Budget sculpting

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•Tithing/Charitable Giving—10-15 percent
•Housing—25-35 percent
•Food—5-15 percent
•Utilities—5-10 percent
•Transportation—10-15 percent
•Clothing—3-7 percent
•Savings—5-15 percent
•Medical/Health—2-7 percent
•Insurance—5 percent
•Personal—5-7 percent
•Recreation/Entertainment—5-10 percent
•Child Care/School 5-10 percent
•Debts—5-10 percent
These are guidelines and are not the universal standard. They are flexible and can be manipulated to line up with your priorities. The important thing to understand as you slice your money pie is that a bigger slice in one category will require a smaller slice in another category. For example, you can cheat up on the housing category allocating 40-percent of your income as long as you reduce your transportation category down to 5-percent.
Here’s how it works. You want to total the amount of money you bring home in your paycheck each month. We’re only concerned with our take home pay (net income) since what we take home in our paycheck is the only thing we can spend. From there you want to look at what you’re currently spending on a particular category. To calculate the percentage of a specific budget category, all you have to do is divide the amount budgeted for that category by your net income. For example, let’s assume that your net income is $2,000 per month. Each and every month you bring home about $2,000. Let’s further assume that your house payment is $900 per month, your car payment is $450 per month and your debts (personal loans and credit cards) are $300 per month. By dividing housing payment of $900 into your net income of $2,000 you calculate housing to equal 45 percent of your net income. By dividing car payment of $450 into your net income of $2,000, you calculate transportation to be 23 percent of your net income. By dividing your debt payment of $300 per month, you calculate debt to be 15 percent of your net income. By comparing these percentages to budget percentage guidelines, you see that you’re over spending in each in every category. By adding up the percentages in these categories you’ll see that housing, car and debt accounts for 83 percent of your net income and you still have to buy food and pay utilities among other things. This leaves very little if any for tithing, savings, entertainment and other things you aspire to do with money.
Leave it to me to use an example that paints a grim picture. My example is a close depiction of what’s taking place in most households. They camouflage their reality by using credit to finance the rest of their lifestyle. Like money, credit is finite; at some point you’ll max out your credit and be forced to accept the wisdom in the budget percentage guidelines. I’d rather heed the advice now and begin to sculpt my budget to align with my priorities, values and goals and get the biggest bang for my buck.
(Mortgage and Money Coach Damon Carr is the owner of ACE Financial. Damon can be reached at 412-856-1183.)

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