Real World Finance$

It’s funny how things seem to show up just when you need them. I read this article sometime last week about the 60% Budgeting Solution. The theory here is to simply your budget. There are 5 categories of your budget to break out expenses into.

• 60% - Committed Expenses. These include your mortgage/rent, utilities, groceries, cable, telephone, car payments, insurance and taxes
• 10% - Retirement Savings. Everything from your 401(k) and any IRA’s you may keep. This is a rather agressive number for most (at least on the surface), but if you are putting in your 6% to your employer plan, you are most of the way there.
• 10% - Long-Term Savings & Debt. This 10% is used to pay off debts including credit cards and what’s left over should be put into savings or investment accounts for future major purchases.
• 10% - Fun. This is where too many of us ending spending the Long-Term Savings portion. Everything from monthly eating out, baseball games, theatre tickets, etc. Anything that is not essential, but you plan on spending every month.
• 10% - Short-Term Savings. This is for the irregular expenses. Annual personal property taxes, vacations, the fridge goes out. You plan on spending this all during the year, you just don’t know when or on what.

It’s that last 10% that we’ve always been told, “You should keep at least 2 months expenses in your savings account” that we never listened to.

This week has reminded me of this section and wished I has paid attention to it much sooner in my life than just last week. We have our every other year vacation to Orlando coming up next month and we have some money set aside for that, but then “stuff” happens. Tuesday night we turned off the AC and opened the windows. One of the upper sashes fell and glass shattered. Luckily that’s not much of an expense, but will come out of what I had planned to fix the wood fence on the house. Then, the wife lets me know about a call from the dentist that our insurance isn’t covering the $2k of bridge work she had done recently. Ouch!

Guess my budget planning I started a few days ago was a bit late. Well, about 6 months late actually. Regardless, I’m still going forward. I’ll be chaging some of the percents around for us. I’m sure the 10% for short term savings will mostly disappear and a few percent of the Retirement Savings to roll into debt in the short term. That will get us much further to having true savings in the coming years.