![]() You could also move your guilt-free money to a prepaid card you use just for fun spending. Making these transfers automatic will have you thanking past you for not forcing you to make these difficult decisions each month. ![]() That way, you don’t even have to think about it.įor example, you could automatically transfer money for your fixed costs to go into a joint account with your spouse. A simple way to do this is to set up regular transfers from your checking account to your savings accounts. The next step is to split your money up into each category when your paycheck comes in. The most important thing is that it works for you. ![]() Don’t feel guilty about it, it’s all part of the process. It’s not the end of the world if you have to tweak the percentages a little bit. 401k, savings goals), and 30% for wants (the stuff you feel guilty about spending money on). Remember, budgeting is an organic process. As we mentioned earlier, a good rule of thumb is 50% for needs (e.g. Now that you have a good idea of everywhere your money should be going, it’s time to bring automation into the mix.įirst off, decide what percentage of your take-home income you want to put into each category. In episode 90 of my podcast, I discuss how you can end money guilt once and for all. You might as well decide how much you’re going to spend on fun stuff rather than ban yourself from spending altogether.īy allocating your money in this way, you make sure all the important costs are taken care of first without leaving out the fun stuff. Most of us are going to spend this money regardless of whether we’ve told ourselves not to. Remember, traditional budgeting is a waste of time. This is where budgets become unsustainable. “But, I thought we weren’t allowed to spend on fun things when budgeting?” Ideally, you want to set aside 20-30% of your take-home pay for this type of spending and variable expenses. These kinds of things can be difficult to prepare for unless you live a rigorously planned-out social life. The Uber rides, popcorn at the movies, an extra cocktail at happy hour. It’s all those little costs that add up before you know it. The guilt-free spending part is the hard part. This means that 20% of your take-home pay should end up in savings.Ī Guilt-free conscious spending plan – what you want, period If we’re following the 50/30/20 (50% essentials/30% wants/20% savings) rule, savings goals and retirement savings fall in the 20% bracket. Mid-term savings include things like a down payment on a car and long-term savings are for big-ticket items such as a down payment on a house or a college fund. Short-term savings are things like gift purchases or a brand new pair of AirPods you’ve been desperate to justify buying. ![]() You can split this section up into short-term, mid-term, and long-term savings. The next thing to look at is financial goals for the future. Savings goals – what you want for the future Not sure how much you should be putting away for retirement? This retirement calculator is your new best friend. Aim to save at least 5-10% of your income after taxes for these accounts. Your priority here is to cover your 401k and Roth IRA. Important investments – what future you needs to live What you have left over is for savings and some fun. Ideally, this figure should be around 50-60% of your net income. Then, subtract this total cost from your monthly take-home pay. This way, if you have an emergency or surprise expense, it won’t derail your month. Why? This will cover the things you haven’t accounted for. Once you’re finished, add an extra 15% on each one. Get it all written down and write the cost next to each one. Starting with the fixed costs, list everything you need to spend during the month, including rent/mortgage payments, car payments, loan repayments, insurance, and utility bills.
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