Every Household Should Have a Budget - Step 2

By
Mortgage and Lending with Bay Equity, LLC 770-634-4021 NMLS #206275 GA 25689
https://activerain.com/droplet/ZLy

Kathy Sheehan

 

Every Household Should Have a Budget - Step 2.  In the Getting Started blog, you were tasked with tracking all of your expenses for a month.  Now that you have started pulling the information together you know when, where and how much you are spending.  Was it a surprise?  For most it is.

 

Now that you have an overview of what you are currently spending on a monthly basis, it is time to make some tough decisions and change some habits.  Here are a few rules that will help get you on track:

  • Rule #1.....DO NOT SPEND MORE THAN YOU EARN!
  • Rule #2 .... PUT THE CREDIT CARDS AWAY
  • Rule #3....SAVING IS NOT AN OPTION
  • Rule #4.... Follow these guidelines to determine what you should spend
    • Your housing expenses should be no more than 30% of your income
    • Your savings should be 10% of your income
    • Your utilities should be 3-4% of your income
    • Your food 15-20% of your income
    • Medical 5%
    • Clothing 2-4%
    • Transportation 5-20%
    • Debt payments 15-20%
    • Miscellaneous 5-10%

Now keep in mind the more you spend in one category will limit the amount you can spend in another.  

 

To check out the other blogs in this series, please click below:

 Every Household Should Have a Budget - Getting Started

 

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Kathy Sheehan Senior Loan Officer

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770.634.4021

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404.745.8060

 

Bay Equity LLC

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11475 Great Oaks Way, Suite 350, Alpharetta, GA 30002

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The opinions and general information in this blog are soley those of Kathy Sheehan.  Specifics regarding an individual case should be discussed in detail with a loan professional.  For a confidential consultation, please feel free to contact me via phone or email.  All terms and conditions are subject to change.

 

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Re-Blogged 4 times:

Re-Blogged By Re-Blogged At
  1. Sharon Parisi 08/15/2013 01:59 AM
  2. Jay & Michelle Lieberman 08/15/2013 04:18 AM
  3. Debbie Reynolds 08/15/2013 04:42 AM
  4. Winston Heverly 10/21/2013 12:10 AM
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Rainmaker
419,251
Michelle Francis
Tim Francis Realty LLC - Atlanta, GA
Realtor, Buckhead Atlanta Homes for Sale & Lease

Kathy, 

BRILLIANT!  We are fortunate to work with buyers who are great savers and typically put down quite a bit.  Life is so much easier when you know where you are, work within your budget and are ahead of the curve.

All the best, Michelle

Aug 15, 2013 07:50 AM #25
Rainmaker
513,600
Lisa Friedman
Great American Dream Realty - Essex, VT
29 Years of Real Estate Experience!

Kathy - Fantastic post! I cannot believe how many people are clueless about their finances!

Aug 15, 2013 08:18 AM #26
Rainer
189,685
Linda Balades
Comfort Real Estate Services - Ventura, CA
Broker Associate

Great advice Kathy...Thank you...

Aug 15, 2013 11:21 AM #27
Rainmaker
1,277,366
Donna Foerster
HomeSmart Realty Group - Parker, CO
Metro Denver Real Estate Agent

Kathy- This is the hard part of budgeting but very important. Controlling spending can be a challenge.

Aug 15, 2013 12:43 PM #28
Rainmaker
646,843
Kathy Sheehan
Bay Equity, LLC 770-634-4021 - Atlanta, GA
Senior Loan Officer

Bett, I hope you find it helpful.

Sharon, this is a conversation I have on a daily basis.

Phil, it is a lesson I learned early on.

Anthony, my pleasure.

Marilyn, of course it should be tailored to each individual, but it is a good guide.

Fred, I am on a mission.

Aug 15, 2013 01:00 PM #29
Rainmaker
1,143,871
David Shamansky
US Mortgages - David Shamansky - Highlands Ranch, CO
Creative, Aggressive & 560 FICO - OK, Colorado Mtg

It never ceases to amaze me some high income earners have little to nothing in the bank? It also never ceases to amaze me some very low income earners follow your guideline of savings is NOT an option and they have a substantial savings.

Its nothing to do with income its everything to do with spending/SAVINGS!

Aug 15, 2013 01:03 PM #30
Rainmaker
646,843
Kathy Sheehan
Bay Equity, LLC 770-634-4021 - Atlanta, GA
Senior Loan Officer

Bill, it all depends on what the individual's needs are.

Thank you Trisha!

Thanks for the re-blog.

Hella, that is a great idea!

Michelle, I appreciate it.

Lisa, thank you!

Linda, I appreciate the comment,

Donna, everyone needs a plan.

Aug 15, 2013 01:06 PM #31
Rainmaker
646,843
Kathy Sheehan
Bay Equity, LLC 770-634-4021 - Atlanta, GA
Senior Loan Officer

David, have you been talking with some of my clients????  You are right, it is all about the discipline

Aug 15, 2013 01:07 PM #32
Ambassador
4,296,734
Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

Kathy, just read David's post on real problem for Realtors - it's not the income, it's the expenses.

So, yes, one needs budget and follow one basic fact -- Do NOT spend more than we earn! So simple - but not easy for sure.

Aug 15, 2013 03:35 PM #33
Ambassador
2,006,627
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

Kathy - So many don't enjoy looking at the realities of their budget, and it's so important.

Aug 15, 2013 04:44 PM #34
Rainmaker
368,638
Travis "the SOLD man" Parker; Associate Broker
Team Linda Simmons, Enterprise, AL 36330 - Enterprise, AL
email: Travis@theSOLDman.me / cell: 334-494-7846

Thanks for the "formula". I'm going to sit down & tweak the percentages for my own personal use, but will use this as a guide to young Buyers.

Aug 16, 2013 02:33 AM #35
Rainer
295,383
Paddy Deighan JD PhD
TimeshareLawyers.pro - Vail, CO
Paddy Deighan J.D. Ph.D

every time that I prepare a budget for a client, I look at my own too...it has never been the same twice in 27 years!!!

Aug 16, 2013 05:13 AM #36
Rainmaker
221,263
Liane Thomas -Top Listing Agent
BROKER Allison James Estates & Homes BRE 01885684 - Corona, CA
Bringing you Home!

Rule number 5 should say "see rule #1".

Aug 16, 2013 09:44 AM #37
Rainer
217,119
Rafi Footerman
Mid Jersey Inspections - Edison, NJ
Home Inspector, Mold Inspector, Radon and More!

Medical at 5%????  I would have needed and income of $740,000 last year.  If you are self employed and have any medical issues, your medical costs will far exceed 5% unless your income is huge.  Ours exceeded our mortgage (with taxes and insurance).  I certainly agree with your assesment for savings and housing, but unfortunately today medical costs are out of control.

Aug 16, 2013 11:48 AM #38
Rainmaker
646,843
Kathy Sheehan
Bay Equity, LLC 770-634-4021 - Atlanta, GA
Senior Loan Officer

Praful, David and I seem to think alike.

Christine, it is important and so often overlooked.

"Travis, thanks for the compliment.

Paddy, a budget should be tailored to each individual.

Liane, that is a great idea!

Rafi, again, the budget needs to fit the needs of the household.

Aug 16, 2013 10:07 PM #39
Rainer
346,164
Dwight Puntigan
DRP Realty, LLC - Saint Peters, MO
Dwight Puntigan

The need to know and pay attention to cash flow is more important every day.  Thanks for putting the numbers to it.

Aug 18, 2013 01:56 AM #40
Rainmaker
1,078,873
Sharon Alters
Coldwell Banker Vanguard Realty - 904-673-2308 - Fleming Island, FL
Realtor - Homes for Sale Fleming Island FL

Kathy, I think I'm going to put this in my Buyer's Book because this is a great simple budget that can be tweaked for a particular family. Thanks!

Aug 18, 2013 11:12 AM #41
Rainmaker
646,843
Kathy Sheehan
Bay Equity, LLC 770-634-4021 - Atlanta, GA
Senior Loan Officer

Dwight, I agree with you.  

Sharon, every budget needs to be adjusted for the specific needs of the household, but this is a good starting point.

Aug 18, 2013 11:21 AM #42
Rainmaker
822,932
Bob Miller
Keller Williams Cornerstone Realty - Ocala, FL
The Ocala Dream Team

Hi Kathy, we wholeheartedly agree.  We once had to go on an aggressive budget to pay off some debt and have been debt free ever since - over 30 years!

Aug 19, 2013 03:15 AM #43
Rainmaker
646,843
Kathy Sheehan
Bay Equity, LLC 770-634-4021 - Atlanta, GA
Senior Loan Officer

Bob, sometimes you have to do what is necessary to get back on track.

Aug 19, 2013 12:25 PM #44
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