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« Festival of Frugality: All Messed Up Edition | Main | How to Become a Millionaire in Three Easy Steps »

April 12, 2011


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I think having a basic plan or outline for spending is the important first step.

Making the choice to code a bill a "need" or "want" helps to clarify your spending choices. (as long as you are at least somewhat honest with yourself)

I think these rules should vary based on your financial situation. If you have credit card debt, spending 30 percent on 'wants' is financially irresponsible in my opinion. If you are independently wealthy, then feel free.

My, I just try to live below my means and save ahead for any wants after everything else is taken care of.

Other an one time shot deals (like buying a new or used car), such percentages would be hard to derive for the average consumer that doesn't use a budget. So using that as my basis, I would stick to the "live below your means" too.

Hmm, I wonder how many people actually use a budget? It would be interesting to know the percentage of the population that use such a tracking mechanism...

I guess I'm also old school. Like Everyday Tips stated, it depends if you have debt. Spending 30% of your income on wants while swimming in debt is not a good idea.

FMF-- Did you or your wife, was there anytime till now, that you or your wife wanted/contemplated to be stay-at-home Parent?

Living within your means is "old school"? Bizarre!

20% goes to savings and debt repayment? 30% to wants? I think this needs better clarifiaction in that 20% to savings and debt repayment usually means 20% credit card debt payment for people.

30% for wants is also vague.I need a car but I really want a BMW? Too easy to manipulate depending on the persons thinking.

Venkat --

My wife has been at home for the past 12 years or so...

If I were to recommend a budget in this style, I would classify "debt repayment" as taking away from wants rather than savings. Using their numbers: 50% to needs, 20% to savings, and 30% to debt first and wants second.

I'd also recommend using that as a starting point, and then increasing savings over time, while keeping spending constant or even reducing it. If you can get to 35% needs, 15% wants, 50% savings, you buy yourself an amazing amount of flexibility.

To be fair the first place that I heard of the 50/30/20 budget was in the book "All Your Worth: The Ultimate Lifetime Money Plan" which predates the above book and goes into great detail about what is to be classified as need/want/savings-debt repayment. It is my favorite personal finance book of all time and is a must read.

I have only been using this for a couple of years, but I just checked and my wife and I are currently at 30/20/50 all-time (I include extra principal debt repayment in the savings category as the book instructs you to). The only debt we carry is our mortgage. The one caveat that we found was that getting the want percentage above 25% was just turning into materialistic purchases (aka wasting money on stupid things) so that is why we have backed off on wants so much.

I am retired and doing okay. I go 60-20-20 = living expenses and wants - giving - savings. I have no debt. I use 2 cc's each month and pay them off each month.

My 503b is low to what most people say we need (less than $100k), but I do not need it to live on.I use the 503b to do stuff around my home if it is needed and then the rest of my minimum withdrawal goes into savings.

I have enough in savings to buy a halfway decent used car if I need another one. As of last month, with all but one repair included, my monthly average for repairs and maintenance is around $103. If it goes over $120-125 for 2-3 months, I will be looking for another car. Even at the higher amount, it would be difficult to buy another car for that amount of payment.

I did not work my finances well most of my life, but in retirement I am doing very well, with my SS and 2 small retirements (mine and my husband's.)

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