The expenses your paycheck has to cover go on and on.
Each dollar is stretched; each expense clamors for attention.
Too often, the expenses go on long after the available money is gone.
What seem like immediate needs squeeze out those necessities that only come round occasionally but in big numbers: car repair, medical incidents, college.
And when the “occasionals” do come round, you’re caught short.
I generally see families to talk about bankruptcy when things have gotten so out of balance that better budgeting won’t fix the problem.
So, let’s take a tour of the cost of living so you can stay in balance, and we’ll never meet face to face in my law office.
What daily living costs
Consumer Credit Counselors proposes a model allocation of your income among all of those categories on your household expense list.
The headings in blue are the big wedges of the pie; below are all of the expenses to be paid from that percentage of your income.
MONTHLY EXPENSES |
MONTHLY AMOUNT |
HOUSING |
35% |
| Rent | |
| First Mortgage | |
| Second Mortgage | |
| Association Dues | |
| Property Taxes | |
| Renters/Homeowners | |
| Lot Rent | |
| Home Maintenance | |
| Electric/Gas/Oil/Propane | |
| Water/Sewer/Garbage | |
TRANSPORTATION |
15% |
| Gasoline | |
| Auto insurance | |
| Maintenance – Oil/Lube/Tires | |
| Auto Tags/Inspection | |
| Bus Fares/Ride Shares/Parking | |
INSTALLMENT DEBT |
15% |
| Car Payment #1 | |
| Car Payment #2 | |
| Student Loans | |
| Tax installments | |
EVERYTHING ELSE |
25% |
FOOD |
|
| Groceries | |
| Meals Out | |
| School Lunches | |
| Food/Snacks at Work | |
| Telephone/Cell Phone/Beeper | |
| Cable TV/Internet | |
CLOTHING |
|
INSURANCE |
|
| Medical | |
| Life | |
HEALTHCARE |
|
| Drugs/Medication | |
| Office Visits/Deductible | |
| Dental | |
| Optical | |
CHILDCARE |
|
| Daycare/Babysitter | |
| Allowances/Kid’s Stuff | |
| Diapers/Formula/Baby Supplies | |
| Child Support | |
| School – Tuition/Supplies | |
| Church/Charities | |
| Lawn/Pool Maintenance/Home Security | |
| Personal Care – Shampoo/Toothpaste/Haircuts | |
| Bank Service Charges/Postage | |
| Work Tools/Clothes/Occupational Dues | |
| Dry Cleaning/Laundry | |
| Home Cleaning Supplies | |
| Cigarettes/Tobacco | |
| Hobbies/Clubs | |
| Lottery/Casinos/Bingo | |
| Gifts/Parties/Holidays/Cards | |
| Vacations/Travel | |
| Alcohol | |
| Books/Newspapers/Magazines | |
| Lawn/Pool Maintenance/Home Security | |
| Movies/Sporting Events/Entertainment | |
| Pet Care/Vet/Food/Medications | |
Savings/Reserve |
10% |
| Emergency reserves | |
| Retirement | |
| College | |
TOTAL |
So, how do your monthly expenditures line up against this model allocation?
I was struck by how many of my standard expenditures are slated to come out of just 25% of my income. That’s a long list.
Reshuffle the cards
Another way to look at your allocation of money comes from now-senator Elizabeth Warren’s book, All Your Worth:
- 20% to savings;
- 50% to must-haves; and
- 30% allocated among your “wants”.
How does it work in your household?
