Three-Legged Stool Budgeting
For many people budgeting is a time consuming
, labor-intensive process. The earnings part of budgeting is easy. Most people just earn a paycheck every week or twice a month. On the expenses side, it can easily be overwhelming. What is the best way to determine your spending categories? What ratios should one consider when looking at spending in each category?
The following budget model is simple. It was invented by my wife's uncle Mario who used to milk cows when he was a boy in Sardinia. An old fashioned milk stool has three legs, which is all one needs to support oneself securely on a stool. A two-legged stool won't work. Four legs is fine, but three legs is simpler and sturdy. Basically, you divide your spending into three legs of a stool, and each represents roughly a third of your spending. Your take home income, after taxes, is what is left after all payroll deductions (such as. insurance, retirement plans, taxes, etc.)
Leg #1: Inside Your Castle
Financial advisors suggest that you spend no more than a third of your income on housing, whether in rent or a mortgage. However, sometimes people become "house poor" and wind up spending 40% or even 50% of their income on housing. Where you live also has a big impact, with large urban areas having a higher housing cost than other places like rural Iowa, for instance. If you go above a third of your income in housing, and you are unwilling or simply can't change your situation, then you will just have to make up the difference in one of the other two categories.
Leg #2: Outside Your Castle
In this category, anything you do that is not housing related you consider "outside the castle." This includes car insurance, car payments, other transportation costs, clothing allowances, tuition, paying back loans or credit cards, and all your other bills (including utility bills) except those involving entertainment.
Leg #3: Eat, Drink, and Be Merry
Food spending in America is about 9% as a percentage of an individual's income. This is a lot less than other industrialized countries. It is as high as 17% in Japan, 27% in South Africa, and 53% in India according to U.S. Department of Agriculture. Food represents a third of this particular category. This means about 20-25% of your entire income can go towards making you merry. For some folks, saving for retirement makes them merry, so they put it all there. Others drink to be happy, and alcohol spending can be nearly as much as food. Others value cable television, vacations, or other entertainment pursuits.
Three-Legged Stool Budgeting
By: Dan Mann
Endless Lead Flow Review Emetophobia Eraser Program Reviews As Greece Struggles With Their Financial Circumstances Vacant Seashores Result In Incredible Bargain Master Cleanse Secrets reviews-Master Cleanse Secrets can make your appetite norma Thinking Of A Budget Lake Tahoe Weekend Getaway? Check Out This Advice On How To Grab Nab Lake Tahoe Save Money On Exchange Rates Maruti Swift Price | Maruti Swift Reviews Album Review For Dungen Tio Bitar Perfect Uninstaller Review - remove the junk files left behind when uninstalling Rehab Ankle Sprain Review-it can be operated by people of all ages Fibonacci Killer Review- it works independently so that you can select the trading platform Esperient Creator Enterprise-Esperient Review Esperient Creator Torrent-Esperient Review