#BALANCED HOUSEHOLD BUDGET PERCENTAGES PROFESSIONAL#

#BALANCED HOUSEHOLD BUDGET PERCENTAGES PROFESSIONAL#

Stanley Poorman, financial professional with Principal ® 3. Financial planning is really more about behavior than numbers. The idea is to modify your behavior by making transfers take longer, so you’re less tempted to use it on a spending splurge. Maybe it’s at an online bank or a different financial institution (try to compare high-yield saving accounts). To help avoid temptation, keep the emergency fund in a different place than your checking account. “Keep allocating to the emergency fund,” Poorman says, “but now that the one-month cushion is set, you can start tackling the credit card balance, too.” With that one-month emergency goal hit, consider splitting your allocation to 8% for credit cards and 2% for the emergency fund. Set an achievable goal-say $1,000-and when you hit it, move on to saving one month of expenses (with the goal of having three to six set aside, which may take a few years). Initially, Poorman says to use it to build an emergency fund, so you aren’t dependent on credit cards to cover unexpected expenses. The other half is your goal/debt money (about 10% of your pay).ĭepending on your circumstances, how you use this money may change over time. Poorman suggests a 10% contribution, then build from there. The priority here is to contribute enough to your retirement plan to maximize your employer’s match, if they offer one, and set yourself up to help meet your long-term goals. Put half of this toward retirement (about 10% of your pay). This is the part of your paycheck set aside to meet future financial objectives-whether they’re long-term or relatively short-term. Dedicate 20% to savings and paying down debt.

If you’re living in a high-cost area, Poorman notes you may have to shell out a higher percentage for essentials. Remove this money from your primary account right away, so you know your needs will be covered. Things like groceries, bills, rent or mortgage, debt payments, and insurance should make up about 50% of a net (after taxes) paycheck. Keep essentials at about 50% of your pay. Let’s break it down: essentials first, savings and investments second, and entertainment third. 20% for personal saving and investment goals.30% for spending on dining or ordering out and entertainment.50% of net pay for essentials: groceries, bills, rent or mortgage, debt payments, and insurance.What does that balance look like? Poorman suggests the popular 50/30/20 rule of thumb for paycheck allocation: 3 Giving up the pleasures you work hard to earn may not be required. That’s all on top of the typical debt load for young earners-student loans, car payments, credit cards-making it easy to fall into a one-step-forward, one-step-back cycle.īut there are ways to find a sustainable balance of living in the now and planning for the future. When you’re young and social, you may put big portions of your monthly paycheck toward lifestyle spending: dining, entertainment, travel. Workers who participate in an employer-sponsored retirement plan yet feel they’re not saving enough.

Balanced household budget percentages