Happy Mortal

I met a theory in a class my senior year of college that I wish I had known before I got out of high school. And in this situation, the early beginning of an economic downturn, I would like to take some time to reacquaint myself with it. And you, if you want. Although from the state of things right now, some of you may never have met this theory.

It’s official name is Personal Finance. I sometimes like to refer to it as “not so common sense”. It also goes by “You don’t really need that”, “Say no sometimes”, and “Put the credit card down sir. Nice and slow”.

This class taught me so many useful things (one of the only classes to do so) that I could fill several blogs with all of the info. But the theory that still sticks out in my mind today is a principle or building block equivalent to 1+1=2. Or really I should say 1-1=0. And that theory is….Budgeting.

I could have walked away learning nothing else from that class and been good to go. The formula I’m going to give you below is a pretty standardly agreed upon skeleton for making your own budget. You may find it referenced other places with slight changes, but they all work.

I’ve gone through and shown how it would apply with a $2000/month income. That is, after taxes have been taken out. (These percentages are not my own making. These are a generalization of what is considered safe and sensible standards for anyone’s budget.)

Budget  (with a $2000 monthly income)

Percentage of Budget spent on…                          $amount

Housing  30%                                                            $600.00

Transportation   18%                                                 $360.00

Food   14%                                                                $280.00

Debt   10%                                                                $200.00

Household   7%                                                        $140.00

Savings   10%                                                           $200.00

Everything Else   11%                                               $220.00

That doesn’t look so tight. Lots of breathing room right. Well, yes and no. Lets look at some of the possible items that fall under each of these categories.

Housing – Mortgage/rent, property tax, electric, water & garbage, home/renters insurance

Transportation – Car payment, gas, car insurance, oil changes & maintanence

Food – Groceries AND dining out

Debt – Student loans, credit card loans, personal loans

Household – Light bulbs, cleaners, yard maintenance, repairs, phone bill, cable bill, internet bill

Everything Else – entertainment, shopping, going out for coffee, dentist and doctor appointments, vet appointments, charitable donations etc……

Now obviously not everybody’s budget is going to fit into this nice and neatly. For example, financially it’s not wise to spend more than 30% of your budget on housing. But, if you live in a large city, you may have no other choice. And then what? Well, you need to readjust the pie chart. If you decide to pay $800 a month on housing, then what category(ies) are you going to take 10% away from? I’m guessing most of you will say savings. Please don’t. Try and split it between a few areas.

Being in charge of the finances for my family, I’m just as guilty as the next person of over extending my means. Needs that go into and beyond wants. But I’m determined to keep examining it. Tighten up any loose ends. Again. And readjust my ideas of needs.

I may or may not “deserve” more than I have. (That’s a discussion for a different time). But I certainly deserve and am worthy of not feeling stressed about trying to pay off or not being able to pay off my stuff/indulgences. And the current economy has reminded me (and hopefully the country) just how silly it is to try and maintain such an unbalanced position.

So here’s to a balanced budget and a balanced life. Now to make sure I don’t go to Nordstrom and charge those beautiful shoes I’ve been eyeing for the last few months.