10%
Tax 21%
Housing 27%
Grocery 11%
Transport 11%
Insurance 5%
Debts 5%
Entertain 7%
Clothing 6%
Savings 5%
Med 4%
Misc. 7%
School 5%
Invest 11%
Total 104%
