Maybe it's the ADD, or the fact that I have tracked my expenses in Quicken (since 1998) down to a level of detail that would make your eyes cross, but I have never really been able to get a handle on what I *need* and how to use the rest to *save*. It has been TOO much information and I need to get up and running fast now that I am determined to turn this cash-boat around.
Cruising around the indispensible It's Your Money! site, I came across an MSN Money article that offers a simple budgeting technique. The author's plan is to keep "committed expenses" to 60% of gross income, use 10% for "fun" and save the remaining 30% across short and long term savings.
I tried his formula as is, but found that if I modified it a bit and based it on my net, the numbers were rounder and I was allocating more for savings and slightly less for "fun". Measured against my gross income, my taxes (payroll and property = committed) are 25% and my 401k (=long term saving) contribution is just under 15%. Here's how I applied the formula to what's left:
$3000 (60% committed expenses)Since I decided to borrow to make my 2004 Roth contribution, I'll be sinking both long and short term savings into paying that back for the next two months. After that, I'll be building my "emergency fund" and short term savings (irregular expenses, travel, christmas...) throughout the year. I'll be setting up an automatic transfer of the $1500 to my ING savings account starting next month so my checking account balance will reflect how well I am doing on my 70% limit on monthly spending.
$1000 (20% long term savings)
$ 500 (10% short term savings)
$ 500 (10% fun)
I need to noodle more on what's committed, what's fun and what's "irregular" for me so I can fine tune this. It's ok to start, but I do feel I should be saving even more. I just don't know if this generous salary is going to last, so I'm trying to make the most of it.