Simple Budget to Avoid Debt - My Method

[Anonymous]

I'd like to share my basic method for budgeting in hopes that it helps others out there in Myficoland. It is very simple, as I believe the easier your budgeting methodology is, the more likely you will stick to it.

You start with your monthly net income. Subtract your housing payment and all bills from your net income. Next, deduct however much you choose to designate into each of the following three categories (I like 10% to each): savings, retirement accounts, and upcoming planned expenses ("upcoming planned expenses" examples would be a christmas present fund, car down payment, summer vacation, etc.). Whatever is remaining is your "free spend" for shopping, dining out, etc. (I put all of my free spend on one credit card to keep tabs of exactly how much I am spending, then PIF each month). Whatever amount is leftover you can either leave in your checking, move to savings, or invest. I choose to leave it in my checking account. The biggest key here is that you should prioritize your bills and retirement/savings first and let your saving habits dictate your spending habits... not the other way around!

Example:

$4000 Monthly net income (payroll into checking account)

-$2000 total bills including housing (autopay from checking, but always validate)

-$400 to retirement (10% of net)

-$400 to savings for emergency fund  (10% of net)

-$400 to savings subaccount(s) for upcoming planned expenses (10% of net)

-$760 "free spend" (use one credit card so that you can easily monitor this number)

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Remainder: $40 cushion per month

Of course life is not one size fits all, and you can tailor it to your needs. For example, once you have a large enough emergency fund, you can adjust and do 5% to savings and 15% to retirement. If your bills are larger and you can only save/invest 5%, that's still great. Big picture, my philosophy is all about prioritizing my bills and savings/retirement contributions to allow my saving habits to dictate my spending habits. This way, you will:

1. Always have money in the bank for emergencies 

2. Always allow yourself to a budget for planned expenses such as vacations and christmas gifts without having to put yourself in debt due to lack of planning

3. Guarantee yourself a retirement nest egg

I refuse to allow my spending habits to control my finances. I hold myself accountable to my monthly "free spend", and if I want to spend more, I have to either reduce my bills or increase my income. If I slip up and use up my "free spend" with two days left in the month, I lock myself in my house until the 1st (almost literally). No going over... period! 

I hope this helps, and please let me know if you have any questions!

[Anonymous]

This is a great plan. I do something similar but I budget everything down to zero. It requires some mid and end of the month adjusting. I am not sure if I will stick with my method though. I love having another idea to look at. Thank you for posting.

[Anonymous]

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@Anonymous wrote:

This is a great plan. I do something similar but I budget everything down to zero. It requires some mid and end of the month adjusting. I am not sure if I will stick with my method though. I love having another idea to look at. Thank you for posting.

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Thanks! I think any time you start a budget, it will take a few months of tinkering to get it perfect. Best of luck to you!

[Anonymous]

Dpeezy, thank you so much for taking the time to share your budgeting method. I think it's pretty straight forward and easy to follow. Imagine if something like this were a mandatory class in high school? Our society would benefit tremendously from a drastic reduction in bankruptcies; divorces (money problems being one of the most cited reasons for divorce); on individuals and families living beyond their means; on seniors who lack the financial ability to lead a comfortable, decent life during their golden years; and many, many more. 

[Anonymous]

Thanks for breaking everything down.  It's a very good budget.  

[Anonymous]

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@Anonymous wrote:

Dpeezy, thank you so much for taking the time to share your budgeting method. I think it's pretty straight forward and easy to follow. Imagine if something like this were a mandatory class in high school? Our society would benefit tremendously from a drastic reduction in bankruptcies; divorces (money problems being one of the most cited reasons for divorce); on individuals and families living beyond their means; on seniors who lack the financial ability to lead a comfortable, decent life during their golden years; and many, many more. 

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I couldn't agree more!!!!! I had a required "economics" class in high school, but it was more about the history of economics in our country rather than practical application.

I, like many, had to learn the hard way with finances. Teaching practical finances and economics early on would help save so many from major headaches down the road! Imagine a country where 25% fewer Americans were in debt - talk about a way to stimulate the economy!

[dajewa1]

Nice

[Anonymous]

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@Anonymous wrote:

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@Anonymous wrote:

Dpeezy, thank you so much for taking the time to share your budgeting method. I think it's pretty straight forward and easy to follow. Imagine if something like this were a mandatory class in high school? Our society would benefit tremendously from a drastic reduction in bankruptcies; divorces (money problems being one of the most cited reasons for divorce); on individuals and families living beyond their means; on seniors who lack the financial ability to lead a comfortable, decent life during their golden years; and many, many more. 

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I couldn't agree more!!!!! I had a required "economics" class in high school, but it was more about the history of economics in our country rather than practical application.

I, like many, had to learn the hard way with finances. Teaching practical finances and economics early on would help save so many from major headaches down the road! Imagine a country where 25% fewer Americans were in debt - talk about a way to stimulate the economy!

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I found it very interesting in my high school they had a budgeting math class. It was supposed to be very good at helping people create budgets and learn how to balance accounts and such. The only problem was the only way in was by invite, and the only way to get an invite was to fail all your math classes. It was a remedial math class meant to prepare people that were not able or willing to do traditional algebra and geomerty classes for those everday math problems they would encounter no matter what career they went into.

While I agree that it was good for those that did not want to learn the upper level math, it would have been a good class for even those of us that were doing AP level Calculus. Traditional math classes taught how to do the arithmetic, but did nothing in regards to how to setup a budget, it was just assumed you could do the math and would figure it out. Somehow you had to make the leap that figuring out when two trains would hit each other could also be used to setup your budget.

Unfortunately no matter what level of schooling you have most of the information taught typically has a very limited scope to the real world and you end up learning by fire.

[celticslegends]

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@Anonymous wrote:

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@Anonymous wrote:

Dpeezy, thank you so much for taking the time to share your budgeting method. I think it's pretty straight forward and easy to follow. Imagine if something like this were a mandatory class in high school? Our society would benefit tremendously from a drastic reduction in bankruptcies; divorces (money problems being one of the most cited reasons for divorce); on individuals and families living beyond their means; on seniors who lack the financial ability to lead a comfortable, decent life during their golden years; and many, many more. 

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I couldn't agree more!!!!! I had a required "economics" class in high school, but it was more about the history of economics in our country rather than practical application.

I, like many, had to learn the hard way with finances. Teaching practical finances and economics early on would help save so many from major headaches down the road! Imagine a country where 25% fewer Americans were in debt - talk about a way to stimulate the economy!

_________________________________________________________________________________________________________________________________

I have to chime in here and I apologize if I offend anyone politically.

Unfortunately it starts in the home. Yes, we all make mistakes, but if public schools and the government were giving speeches about budgeting your finances and watching your spending, they wouldn't be in power. They need a dumb populace to keep their jobs. Instead they give empty speeches, with empty promises and a majority of the people lap it up. Instead of the media challenging the politicians, they make a big deal about deflated footballs.

The moral of the story is that we are responsible for our own decisions. We can change and learn from our own mistakes, as well as the mistakes of others.

[StartingOver10]

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@celticslegends wrote:

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@Anonymous wrote:

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@Anonymous wrote:

Dpeezy, thank you so much for taking the time to share your budgeting method. I think it's pretty straight forward and easy to follow. Imagine if something like this were a mandatory class in high school? Our society would benefit tremendously from a drastic reduction in bankruptcies; divorces (money problems being one of the most cited reasons for divorce); on individuals and families living beyond their means; on seniors who lack the financial ability to lead a comfortable, decent life during their golden years; and many, many more. 

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I couldn't agree more!!!!! I had a required "economics" class in high school, but it was more about the history of economics in our country rather than practical application.

I, like many, had to learn the hard way with finances. Teaching practical finances and economics early on would help save so many from major headaches down the road! Imagine a country where 25% fewer Americans were in debt - talk about a way to stimulate the economy!

_________________________________________________________________________________________________________________________________

I have to chime in here and I apologize if I offend anyone politically.

Unfortunately it starts in the home. Yes, we all make mistakes, but if public schools and the government were giving speeches about budgeting your finances and watching your spending, they wouldn't be in power. They need a dumb populace to keep their jobs. Instead they give empty speeches, with empty promises and a majority of the people lap it up. Instead of the media challenging the politicians, they make a big deal about deflated footballs.

The moral of the story is that we are responsible for our own decisions. We can change and learn from our own mistakes, as well as the mistakes of others.

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I agree with this conclusion. However, I like the idea of having the practical math/budgeting class in school. Too many adults have no idea of how to budget and get glassey eyed at the prospect of putting together a financial plan.   How are the kids going to learn from the parents that have no idea of how to budget? That is the reality of the issue. Right now you have a subset of parents that are knowledgeable and teach their children - but that is the exception and it clearly isn't working.

We are responsible for our own decisions. But lets give the children the tools to make those decisions.