Is your spending on track?
Last week I introduced a series of blog posts designed to show you how much you should be spending on certain categories. I provided suggestions on what you might expect to pay in housing costs. This week, I’d like to talk about some of those other costs that tend to eat up our budgets and leave us without the financial resources we need.
Food. Don’t underestimate how much your monthly food bill will be. Remember, the little things add up. A good rule of thumb is to allocate 5-15% for this category. This includes groceries, dining out, coffee, fast food, snacks and any other consumable items.
Transportation. Even if you don’t have a car note, you likely have plenty of transportation costs. This category includes your car payment, gas, insurance, parking, public transportation and car repairs. All in all, expect to pay 10-15% of your monthly pay on this area.
Medical/health. It’s important to set aside money for your healthcare. Five to 10% is a good number to strive for. This includes prescriptions, doctor co-pays, gym memberships, trainers, and anything else relative to your health and wellness.
Giving. Tithing falls in this category, as do donations, special event gifting (birthdays, Mother/Father’s Day, housewarming, wedding, etc.), and charitable contributions. Should you decide to loan someone money, it too should go in this category, as there’s no guarantee the money will be returned. Designate approximately 5-15% for this category.
Clothing. A good rule of thumb for this category is 2-10% of monthly take-home pay. The high side of this category should really only come into play when you have growing children. Adults can typically handle 2% or less. In addition to the purchase of clothes and shoes, this category also includes dry cleaning, shoe repair, clothes alterations, and other laundering expenses.
Personal. All other lifestyle costs fall in this category. Designate 5-10% for such expenses as hair, nails, cosmetics and toiletries.
Recreation. This is one you really shouldn’t ignore. Designate 5-10% for things we do for fun, such as movies, sporting events, concerts, a night out at the club, children’s non-academic activities, and hobbies. While the allocation for this category may go as low as 0% at times if money is tight, that should only be for a short period. Without recreational activities the mandatory parts of your world are likely to suffer.
As I said last week, these guidelines can be amended to better reflect your life. When you set financial guidelines, your budget works for you rather than against you.
And so it is.