What is the best method to budget?

[tinapbeana]

Originally Posted by Aleta

She used a rule of 50/30/20. She believed that your must haves should not exceed 50% for a common sense reason. Say, tomorrow that you are unemployed, you're only going to receive 50% of your pay and that will go to what has to be paid. She says that 50% is sustainable; it is safe. ( because of what I said about unemployment and disability checks only covering 50% of income); and it has been tested over time.

be careful with the 50% figure! in a lot of states you may receive up to 50% of your salary up to a pre-set cap. for instance, in SC the cap is $303 per week pre-tax, which means if you make more than $606 per week (or $15.15 per hour or $31512 salary per year) your unemployment will not be half your income. better check your local unemployment office your specifics in your area before you determine what is a 'safe' amount to live on for essentials.

also, i would consider 'essentials' to be my mortgage, power bill, home taxes/insurance, and food. enough to sustain life and not be homeless, nothing else. in my house that is about $850 per month. anything else is flexible if necessary.

[Aleta]

As you said, you have to check with your state. I think that the message that I got from it was finding out was really a must have, because sometimes we don't cut corners because we consider a want as a must have. She does consider a mortgage, utilities and the like a must have. For instance, as much as I tried to figure and refigure, it was difficult because I live in South Florida and our homeowners insurance rates are higher than most people's mortgages. So, you have to read it and gleam from it the little nuggets that it has. It's still a book worth reading.

[vsjhoc]

Aleta, if you enjoyed that book you'll like one of her other books, The Two Income Trap (which she co-wrote with her daughter). Warren is a professor at Harvard but writes so that the rest of us can understand what she's talking about.

[vishenda]

Originally Posted by vsjhoc

Aleta, if you enjoyed that book you'll like one of her other books, The Two Income Trap (which she co-wrote with her daughter). Warren is a professor at Harvard but writes so that the rest of us can understand what she's talking about.

I think my sister has a copy, will take a look!thanks for the mention

[LivingAlmostLarge]

10% for retirement is not enough. It might be if you are 22, but if you are 35, it's definitely not enough. You really need to think about what you need to retire and work backwards from there. I think the idea is very close to the 60% rule from MSN, however every situation is different.

15% is probably better in the 20s for retirement, 25% 30s, and 35% in your 40s.

[Raisecapital01]

I do not know if you ever read Dave Ramsey's book. He offers great information on budgeting with the envelope system. I follow it now, and have fairly well with it. The way it works, is that you put all your billing money in each envelope including making an envelope for spending money. If your envelope empties, you are out of money.

[Budgeteer]

Originally Posted by Raisecapital01

I do not know if you ever read Dave Ramsey's book. He offers great information on budgeting with the envelope system. I follow it now, and have fairly well with it. The way it works, is that you put all your billing money in each envelope including making an envelope for spending money. If your envelope empties, you are out of money.

Isn't this a lot of work? It's the same as doing it with excel, except you don't have to go get cash and shuffle stuff in and out of envelopes all the time. Let computers to do the work for you. =)

[Aleta]

Yes vsjhoc, I have heard about the book that you mentioned. My daughter-in-law and son is currently in that position. I have heard that it is excellent.

Yes, I have heard of the envelope system and Dave Ramsey. I haven't read his books, but plan to. I like the reader above use a facimile of an envelope system. I have a page with each account on it and it does basically the same thing of subtracting and I wholeheartedly agree with it.

My goal for the new year is to read a book a month on finances. You can always get a nugget from each book. I'm currently reading The Only Investment book that you'll ever need by Tobias. I also have checked out The Wealthy Barber. On the website, there is a whole list of books you can choose from. I get them from the library.

[disneysteve]

Originally Posted by vsjhoc

Aleta, if you enjoyed that book you'll like one of her other books, The Two Income Trap

I think there is some fascinating and enlightening history in that book, particularly of the credit industry. It's a very good read. But I found some of the conclusions unconvincing. It's been a while since I read it, so I can't recall specifically what my issues were. I just recall feeling some of their points weren't accurate.

[disneysteve]

Originally Posted by LivingAlmostLarge

10% for retirement is not enough. It might be if you are 22, but if you are 35, it's definitely not enough...
15% is probably better in the 20s for retirement, 25% 30s, and 35% in your 40s.

I'm assuming you mean if you are just starting your savings at those ages, correct? If so, you're right. Starting at age 40 and only putting away 10% won't be enough. However, if you are 40 and have been saving for 15 years already, that's a different story.

That said, however, so very many people are saving little to nothing that even 10% would be a huge improvement.

[scfr]

Originally Posted by Budgeteer

Isn't this a lot of work? It's the same as doing it with excel, except you don't have to go get cash and shuffle stuff in and out of envelopes all the time. Let computers to do the work for you. =)

I think it depends on the person. For some people, numbers on a screen or piece of paper work just fine. But for others, they need to see the cold cash. For me, a spreadsheet is perfect. But I know people who were really helped by using the envelope system.

[vishenda]

Im trying the envelope system, its better than my old budgeting technique.

[boefixepa]

I like the envelope system. I do on the computer using the menvelope system. The concept is what is important and you can simplify it as much as you need to in order to use it. For anu budget to work, you have to want to do it. So use whatever system works for you. Let us know how the envelope system works for you.

[vishenda]

sure sure thankies