5 Rules for Your Household Budget
The most important reason to have a budget is to know where your money is going. Most of us know off the top of our head how much we spend each month on rent or a mortgage, and also on our car payment. But beyond that, most Americans don’t know how much they spend each month on groceries, meals out, clothing, entertainment and a host of other ways clever marketers have devised to separate us from our money! We’ve surveyed lots of clients, and found that these 5 rules will help you succeed at putting together, and sticking to, your monthly budget. Good luck!
Know your monthly GROSS and NET income. GROSS income is what you earn, before all the deductions - taxes, 401(k), health insurance, etc. And regarding your 401(k) plan at work, although not strictly a budget issue, but if you’re not maximizing what your employer is willing to contribute, YOU ARE LEAVING MONEY ON THE TABLE! See the 401(k) article in this BLOG.
Pay yourself first! Save or invest AT LEAST 10% of your GROSS income. We Americans are terrible at saving. The savings rate in 2017 was just 2.4%. Be better than that, and pay yourself first, at least 10% of your net income.
Housing no more than 28% of your GROSS income. And this percentage includes other costs that go along with housing - insurance, property taxes and association fees.
No more than 50% of your GROSS income tied up in “things with motors and wheels”, as recommended by financial expert Dave Ramsey. Cars, motorcycles, boats - they all go down in value. So the rule of thumb is, if you make $120,000 gross per year, you should have NO MORE THAN $60,000 tied up in ALL your vehicles. At today’s car prices, it’s easy to go above that number, so you guessed it, buy reliable and USED vehicles.
Track your expenses every month! It used to be a person had to save their receipts, sort them by category, and everything up each month. But today there are many financial service tools, with smart phone apps, that make this job much easier. See “Every Dollar” by Dave Ramsey.
Coming up with a budget on your own can be difficult. The good news is, you’re not alone! These are the kinds of tools that JB WAGG INC Daily Money Managers develop for our clients, every day. Try out the following “Household Budget” tool available to you as a FREE download here. And if you would like help with this or other matters related to daily money management, send me an email at firstname.lastname@example.org. We would be happy to help you!
Budget Sheet Summary: The "Monthly Budget" XL sheet is organized to give you a look at the entire year's budget, one month at a time. Categories for income, fixed expenses, variable expenses and non-routine expenses are included. Most fields can be edited and changed to fit your unique circumstances. Put your expected income and planned expenses into each category, for each month, to give you a "look ahead", and to develop a plan for your spending, to make sure that it does not exceed your income!