I don't know that it's inefficient, especially if you are playing catch up with savings or are looking to retire early (or just build in some flexibility into your work schedule in general). Last thing, I got my math for $101,000 by adding the tax advantaged limits (HSA IRA 401k) (6750,5500,18000) and dividing by 3/10. Could save it and index fund it or pay off mortgage, but just illustrating that the 30% savings rule kind of is null after that point for the purposes of being a wise budgeting tool. If you have a fully funded emergency fund, there will come a point where maxing your 401k HSA and IRA will be less than 30% of your income (that point is at $101,000) and at that point I would argue you certainly do not need to be saving more than that, it would be inefficient actually because your tax advantaged options are exhausted. I'll admit the whole thing is pretty conservative though and not always necessary. So if I have a 100% of 5% match and a 5% pension, that doesn't mean I now have a free ticket to only save 20% since I'm making up the other 10% from employer contributions. Basically what I'm getting at is 30% of your income does not include pensions or employer matches. Also this is a total of 100% of your pretax income box 1, as opposed to box 5 or otherwise. In my head though categories 1 and 3 are interchangeable. I like this as well, though I am a 50/30/20 guy. Here, please treat others with respect, stay on-topic, and avoid self-promotion.Īlways do your own research before acting on any information or advice that you read on Reddit. Get your financial house in order, learn how to better manage your money, and invest for your future. Banking Megathread: FDIC, NCUA, and your cash.Private communication is not safe on Reddit. Scam alert: Ignore any private messages or chat requests.It is better to start from a less restricted budget and work with that and then determine if you can further restrict it. When you restrict yourself too much, and you find yourself unable to reach your budgeting goals, you may become frustrated and completely give up. You may find yourself even more tempted to spend money because you have restricted yourself so much. In some cases, you may try to restrict your spending so much that you are not allowing yourself to have any fun, or purchasing enough food to last you the entire month. While that is admirable, it is not the best way to go because you may set yourself up to fail. If you want to eliminate your debt, you may seriously consider eliminating certain items from your budget, or making the allowable amount small, so you can focus all of your money on reducing debt. It is important to make sure your budgeting goals are realistic. You may even be able to pay off your debt earlier than eight months, but keep in mind that this is an incredibly strict budget. With this aggressive budget, you can pay off your debt in the timeframe you selected. That means you must pay $1250 per month to get that debt paid. If you have $10,000 in debt, but you want to pay it off in eight months. You can adjust the timeframe in which you want to achieve your goal. If not, you may need to make some adjustments. Once you determine how much money you need, you can see if it fits into your budget percentage. Once you have your goals written down, it is time to determine how much money you need to make that happen. How Can Budget Percentages Help Me Reach My Goals? If that is your goal, you may want to use this type of budget. This is a much more aggressive budget to help you save money or pay off debt faster.
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