Do you ever wonder if you are spending to much of your paycheck on one particular expense? If so, this might help. Given the economy downturn, I have been researching and evaluating what percentage of our household income is going towards each expense.
I first created a category for each expense. Those category's were: Mortgage to include taxes and insurance, Food to include groceries & dining out, Debt payments such as credit cards and student loans, Utilities like cell phone, home phone, internet, cable, water, trash collection, and sewer bills, Transportation to include car payments, auto insurance, and gas, Savings which only includes after tax transfers to your savings account, 529 plans if you have children, Entertainment & Club memberships, and Finally Misc Household Expenses.
Below is a good plan to follow when determining, if you should upgrade in house, buy that new car you been wanting, go out to dinner- again, or even look for savings opportunities on cell phone plan, auto insurance, etc.
Percentage of monthly income allocated to expenses.
30%- Mortgage - If you have a 2nd mortgage with a balance, refinance it so you only have one mortgage payment.
15% - Food - Make the grocery list, then clip the coupons
10% - Debt Payments - Focus on the debt with highest interest rate first.
13% - Utilities - Look at the service providers you are using and ask for discounts annually.
12% - Transportation - Put your Insurance out to bid annually. I recommend Farm Bureau's.
10% - Savings - Park the money and use on a rainy day. If it's not raining, play in the sun.
5% - Entertainment/ memberships - Ask for discounts & volunteer.
5% - Household Expenses - We all have these... repairs, doctor visit, etc.
Do not be discouraged if your finances don't fit exactly into this plan, just use this plan as a template to help shape your financial future.
