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Goals For Your Budget
By Molly's Brother | June 16, 2006
If you’ve never developed a budget before, it’s difficult to understand exactly how to attack it. Moving towards understanding where your money goes over the course of a span of a month or two allows you to figure out how to effectively develop a budget. Here are some helpful things to keep in mind.
Write down everything you spend over the course of 30-45 days. Everything. If you buy dinner, write it down. If you buy a stamp, write it down. After a course of a month, you’ll have the perspective to know exactly where your money is going.
It wasn’t until I saw Jean Chatzky on Oprah a few months ago that I understood exactly what how I should define my budgeting goals. Ms. Chatzky established the following guidelines for your monthly spending plan:
- 35% Housing (Mortgage/rent, insurance, any household bill)
- 15% Transportation (Car payment, car insurance, gas, maintenance)
- 25% Other (Eating out, vacation, clothing, entertainment)
- 10% Savings (Although I aim for at least 15%)
- 15% Debt (Get rid of it. Not including car payment or mortgage.)
It’s a simple rule: If you are spending more than the percentage, you are spending too much money on any given category. Look for ways to eliminate the expenses in that area.
For many people, budgeting doesn’t make much sense. It’s too much work. Richard Jenkins at MoneyCentral.msn.com came up with the 60% Solution. Basically, take 60% of your gross income and apply it to your committed expenses. Mr. Jenkins suggests that 60% may not be the right number for you. You might have to develop a 70% or 75% Solution.
Budgeting is difficult. But it increases your awareness as to where your money is going. Not budgeting does nothing but get you into trouble. I’m sure there are millions in the blogosphere who can attest to this.
Topics: Spending Log, Your Budget |