How can I budget?

[spacer height=”04px”]

By David S Edge

[spacer height=”04px”]

We get lots of folks who simply ask how they can make a budget. They tell us that they never seem to have money to save for retirement. They also say that they feel like all they do is pay off bills with what money they do having coming in each month. While this can seem difficult, there are some basic rules that anyone can apply to help them decide what to do when it comes to spending their money. There is what some folks call the 50/30/20 Rule.

[spacer height=”03px”]

As a general guideline, you should never spend more than 50% of your income on fixed costs. This includes rent or mortgage, utilities, phone, car, groceries, insurance, etc. Stuff you have to have on a monthly basis. No frills, just the basics! By reviewing your fixed cost, this allows you the opportunity to get rid of some of these items that may have been necessary a few years ago, but are no longer necessary. Get rid of unnecessary services! House cleaner, pool guy, pet walker, yard guy, are these some services you could do to save some monthly expenses? Are there home deliveries you currently use that you really don’t need?

[spacer height=”03px”]

Financial goal payments should be in the 20% range of your income. It’s the old adage of “Pay yourself First!” If you take the savings cash out of circulation, it isn’t there to spend. Take a percentage every month to put into an IRA, Roth, or your company’s 401K or 403b. Many of these vehicles make you leave the cash alone and let it grow, and if you attempt to use it there is a penalty. Think of these penalties as a small slap on your hand to leave it alone and let it grow for retirement. Keep your hand out of the retirement cookie jar!

[spacer height=”03px”]

With approximately 30% left over, now you can decide where you want to spend this discretionary income. This flexible spending covers what you really care about. While your monthly budget of fixed cost includes a food budget, your flex money would allow eating out or picking up some additional goodies in the food budget. Other unessential items in this category would include hobbies, sports, entertainment, beauty salon visits, etc.

[spacer height=”03px”]

This last 30% is where you need to get tough with yourself and your family. Instead of going out for a movie, stage a family game night. Pull out playing cards, board games, or charades. Not only can this be fun, but it can rebuild relationships or reconnect you with your loved ones!

[spacer height=”03px”]

Working towards your retirement, you must have a goal if you want to live in retirement at your expectation! Even if it’s late in the game of your working years, revising how you spend your money can help prepare you for those years where your income will be reduced.

[spacer height=”03px”]

Don’t delay! Now is the time. Need help? Call us!