People don’t poop money. Budget to spend it wisely!

Stories To Live By | Thomas Jefferson Budget

The basic rule of budgeting came from Thomas Jefferson that never spend your money before you have it. When America was young he may have thought that the concept is simple but in today’s day and age when instant gratification is the norm in the society, he would have said “AH... IT’S SO HARD!” I bet he did not envision America would be 18 Trillion in debt. I think Thomas would agree with me that we have to educate our young people --- the future leaders of this country to live within their means and avoid unnecessary spending.

It’s New Year 2015, and it’s a good start to tell where your money would go instead of wondering at the end of the year where it went, and why you are broke.

The table below is recommend percentages from Dave Ramsey’s book The Total Money Makeover which will dramatically change if you have a very high or very low income. For example if have very low income, your necessities percentage will be high. If your income is very high, your necessities will be very low. If you have debt, it will be higher than recommended.

Item Actual % Recommended %
Charity and Tithing   10-15%
- Lifetime Fund
- Emergency Fund
Housing   25-35%
Utilities   5-10%
Food   5-15%
Transportation   10-15%
Clothing   5-15%
Medical/Health   5-10%
Personal   5-10%
Recreation   5-10%
Debt   5-10%

From the Saving Money article we talked about Targeted Savings which is putting off purchase until you have money to pay for it. Target savings can be for Personal or Recreation Expense. First identify the total amount and when you plan to spend. Divide the total with the number of remaining months. The result is your monthly target savings. For example, today is January and you need a new laptop by start of school in September worth $600.00. That is 8 months away but you will have to buy it in August, therefore $600 / 7 months = $85 is your monthly target savings. Apply the same principle for other items like Pocket Money for summer vacation, new clothes, car maintenance, car insurance, membership fee, annual license and taxes, etc.

Car maintenance under Transportation is required every 6 months. If the average Oil Change is $30, your monthly targeted savings is $5.

License and Taxes are charged annually, for example, $250.00 Personal Property tax in December will be $20 to your monthly targeted savings.

Utilities include electricity, water, gas, phone, trash, and cable. Water is usually charge every quarter (3 months.) Take the estimate for the year, and divide by 12.  For example, $300.00 per year is $25 per month towards your monthly targeted savings.

Total all your savings and expenses, and subtract that from your monthly income.  Positive result is great. Zero result is good. Negative is bad. Negative amount is a challenge for you to suck it in and adjust your life style. It is also an encouragement for you to look for additional income.

Open a checking account and a savings account. Your income from your employment, business, or allowance should go to the checking account. Avail the automatic transfer facility of your bank to put the targeted savings to your savings account monthly, and use the money as intended later.

I can’t cover everything about budgeting in this article but if you master the concept of targeted savings, you will be set for a debt-free life. I advise you to learn more about financial management because in life there are 2 aspects that affect you most: Finances and Relationships.

(Image scanned from St Louis Post Dispatch, Personal Finance, July 29, 2007)

Today you are one step ahead of your peers because you completed reading this article, but I ask you to really commit to your budget. If you have partner in life, make sure he or she should agree to the budget otherwise it will cause personal relationship issues. 

My final thoughts:
People don’t poop money.
AH... IT’S SO HARD (to earn it.)
Budget to spend it wisely!

Next Topic:  Giving Money


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