Money Allocation

[Radiance]

I think I saw once a table explaining how much should I be allocating to each expense as a percentage of my income...

In any case
How much should I allocate to take care of my family which is my pregnant self and my 15 month old baby (I am separated)
Preschool: $800/mo
Diapers, medicines, toys, clothing: ???
Food/household Items: ???
Emergencies:???

I do buy at walmart and my son owns only one pair of shoes at a time, but right now for example, he needs PJ's and t-shirts. Poor thing is always fighting a cold since he started preschool and I don't do drugs so I am spending in homeopathics and herbs...

Thank you, I need to get this figured out to determine if I can keep my house. I am trying to track all my expenses but need a head start.

[creditcardfree]

I think you need to write everything down you spend. I would look back at May expenses and see where you were spending things. Does your bank allow you access to your bank statements online?

No one percentage can really be applied to everyone.

You can buy pj's, t shirts and toys for infants at garage sales for pennies on the dollar. Babies don't really wear their things out, so the items will be in very good condition.

[disneysteve]

Originally Posted by WealthyMe

Poor thing is always fighting a cold since he started preschool and I don't do drugs so I am spending in homeopathics and herbs...

Stop wasting your limited funds on homeopathic products. They are nothing more than placebos in a bottle. And PLEASE, speak to your pediatrician before giving a baby any herbal remedies. Most are of highly questionable value and many are potentially harmful. Make no mistake about it. THEY ARE DRUGS except instead of being highly regulated and carefully tested, they are allowed to be sold with zero proof that they are either safe or effective.

Otherwise, I agree that most baby stuff can be purchased second-hand for very little.

[sandrark]

Hi WealthyMe:

Welcome to the forum!

It's hard to answer your question, because while percentages can be useful as a guideline, there's no way that someone making $100K per year should spend the same percentage on food as someone making $20K. That said, there are some guidelines.

I looked up Dave Ramsey's guidelines (he is a Personal Finance guru, who hates debt and borrowing). I strongly recommend you read his book The Total Money Makeover - it will give you a plan to follow, which helps the decision-making more manageable.

On his website, he has recommended percentages. I've copied them below:

CHARITY 10%
SINKING FUNDS 8%
RETIREMENT 15%
HOUSING 25%
UTILITIES 5%
FOOD 5%
TRANSPORTATION 10%
CLOTHING 2%
MEDICAL/HEALTH 5%
PERSONAL 5%
RECREATION 5%
DEBTS 5%

I've taken a little liberty with his ranges to total to 100% (for example, he has clothing from 2-7%, and housing from 25-35%). But he left out retirement savings (since he assumes during the early budget that you will suspend all retirement savings - which, depending on your age and assets, I don't necessarily agree with).

Hope this helps.

Sandi

[mikefullerton]

Hi there,
I am sure you are talking about cost allocation table. But for personal or general use, you don't require to have such complex table, which is based on various corporate parameter. Just chalk down on a sheet making 2 columns expenses and income and add the items appropriately. And then automatically get the conclusion, so accordingly you can manage your expenses and incomes.

Regards
Mike
Fullerton securities india

[Runaway Finances]

I know I sound like a broken record in this response, but most financial problems are because there is no plan. Most people have no idea what it costs to live. Here's a little exercise....make a list from the top of your head what your expenses are. Now, add them up. Subtract that total from your income and how much do you have left? You're now say "I don't have that much left!" THat's because there is no way you can remember all your expenses. You HAVE to figure out what it costs you to live. Everyone's finances comprise of income, Fixed Expenese (utililities, rent/mortgage, insurance, etc), and discretionary expenses (groceries, gas for cars, clothing, haircuts, etc.). Fixed Expenses are usually paid from your home and discretionary expenses generally are incurred away from home. This is a simple rule of thumb. Now, you need to take 12 months of bank statements and categorize your expenses into Fixed and Discretionary. Do this month by month. You are going to be shocked at how much you spend.

Another simple procedure.....take your tax return and take the Gross Income at the bottom of page 1 before deductions. Now, subtract how much you put into savings that year (net of withdrawals from savings), then add to that result any increase in debt (loans, credit card balances, etc.) that year. The result is how much you spent that year. If you added nothing to savings AND you had an increase in debt, then you spent more than you earned that year.

Very few people I know have ever done these calculations. You should if you haven't, but I warn you, be prepared for a shock.

[Alex_Adviser]

You need to properly write down all your expenses for the month and have a savings limit as well to it. This way you can manage all your expenses wisely.

You can find attached a monthly budget form where you can write all your expenses and manage them accordingly. I hope that it will be of some help to you.

[Alex_Adviser]

As there are some problems in attaching the document you can find it at http://acornhousing.org/TEXT/documen...udget_Form.doc

All the best...........

[mikefullerton]

Hi Runaway Finances,
I agree with your comments, but either in your stated process there is a need of initial preparation and it much more complex process then my solution. As i said it very early that such complex calculations is favorable for corporate works not for household.

Regards
Mike

[Runaway Finances]

Mike,

Actually, my process is easier than it sounds. It takes about 1 hour to take twelve bank statements and enter fixed expenses into our online spending planner, which is essentially a spreadsheet but it does all the calculations automatically. I've used this system for years and finally a client offered to partner with me to put it on the web. We're working on a video that will demonstrate it that we hope will be up in a few weeks.

What gets most people when they do budgets is they miss expenses or they average expenses. Then, that unexpected expense comes along or bills that are higher than their budget, and their plan gets derailed. I came up with a formula to build in some "fat", so IF you follow the plan there is almost always extra in the account. It is amazingly simple. When you get your finances in control, relationships change for the better. That is why I keep saying the things over and over. It is a life changer. You just have to want it bad enough to do something to change what you have been doing.

[boosami]

I read an article called the "60% Solution" a while back. It proposed that no more than 60% of your gross income goes to fixed expenses (including withholding taxes, housing, bills, utilitities, anything where payment is "due" and not voluntary) and the remaining 40% to savings and "fun" money.

The breakdown in more details was something like:
60% - Fixed expenses
10% - Short-term savings
10% - Long-term savings
10% - Retirement savings
10% - Disposable income

In reality there is no one-size-fits-all answer for budgeting. You just have to figure out what works for you and what your comfort level is.

[mikefullerton]

Hi Runaway,
I agree with boosami's coment, but your post post also seems interesting. Can you tell us or share the software with us. I seems very useful.
Regards
Mike Fullerton
Fullertonsecurities india

[zetta]

I like the book All Your Worth by Elizabeth Warren. Her recommendation is
50% needs
30% wants
20% savings

[Runaway Finances]

You can click the link in my signature and it will take your to our site. You can download our book for free and watch a video that demostrates the online spending planner. Access to the spending planner requires a subscription. I developed this system for use with high income clients of mine, and wanted to develop something that people could do on their own. The key to our system is determining the fixed expenses, but our system doesn't take just a simple average of your expenses.

[Radiance]

Thanks everyone, I just continue my tracking to get a hold of my finances, slowly, but surely.

Steve, I respectfully disagree. My pediatrician is the one "prescribing" herbs, homeopathics, accupuncture to my baby. Baby Belladona works much better reducing a fever than motrin and without side effects and without masking any underlaying health problems.
My pediatrician is a regular pediatrician who decided to get a Naturopathic degree in top. He is awesome!

I have to totally disagree when you say

"Most are of highly questionable value and many are potentially harmful. "

Where do you get that information from? Done correctly natural remedies are better by far than famaceuticals.

As per drugs, they are not properly regulated, The FDA approves a 'medicine' today just to take it out of the market in a few years because is causing more harm than good.

I can tell you that when everybody in my office gets sick, my cold/flus last less and are milder with natural remedies than my co-workers in anti-viral and antibiotics and who knows what else.

At the end is a matter of choices and style, but I felt compelled to "defend" natural remedies from such biased attack.

Natural remedies/treatments will have to remain as a category on my budget. What makes them expensive is the lack of insurance coverage.

Thanks for listening.