Recommended % for Categories?

[wikiwiki]

Is there a general recomendation of % for a monthly breakdown of income? I had been using
Housing 35%, Debt 15%, Transportation 15%, Other Exp 25% and Savings 10%

We have $5700 coming in each month, what % should we aim to save? That $ doesn't include the 11% going to retirement already. When you're looking at what to save, does retirement $ count towards that? Or should there be a separate account too - maybe for more short term goals? (ie trips, large purchases?)

I feel like everything is so tight right now as it is, but if I knew what I needed to put away, we could do that automatically with hubby's check and only work with what we have then. We have 3 young children so it is hard to save now but I really want to get into a better habit now.

[kork13]

These are just some of the more common rules of thumb that get bandied about, but perhaps something to work off of for you...
Taxes: probably 15%-20% (based on your income)
Housing, insurance, and utilities: <30% (or just <25% for housing/insurance)
Auto, insurance, and gas: <10%
Savings: 15% retirement, 5% other (20% total, though more is always better if you can manage it)
Debt: <10%
Food/Household items: $100 + $100/person (this one isn't common, it's just a decent ROT that I've personally found to be a useful estimate)
***Note --- these are all based on gross income...personally, I find that much simpler to work with.

Obviously, those figures are VERY general, and absolutely subject to individual situations... but the big idea is to reduce and control your expenses, eliminate your debts (then stay out of debt), and build up your savings.

You definitely want to keep some money in a safe, liquid account that can serve as an emergency fund, because you never know what may happen. Some people choose to keep other short term cash mixed in with their EF, others keep many pots of money with each having a separate purpose...to each his own, really whatever you're most comfortable with.

[disneysteve]

Is there a general recomendation of % for a monthly breakdown of income? I had been using
Housing 35%, Debt 15%, Transportation 15%, Other Exp 25% and Savings 10%

A very big picture way to look at it is 50/30/20. That's 50% for needs, 30% for wants, 20% for savings.

Since you have 11% going to retirement and another 10% going to savings, that's 21% total which is good. It looks like your needs are over 50% though between housing, debt, transportation and other. Of course, as you repay debt, your percentages will improve.

That said, my wife and I don't use a budget for our spending. We do budget our savings. As long as that is taken care of, I feel it really doesn't matter how much is being spent on food or gas or travel or clothing or anything else. One month, it might be a lot on a vacation. Another month, it might be dining out or fixing the car or doing something in the house. As long as the money goes into savings month after month, the rest is all good.

[Nika]

Originally Posted by wikiwiki View Post
Is there a general recomendation of % for a monthly breakdown of income? I had been using
Housing 35%, Debt 15%, Transportation 15%, Other Exp 25% and Savings 10%

Is that 10% outside of retirement?

I think in general these guidelines are silly. Housing 35 and debt 15, means you are ok, but housing 40% and debt 4% means you are struggling? Even tough overall it is less.

Also, for example, if you take home 3K a month your will spend more percentage of your income on food than someone who takes home 10K a month. Even though in actual dollars you spend a lot less.

How can they advice so arbitrary? Same formula for a couple with no kids, a couple who has family able to provide childcare, or a couple that must pay for daycare monthly? And on and on. There are so many factors that are different for each family, there is no magic formula.

[disneysteve]

I think in general these guidelines are silly.

if you take home 3K a month your will spend more percentage of your income on food than someone who takes home 10K a month. Even though in actual dollars you spend a lot less.

there is no magic formula.

To some extent, this is true. Many costs are regressive in nature. A gallon of gas costs the same amount whether you earn 20K or 50K or 200K per year. But that doesn't mean some general guidelines aren't useful. Otherwise how do you know if what you are spending is reasonable no matter what your income happens to be?

[Nika]

Otherwise how do you know if what you are spending is reasonable no matter what your income happens to be?

I know by setting goals. As long as we manage to do the "musts" we think we have a fairly reasonable judgement.

These "musts" are:

1. Never carry a balance on a credit card.
2. Contribute to at least max out the match from DH's employer (I have a traditional pension)
3. Max out ROTH for me and for DH every year.
4. Max out ESA for baby every year
5. EF must be funded and should increase a little every year

after that, it is negotiable, we can try to do more, if we can, but are allowed to enjoy life, and think whatever we decide to do with the rest of the money is generally reasonable.