Monday Morning Money Moment: April 3, 2017
Budget Percentages
Happy Monday friends! Hope you had a great weekend. Welcome to the wonderful month of April. Spring is here, birds are chirping, all that good stuff. Today’s money moment is about budget allocation. This is what you should be spending on various life items as a percentage of your income. Remember these are guidelines and aren’t set in stone. I will discuss that a little bit later in the post.
1) Housing: 35%
-This includes rent/mortgage, utilities, cable, taxes, insurance, etc.
-This percentage is often higher if you make less income
2) Life: 25%
-This is your variable spending including food, entertainment, clothing, toiletries, charities, memberships, etc.
-This number can get out of control for some people. A dedicated budget then becomes crucial.
3) Transportation: 15%
-This includes car payments, gasoline, insurance, maintenance, etc.
-Make sure this number is not out of control, or adjustments will have to be made.
4) Debt Repayment: 15%
-This includes credit card payments, lines of credit, personal loans, etc.
-If you are in a large amount of debt this percentage needs to be higher until you get out of debt.
5) Savings: 10%
-This includes emergency fund saving, TFSA’s, retirement savings, educational savings, etc.
-As your income grows this percentage needs to as well.
One key point to take from these numbers is that they are just guidelines. That doesn’t discount their importance. You can adjust one area and take from another. Some people spend 50% on housing but nothing on transportation. Some people spend 30% on transportation but very little on housing. The main area of focus is the Life, Debt and Savings categories. If you are spending a large part of your income on life and save nothing then there is a problem. If you have debt and then get rid of it then those funds need to be converted into savings. The point is that as your income grows, your lifestyle shouldn’t dramatically grow either. That is where you can get into serious problems.
Thanks for reading my Monday Morning Money Moment. To learn more about Budgets check out the link to my article below about why they are important. See you tomorrow for the “Tuesday Tip of the Week.” Happy saving friends!
“The budget is not just a collection of numbers, but an expression of our values and aspirations.” – Jacob Lew
https://budgetboss.ca/budgets-suck-right/
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Joseph James Francis is a Financial Advisor. You can find him on various social media platforms and at budgetboss.ca.