Are You Spending Wisely?
Knowing where you spend money is as important as finding ways to save it.
Taking a hard look at where you spend money is just as important as finding ways to save it.
Big-ticket items like mortgage and car payments are part of the equation. But pocket change spent on soft drinks and DVD rentals can add up quickly.
Are your household expenditures in balance?
- Start with the basics like monthly housing costs. Homeowners should include mortgage principal, interest, real estate taxes and homeowner's insurance. Renters should include rent and renter's insurance. Ideally, you should also set aside money periodically for unexpected maintenance costs.
Monthly housing costs should be approximately 20%-25% of your total monthly "pre-tax" income.
- Total monthly payments on long-term debt such as car loans and major purchases, plus the monthly cost for auto insurance, and credit card balances.
- Do the math. Combine your long-term debt payments with your monthly housing cost calculated in Step 1. The combined cost should constitute no more than 36% of your total monthly "pre-tax" income.
- Are you spending wisely? Compare other monthly expenses to the recommended averages.
|Take Our 1-Week Challenge!|
|Grab a pocket-size notebook and write down every purchase for 1 week. Yes, that morning cup of Joe, lunch, even that cool magazine. Total your expenses on Saturday morning. Are you surprised at the amount of money you spend on 'extras'? See if you can find new ways to spend your 'extra' dollars wisely!|