Lizard Queen
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50/30/20
Nov 26, 2019 20:35:15 GMT -5
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Post by Lizard Queen on Nov 26, 2019 20:35:15 GMT -5
I topped out around $40k, and was really into budgeting at the time I was making that. I liked the 50/30/20 as much more attainable than the 60/40 solution. The 60/40 was completely impossible for me, and I was doing fine with money!
(I believe the 50/30/20 budget is from Elizabeth Warren's book.)
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Rukh O'Rorke
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Post by Rukh O'Rorke on Nov 26, 2019 20:51:37 GMT -5
What the hell is a nut budget?
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Rukh O'Rorke
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Post by Rukh O'Rorke on Nov 26, 2019 20:52:10 GMT -5
I topped out around $40k, and was really into budgeting at the time I was making that. I liked the 50/30/20 as much more attainable than the 60/40 solution. The 60/40 was completely impossible for me, and I was doing fine with money! (I believe the 50/30/20 budget is from Elizabeth Warren's book.) And - Elizabeth Warren? Shesh! Rethinking my vote! dumb -note-dumb dumb -note-dumb -note-dumb But maybe that is the point - it's for dummies? ok - going to check my spreadsheet to see where I am at. Maybe I'm a dummy.....
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Deleted
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Post by Deleted on Nov 26, 2019 22:33:49 GMT -5
@athena53, so you don't save in retirement?
I have one more Roth contribution for December and then I am through. But I still save for me and my grandchildren. I also have regular savings.
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Deleted
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Post by Deleted on Nov 26, 2019 22:53:11 GMT -5
No. My average annual withdrawal rate is 3.5% but that’s trending downward because our downsizing in 2015 was costlier than anticipated. What I don’t spend goes into the grandkids’ 529s. That gives me a state tax deduction and I don’t have to pay taxes on the investment gains.
My investments (excluding the 529s) have increased by over 3% per year since I retired in 2014 AFTER withdrawals so I’m OK with not putting anything back in. I might have to re- think in a bad market but travel and charity could be cut back.
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Tiny
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Post by Tiny on Nov 26, 2019 23:24:38 GMT -5
Here's what's in the 50/30/20 break outs as per investopedia: www.investopedia.com/ask/answers/022916/what-502030-budget-rule.asp50%: Needs/Fixed expenses: Mortgage/Rent, car payments, insurance, groceries, utilities, healthcare, minimum debt payments 30%: Wants: non-essentials like dinner and movies out, vacations, latest electronic gadgets, etc 20%: Savings: retirement (401k/IRA), emergency fund, and/or additional debt repayment. I would agree that it's probably a better rule of thumb for someone with quite a bit more income than 40K. What would you say for someone with 40k? Just curious because I would have said 40k would be better around maybe 60/20/20. But much higher than 40k I would have wanted to see it closer to 40/30/30. I think a big mistake many people make as they increase income is increasing that needs/fixed expense bucket too in line with their income. I think those with higher incomes would be better off for a variety of reasons (both financial, but also enjoyment of life) in allocating less to fixed expenses and more to wants, while also bumping up retirement under the idea they're going to want a more "spendy" retirement or earlier retirement than someone planning on working until 65. I suspect someone with a 40K income in my area would be allocating 70% or so to the Needs/Fixed Expenses slot ($900 for rent, $100 for utlities/laundramat not included in rent, $250 car payment, $70 a month for car insurance, $100 for gas for the car, $300 for groceries/household stuff/personal care, and $80 for phone and that doesn't include a minimum payment on a credit card. It's probably 10% for "wants" - like vacation or dining out and then 20% for debt repayment and maybe alittle (like 3% towards retirement). A student loan payment might $250 a month...and then the rest towards other debt. So, maybe more of a 70/10/20 budget on a 40K income. It's a medium/high cost of living area. Was playing around with income numbers and housing costs a year ago... and it's not unheard of to have $1700 a month in fixed "shelter and food" expenses (a crappy 1b/1b garden appt, a car loan, insurance, food, gas for the car, cell phone). With a 40k income -it helps to have a roommate or be a "double income" family. Once the household income hits the 60K median there's more $$ for wants and savings/debt repayment.
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hoops902
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Post by hoops902 on Nov 27, 2019 8:48:31 GMT -5
Im sorry It's a budgeting tool all net pay 50% goes to necessities housing, electricity, food, transportation etc 30% goes to wants, TV, spending, vacation, etc 20% savings retirement, paydown debts etc... why is debt and retirement lumped? - that seems very odd.... I'm calling it dumb.... I can think of a couple of reasons. 1. It's "financial goals", which makes a little sense in paying off existing debt (consumer debt) and also saving for retirement. The required payments come out of the 50% category, this category is more the elective paydown (personally I think it makes more sense for something like lower interest debt like student loans to go here than high interest CC debt or something that you'd want to get rid of immediately). 2. When you've got that 20%, it makes some sense to pay down high interest debt prior to saving at a lower rate for retirement. 3. Once you're done paying down your debt, ideally you'd want to keep living the same lifestyle and simply moving that money to retirement. I think most people on this board would be more likely to pull the debt part from wants. I think most people in the real world would be doing very well to get that 20% at all.
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hoops902
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Post by hoops902 on Nov 27, 2019 8:58:05 GMT -5
I topped out around $40k, and was really into budgeting at the time I was making that. I liked the 50/30/20 as much more attainable than the 60/40 solution. The 60/40 was completely impossible for me, and I was doing fine with money! (I believe the 50/30/20 budget is from Elizabeth Warren's book.) And - Elizabeth Warren? Shesh! Rethinking my vote! dumb -note-dumb dumb -note-dumb -note-dumb But maybe that is the point - it's for dummies?ok - going to check my spreadsheet to see where I am at. Maybe I'm a dummy..... Basically, yes. I mean all of these "general rules" are for "dummies". Or people too lazy to do it the right way. It's probably more for lazy than dumb (because doing it right doesn't require a lot of intelligence, just the desire to do it). It's simply a light codification of "don't lock yourself into spending all your money on needs, always "pay yourself" by putting money towards retirement, etc". It's not much different than all the other financial guru folks. Their advice typically isn't all that good...but following their advice would get most people in a better position because most people are horrific at their personal finances. It would be like if I came out with a diet plan that said you can eat all kinds of things that are terrible for your body...people would tear it apart who actually understand it and already eat healthy. But if my diet plan is still eating more healthy than 90% of people do...they'd still be better off following my plan than what they're currently doing.
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hoops902
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Post by hoops902 on Nov 27, 2019 9:01:52 GMT -5
@athena53 , so you don't save in retirement? I have one more Roth contribution for December and then I am through. But I still save for me and my grandchildren. I also have regular savings. I would think for most people who are retired and withdrawing money..."saving" is really just "moving money" around though right? For example, if I have $1 million in my retirement account and I typically follow the 4% rule. I might withdraw $40k this year. If I decide to "save" $10k...I really just withdraw $30k instead. Maybe I move that $10k somewhere else, like to a special account for a specific purpose...but it's not really saving anything. That money is already saved years ago, I'm simply not spending it. Obviously this works differently for people who are living off a fixed income only with no withdrawal from a retirement account who are living below their fixed income levels, they'd actually be saving if they get $40k from pension/SS/whatever and take $10k of that and save it.
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Rukh O'Rorke
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Post by Rukh O'Rorke on Nov 27, 2019 9:15:53 GMT -5
so much comes out of my check pretax, I'd have to go back to pay stubs to figure out.
So for net here, you would take your net pay, and then add in pretax amount, and then compute the percents? I have a lot of benefits, including transit, and then 401k. Not sure I care enough to figure it out. I'd say I am over on the 50, over on the 20, and under on the 30. I don't have much flexibility in changing this at the moment - other than to increase income or sell the house. I am working on the first, and I don't include my side income in my numbers.
Just looking at the take home pay after 20% gross for 401k is taken off the top (just upped it from 12%). Mortgage and utilities is about 50% of take home pay. Student loans minimums are about 20% Currently only allocating about 1% to other savings Food, pets, household, etc. is about 10-15% Then there is phone, internet, netflix et al. for the rest.
That is based on 2 checks/month.
So - just roughly guestimating, I'd say I was 65 - 10 - 30...so as suspected, I need more fun money!
Will be changing in 2020 when I switch to HDHP and HSA. I might need to include my side income in overall numbers to make it work.
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Deleted
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Post by Deleted on Nov 27, 2019 10:03:13 GMT -5
I tried figuring mine, but it's pretty complicated with all the income streams and the pre-tax stuff, so I said screw it and went gross. I added child support and refundable tax credits to my gross and came up with a rough... I know retirement and college savings are 37% of gross, but the breakdown of the other two are a little harder to figure out.
50/10/40
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Deleted
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Post by Deleted on Nov 27, 2019 11:23:41 GMT -5
I would think for most people who are retired and withdrawing money..."saving" is really just "moving money" around though right? For example, if I have $1 million in my retirement account and I typically follow the 4% rule. I might withdraw $40k this year. If I decide to "save" $10k...I really just withdraw $30k instead. Maybe I move that $10k somewhere else, like to a special account for a specific purpose...but it's not really saving anything. That money is already saved years ago, I'm simply not spending it. Obviously this works differently for people who are living off a fixed income only with no withdrawal from a retirement account who are living below their fixed income levels, they'd actually be saving if they get $40k from pension/SS/whatever and take $10k of that and save it. I agree. I'm not in the second position so there are no net additions to my investments other than dividends and capital gains. I still feel a little guilty spending what I withdraw even though it's sustainable. I'd been sending $1,000/month to DBIL and DSIL for 24 months after DH's death (DBIL was his brother) and that ended in November of last year. I have to remind myself of that when I look at my spending this year compared to last year; it's up slightly but I've got $12,000 more to play with. I've also funded a LOT of travel including my trip in March which is really pricey (fully paid for) and a $750 down payment on a cruise I'll probably take in 2021.
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movingforward
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Post by movingforward on Nov 27, 2019 11:42:25 GMT -5
40% - Housing, necessities, etc. 35% - Savings 25% - Entertainment/Travel
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Deleted
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Post by Deleted on Nov 27, 2019 13:32:29 GMT -5
@athena53 , so you don't save in retirement? I have one more Roth contribution for December and then I am through. But I still save for me and my grandchildren. I also have regular savings. I would think for most people who are retired and withdrawing money..."saving" is really just "moving money" around though right? For example, if I have $1 million in my retirement account and I typically follow the 4% rule. I might withdraw $40k this year. If I decide to "save" $10k...I really just withdraw $30k instead. Maybe I move that $10k somewhere else, like to a special account for a specific purpose...but it's not really saving anything. That money is already saved years ago, I'm simply not spending it.Obviously this works differently for people who are living off a fixed income only with no withdrawal from a retirement account who are living below their fixed income levels, they'd actually be saving if they get $40k from pension/SS/whatever and take $10k of that and save it. You are right in that I am currently living off a fixed income. But you are quibbling over words in my view. Not spending is always a form of savings. So when I have to take RMDs at age 70.5, if I choose to "not spend" whatever is left after taxes , that is savings to me. I probably won't put it back into the market because of my age, but there are other forms of savings, including the Bank of Posturepedic. And in your example, if you choose to only take $30,000 and not $40,000, you are saving that extra $10,000 for another day.
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Tiny
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Post by Tiny on Nov 27, 2019 13:44:53 GMT -5
What the hell is a nut budget? It's NOT a budget. Nut in the context it was used is old timey slang for "money to be paid" usually in the context of having the money that you will use to pay your bills/expenses that are due. Maybe you've heard it as "making my nut" or "covering my nut" again used in terms of making/having/using money to cover a due bill. What's your monthly nut just means what's your monthly fixed expenses. I haven't heard it used in years - mostly I heard it when someone would hand cash to someone else usually a payment for a football pool or say a collection for an office gift. So when handing over a Hamilton you'd say "here's my nut for Suzie's baby gift". Or you might say "I'm getting my football pool nut this weekend - I'm moonlighting bar tending a wedding on Saturday. Go Team!!"
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hoops902
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Post by hoops902 on Nov 27, 2019 13:50:03 GMT -5
I would think for most people who are retired and withdrawing money..."saving" is really just "moving money" around though right? For example, if I have $1 million in my retirement account and I typically follow the 4% rule. I might withdraw $40k this year. If I decide to "save" $10k...I really just withdraw $30k instead. Maybe I move that $10k somewhere else, like to a special account for a specific purpose...but it's not really saving anything. That money is already saved years ago, I'm simply not spending it.Obviously this works differently for people who are living off a fixed income only with no withdrawal from a retirement account who are living below their fixed income levels, they'd actually be saving if they get $40k from pension/SS/whatever and take $10k of that and save it. You are right in that I am currently living off a fixed income. But you are quibbling over words in my view. Not spending is always a form of savings. So when I have to take RMDs at age 70.5, if I choose to "not spend" whatever is left after taxes , that is savings to me. I probably won't put it back into the market because of my age, but there are other forms of savings, including the Bank of Posturepedic. And in your example, if you choose to only take $30,000 and not $40,000, you are saving that extra $10,000 for another day.
So if I said to you "Every year for the last 10 years, I've saved $10k. I put it in a coffee can, I never spend it, nobody else knows it's there". If you ask most people how much money is in the coffee can I think they'd say "well he saves $10k/year for 10 years, it's $100k". By your logic though, the answer would be a total of $10k in there, because I just save the same $10k/year by simply not spending it. Heck, by that logic I'm saving hundreds of thousands of dollars every second that I simply choose not to spend it...it loses all meaning. I think most people recognize a difference between saving money that is incoming to them vs simply not spending money they've already saved previously.
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hoops902
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Post by hoops902 on Nov 27, 2019 13:52:19 GMT -5
What the hell is a nut budget? It's NOT a budget. Nut in the context it was used is old timey slang for "money to be paid" usually in the context of having the money that you will use to pay your bills/expenses that are due. Maybe you've heard it as "making my nut" or "covering my nut" again used in terms of making/having/using money to cover a due bill. What's your monthly nut just means what's your monthly fixed expenses. I haven't heard it used in years - mostly I heard it when someone would hand cash to someone else usually a payment for a football pool or say a collection for an office gift. So when handing over a Hamilton you'd say "here's my nut for Suzie's baby gift". Or you might say "I'm getting my football pool nut this weekend - I'm moonlighting bar tending a wedding on Saturday. Go Team!!" Is this what they mean by No Nut November? People can't make the money they need for their bills because they're spending it on Christmas gifts?
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Deleted
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Post by Deleted on Nov 27, 2019 15:50:08 GMT -5
You are right in that I am currently living off a fixed income. But you are quibbling over words in my view. Not spending is always a form of savings. So when I have to take RMDs at age 70.5, if I choose to "not spend" whatever is left after taxes , that is savings to me. I probably won't put it back into the market because of my age, but there are other forms of savings, including the Bank of Posturepedic. And in your example, if you choose to only take $30,000 and not $40,000, you are saving that extra $10,000 for another day.
So if I said to you "Every year for the last 10 years, I've saved $10k. I put it in a coffee can, I never spend it, nobody else knows it's there". If you ask most people how much money is in the coffee can I think they'd say "well he saves $10k/year for 10 years, it's $100k". By your logic though, the answer would be a total of $10k in there, because I just save the same $10k/year by simply not spending it. Heck, by that logic I'm saving hundreds of thousands of dollars every second that I simply choose not to spend it...it loses all meaning. I think most people recognize a difference between saving money that is incoming to them vs simply not spending money they've already saved previously. You are still quibbling. When people say, "I saved $40 on this new dress," they mean they didn't spend $40. Not that they had $40 incoming that they put aside. Publix told me today I saved $15.65 on groceries. I already had the grocery money. I chose not to spend it. We are using the words in different ways from each other. I accept that.
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hoops902
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Post by hoops902 on Nov 27, 2019 16:15:55 GMT -5
So if I said to you "Every year for the last 10 years, I've saved $10k. I put it in a coffee can, I never spend it, nobody else knows it's there". If you ask most people how much money is in the coffee can I think they'd say "well he saves $10k/year for 10 years, it's $100k". By your logic though, the answer would be a total of $10k in there, because I just save the same $10k/year by simply not spending it. Heck, by that logic I'm saving hundreds of thousands of dollars every second that I simply choose not to spend it...it loses all meaning. I think most people recognize a difference between saving money that is incoming to them vs simply not spending money they've already saved previously. You are still quibbling. When people say, "I saved $40 on this new dress," they mean they didn't spend $40. Not that they had $40 incoming that they put aside. Publix told me today I saved $15.65 on groceries. I already had the grocery money. I chose not to spend it.We are using the words in different ways from each other. I accept that. We are using words in different ways, I think it's far more important than simply quibbling. Even to your 2 examples, people feeling like they "saved money" because the company they were giving their money to told them that they were. It's a great example of why so many people in the country have no idea about the basics of personal finance. They pay market price for something, but convince themselves they're making good financial decisions because the person they gave their money to told them it was a good idea to give them their money. If you see a car you like and it costs $80,000, you didn't "save $20,000" by buying a car for $60,000 instead. You didn't even save $20,000 if you paid $60k for the car advertised for $80k. It doesn't matter that the salesperson said "great financial decision, super solid, you really know how to manage money big guy". That's why I don't think it's quibbling, we're talking about 2 VERY different things. A quibble is small. Based on my way of "how much did I save this year" the answer is about $20k. Based on your way, it's over $500k. I don't think $480k is quibbling...that's pretty significant to me (if that's an insignificant amount to you, by all means good on you!).
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ednkris
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Post by ednkris on Nov 29, 2019 14:46:20 GMT -5
You are still quibbling. When people say, "I saved $40 on this new dress," they mean they didn't spend $40. Not that they had $40 incoming that they put aside. Publix told me today I saved $15.65 on groceries. I already had the grocery money. I chose not to spend it.We are using the words in different ways from each other. I accept that. We are using words in different ways, I think it's far more important than simply quibbling. Even to your 2 examples, people feeling like they "saved money" because the company they were giving their money to told them that they were. It's a great example of why so many people in the country have no idea about the basics of personal finance. They pay market price for something, but convince themselves they're making good financial decisions because the person they gave their money to told them it was a good idea to give them their money. If you see a car you like and it costs $80,000, you didn't "save $20,000" by buying a car for $60,000 instead. You didn't even save $20,000 if you paid $60k for the car advertised for $80k. It doesn't matter that the salesperson said "great financial decision, super solid, you really know how to manage money big guy". That's why I don't think it's quibbling, we're talking about 2 VERY different things. A quibble is small. Based on my way of "how much did I save this year" the answer is about $20k. Based on your way, it's over $500k. I don't think $480k is quibbling...that's pretty significant to me (if that's an insignificant amount to you, by all means good on you!). I remember a economics professor asking when is a sale not a sale ---when you don't need / use the item. Spending money that you didn't need to just to say you spent it is not the same as saving it.
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Knee Deep in Water Chloe
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Post by Knee Deep in Water Chloe on Nov 29, 2019 15:04:41 GMT -5
I spent so many years with my just my housing costing 50% of my income that I couldn't further entertain the 50/30/20 concept. I just felt even more like a failure.
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Deleted
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Post by Deleted on Nov 29, 2019 18:40:03 GMT -5
You are still quibbling. When people say, "I saved $40 on this new dress," they mean they didn't spend $40. Not that they had $40 incoming that they put aside. Publix told me today I saved $15.65 on groceries. I already had the grocery money. I chose not to spend it.We are using the words in different ways from each other. I accept that. We are using words in different ways, I think it's far more important than simply quibbling. Even to your 2 examples, people feeling like they "saved money" because the company they were giving their money to told them that they were. It's a great example of why so many people in the country have no idea about the basics of personal finance. They pay market price for something, but convince themselves they're making good financial decisions because the person they gave their money to told them it was a good idea to give them their money. If you see a car you like and it costs $80,000, you didn't "save $20,000" by buying a car for $60,000 instead. You didn't even save $20,000 if you paid $60k for the car advertised for $80k. It doesn't matter that the salesperson said "great financial decision, super solid, you really know how to manage money big guy". That's why I don't think it's quibbling, we're talking about 2 VERY different things. A quibble is small. Based on my way of "how much did I save this year" the answer is about $20k. Based on your way, it's over $500k. I don't think $480k is quibbling...that's pretty significant to me (if that's an insignificant amount to you, by all means good on you!). LOL I just mentioned this to the cashier at Target today. She tells me, "You saved $5 today!" I'm like, "Really? Because it sure feels like I spent $30."
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Deleted
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Post by Deleted on Nov 29, 2019 22:09:35 GMT -5
I spent so many years with my just my housing costing 50% of my income that I couldn't further entertain the 50/30/20 concept. I just felt even more like a failure. I had some years like that-lived in NNJ, $250K mortgage, exorbitant property taxes and then sending DS to NY Military Academy for 4 years at $12K/year. This was all in 1998-2003. Then he started college. I made azero improvements to that house- it was all I could do to pay the mortgage, insurance and taxes and pay for necessary repairs. It was easier for me than most- I was making good money so the % left over after housing expenses was bigger in dollar terms than for the hypothetical person mentioned earlier who made $40K.
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haapai
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Post by haapai on Nov 30, 2019 10:34:18 GMT -5
I think that you might have garbled that last paragraph, but I imagine that I get your drift. Perhaps it should read that the amount left over after paying for shelter was larger in dollar terms than someone making less or that the percentage left over after every other need/must-have/fixed expense was paid for was larger than what a lower earner would typically have.
But I still have to wonder if you had nerves of steel, no other option, a blissful ignorance of what income disruption could do to you, or gobs of equity and/or savings that allowed you to sleep at night.
I spent several years not sleeping very well at night because it took 80% of my after-tax to just avoid having uncomfortable conversations with people that I had made promises to. My mind would not stop harping on how that meant that it took 4 months of complete austerity and perfect luck to save up enough to get me through a single austere month. I was constantly doing the math for other percentages too. 75/25 is much nicer, but things deteriorate rapidly when you do the calculations for 85/15, 90/10, and 95/5.
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Deleted
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Post by Deleted on Nov 30, 2019 18:24:14 GMT -5
OK, maybe it wasn't that bad- it was 1998 so I don't have all the numbers but I was making $10K/month, let's say $6,500 after deductions, mortgage was about $2,000, property taxes about $600, utilities about $400, DS' boarding school expenses $1,000. Maybe another $200/month for car and home insurance? It felt a bit scary and I certainly didn't have nerves of steel. I did have savings inside and outside of the 401(k) and had put down $100K on the house so I had funds I could tap in an emergency. I also had good health insurance, which mitigated one of the main causes of emergencies. It was worse in the years before that when I was married to the Ex and he was unemployed after we'd taken out a mortgage based on both our incomes. The house was bigger, taxes and utilities were higher and my Ex insisted on an exorbitant cable TV package. I don't remember those numbers at all.
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Deleted
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Post by Deleted on Nov 30, 2019 19:03:00 GMT -5
I use to use (and love) Microsoft Money software for managing my finances. It used a similar idea, but it was 60/40.
60% of gross went to “committed” expenses..... taxes, insurance, mortgage/rent, whatever you “had” to pay every month. 10% went to “fun”, 10% went to “savings/debt”, 10% went to “irregular” expenses, and 10% went to “retirement”.
It was helpful to me because if any category went over the %, it was clear to me that the money had to come from another category. For me, the “fun” category was the first to get cut. Which wasn’t much fun and motivated me to line everything up better.
I’ve seen the 50/30/20 mentioned in personal finance articles or whatever, but using software that was actually based on the idea of 60/40 kind of forced me to try to stay on track.
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Rukh O'Rorke
Senior Associate
Joined: Jul 4, 2016 13:31:15 GMT -5
Posts: 10,018
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Post by Rukh O'Rorke on Dec 1, 2019 10:32:50 GMT -5
I use to use (and love) Microsoft Money software for managing my finances. It used a similar idea, but it was 60/40. 60% of gross went to “committed” expenses..... taxes, insurance, mortgage/rent, whatever you “had” to pay every month. 10% went to “fun”, 10% went to “savings/debt”, 10% went to “irregular” expenses, and 10% went to “retirement”. It was helpful to me because if any category went over the %, it was clear to me that the money had to come from another category. For me, the “fun” category was the first to get cut. Which wasn’t much fun and motivated me to line everything up better. I’ve seen the 50/30/20 mentioned in personal finance articles or whatever, but using software that was actually based on the idea of 60/40 kind of forced me to try to stay on track. I remember conversations about that one on the old MSN boards! Looking forward to years end, and my new an shiny spreadsheet full of every penny spent in 2019, and looking at the retrospective and prospective for 2o2o to make some plans!
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