Today's Blog Post Was Written by Financial Coach Tonia Peasley
Even those of us that spend our days with the “numbers,” need to spend time evaluating whether our spending is in line with our goals. The COVID situation gives us all time to re-evaluate our priorities in life and to tighten up our spending. To do that, using a generic spending plan is a good place to start. It’s designed for after-tax income. To find out how much you can spend in any area, just multiply your monthly after-tax income times the percentage. For instance, according to the plan, you can afford to spend $688 on housing ($2,150 times .32 = $688).
A Generic Spending Plan
Spending
category
Typical budget percentage
Example with a $2,150 monthly income
Housing
32%
$688
Auto
15%
$323
Food
15%
$323
Insurance
5%
$108
Debts
5%
$108
Entertainment
7%
$151
Clothing
5%
$108
Savings
5%
$108
Medical / dental
5%
$108
Miscellaneous
6%
$129
This is just a guideline. You’ll need to adapt it to your situation. If you live in a major metro area, you might spend more on housing and clothing than the guideline recommends, but because you can use public transit (and not a car), you may need less for auto. If you are feeding teenagers, your food category might be much higher.
Using percentages and buckets to track spending make it easier to make changes when appropriate. The categories and percentages created are just an average, but it gives you a place to start. The next step is holding yourself accountable to stick to the categories. If you would like more help with creating a spending plan and then working with someone that will help you be accountable to a plan, give me a call.
If you found this article useful, you might like the following blog posts:
Disclaimer
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by C.L. Sheldon & Company, LLC ), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. C.L. Sheldon & Company, LLC does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to C.L. Sheldon & Company, LLC website or incorporated herein, and C.L. Sheldon & Company, LLC takes no responsibility therefore. All such information is provided solely for convenience, educational, and informational purposes only and all users thereof should be guided accordingly. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from C.L. Sheldon & Company, LLC . To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. C.L. Sheldon & Company, LLC is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the C.L. Sheldon & Company, LLC ’s current written disclosure statement discussing our advisory services and fees is available for review upon request. DISCLAIMER OF TAX ADVICE: Any discussion contained herein cannot be considered to be tax advice. Actual tax advice would require a detailed and careful analysis of the facts and applicable law, which we expect would be time consuming and costly. We have not made and have not been asked to make that type of analysis in connection with any advice given in this blog post. As a result, we are required to advise you that any Federal tax advice rendered in this blog is not intended or written to be used and cannot be used for the purpose of avoiding penalties that may be imposed by the IRS. In the event you would like us to perform the type of analysis that is necessary for us to provide an opinion, that does not require the above disclaimer, as always, please feel free to contact us.
