Some Spending Guidelines

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Spending guideline percentages may be useful as you examine your spending habits. These spending guidelines are for comparison purposes ONLY. They are NOT hard and fast rules. One family may choose to spend forty percent of their income on housing and less on clothing, and transportation. Another may choose to spend more on transportation and less on housing. It's up to you to decide your priorities.

These inquires are from the Department of Labor Consumer Expenditure Survey. Remember, these show only the average expenditures of surveyed households, NOT the amounts families should spend. You can see housing, food and transportation take about two-thirds of the family budget and about one-third goes for all other expenses. That's where the challenges of money management come in. Housing 31.8% Food 15.6% Transportation 17.6% Clothing and Services 7.1% Health Care 4.6% Entertainment 5.6% All Other 17.6%

Note: All other includes alcoholic beverages, reading, education, tobacco, personal care,cash contributions personal insurance and pensions and miscellaneous expenditures. Are you wondering how to calculate your spending percentages? Here's an example. If you spend $350 a month on housing and your take-home pay is $1,000, you are spending 35% of your income on housing. $350 divided by $1,000. x 100 = 35%.

The most important thing for you to remember is your take-home pay is like a pie. If you cut one slice too big, all of the other pieces will have to be cut smaller so everyone gets a taste, or there will be someone who won't get a piece of pie. If you do this with your paycheck, you will probably find yourself having to borrow to make ends meet.

Plan For Savings By Making a Written Plan

These guidelines will assure you of a money management plan to fit YOUR special needs. If you follow each step, it will also save you a complicated job of bookkeeping. This guide won't be able to work miracles for you but will help show you the way to get the most out of your money. For a workable plan, the following four steps are necessary:


• Add up your total income, including any funds you receive in addition to your earnings.
  
  
• Figure out your total fixed expenses such as rent or mortgage, insurance and car payments.
  
  
• Provide for a savings fund, adequate to meet emergencies and achieve special goals.
  
  
• Estimate how much you need for day to day living expenses.

While these steps are listed in sequence, it's likely you will arrive at your final estimates by considering them as a group. You may need to do some adjusting of the amount in each step until you have what you feel is a satisfactory plan. After going through each step and filling out the worksheet, you will have a better idea of where your money is going and how much you have left over to work with.

Before you begin to work out your plan, it is important to remember good money management starts long before you begin keeping track of dollars and cents. As we have discussed in previous lessons, your plan is a personal or family matter. You need to take a long hard look at your values. Your goals will reflect your values. No one can tell you what your lifestyle ought to be. Only you can decide how your income is spent. Effective money management will depend on the way you choose to live and the goals you plan to achieve.

So where do you cut expenses to keep the budget balanced? Travel? Clothes? Entertainment?, Education? That's up to you. Think about where you are now and where you want to be in five or ten years. Your long-term plan should reflect those goals you and your family have decided are most important.