The 4 Keys to Smart Household Budgeting

How to update your household budget

With summer in full swing, it’s a good time to take a fresh look at your budget. Why now? Because over the next few months, with travel, camp for kids, etc., money could get a little tight. So open up the budget and give it a revision. Here are a few suggestions for how to do it.

1.Start with 50/30/20

If you’re looking for a good ballpark figure for your budget, start with a 50/30/20 split.

This number breaks down after-taxes income spending into three categories:

  • Living Expenses. Half of your money (50%) goes to living expenses, which include mortgage/rent, car costs, utilities, and food. Think of it as anything that keeps your home operating the way it should.
  • Flexible Costs. 30 percent spend covers flexible spending, which includes entertainment, gym memberships, and more. That’s the fun portion of your budget.
  • Long-Term Goals. The final 20 percent of the budget covers retirement and college savings, other various long-term savings goals, and your emergency funds.

2.Think Over Transportation

Sticking with the 50/30/20 rule, your transportation costs should be housed under the 50 percent section. However, getting a little more specific always helps. Most experts suggest keeping transportation costs at 10-15 percent of your take-home pay. Make sure this includes everything: maintenance, gas, license, registration, and taxes. (And yes, Ubers too.)

3.Tighten-Up Food Spending

One way to save some money in your budget is to cut back on dining out and prepare food at home more often. It’s flat-out less expensive to prepare food at home. As for a percentage, look to spend about eight percent of your take-home pay on groceries and three percent on eating out.

4.Keep Savings Up

As US News reports, at the very least, you want your retirement savings to be about 15 percent of your gross pay. When times are flush, increase this percentage a bit. That way when times are lean, you’ll have already made up for it.

Chris O'Shea

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