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I Don't Budget Because...

You're not alone-whatever your excuse may be. It's too time consuming, complicated, not sure how... Unfortunately, a budget is the very foundation for your entire life plan. Without one, you can't build any kind of plan without running a huge risk that it may all fall apart. According to a GoBankingRates survey, 1 in 4 Americans' number one daily thought is money. Two in five Americans feel their biggest challenges are either sticking to a budget or saving for retirement, with these answers selected almost equally.1
No matter what your age, it's critical to have a clear picture of who you are today financially so you can better plan for tomorrow. So I would like to offer you an easier way to create your budget and categorize yourself with those 5 percent of Americans who will retire successfully and stay successfully retired. It is called the "60/40 Rule."
It is fast and simple. If you are overspending, it really doesn't matter what you are overspending on. You are just overspending. So just make a decision to keep your budget in-line with your income. Keep your committed expenses to 60 percent of your gross income each month. What are committed expenses? They are the non-negotiable, basic expenses (though a couple of them can be adjusted to suit your income - such as eating out less often or resisting the NFL package on Direct TV). Here is a start for a list of committed expenses:
  • Food (Eating out and Eating In)
  • Clothing
  • Household Items & Expenses
  • Bills & Loan Payments
  • Insurance
  • Taxes (ALL of them-income, real estate, etc.)
  • Charitable Contributions
That leaves 40 percent of your gross income to divide and take care of tomorrow, next year, and the future years beyond that. But hold on - this 40 percent has a priority list.
First and foremost, the young person you are today will be the only one to take care of the older person you will be someday-so save for your retirement first! Regrettably, there is no set percentage. It's different for every person. And if you don't know what you should be putting back, you've got a new #1 for your to-do list: talk with your advisor and find out.
Next, plan for an emergency before it happens. A good rule of thumb is to keep 3 to 6 months of income easily accessible in order to withstand an emergency. Visit with your advisor about the best place for you maintain these funds.
The third savings spot is your "savings to spend" plan. Consider having your employer directly deposit this percentage into your savings account for those little or big expenditures throughout the year such as a vacations, a new car or appliances, etc.
The last part of your 40 percent does have a limit. This is your fun money. Spend it however you want... just as long as it doesn't exceed 10 percent of your income.
So that's it. It really is that simple. With less than an hour of set-up you just completed your budget and not to mention, started saving at least 30 percent of your income. Henry Ford stated, "Whether you think you can or you can't; you are correct." Do you think you can be in the top percent of confident Americans who believe they can successfully retire and stay successfully retired?
  1. GoBankingRates 2015 Life + Money Survey
Written by Angela Robinson CRC®

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