Balancing Act, "All Your Worth" Style
The book suggests having your money in the following balance:
50% toward your Must-Haves (home, food, insurance, etc.)
20% savings (details to follow)
30% fun
*This is almost exactly where we're at in our own balance right now.
FUN
They have great arguments for budgeting for fun money. First, the financially wise argument: it's a safety net. If (heaven forbid) someone loses their job or can't work for some reason, if things get tight for any reason, you actually have some spending you can do without! But also important, if you can't have fun, what's the point to begin with? They also recommend a shared income household to "divide and conquer." Each of you gets money that is your own to do whatever you want with, no questions asked. For us, this means Erik can buy video games guilt free - and while I was working, I could go out to lunch frequently, financially guilt free. (Health-guilt may be a different story.) We've actually been trying to do only 20% fun money and it's been working out well. We've even reached our savings goal for a trip to Germany! (goal=$2500. Do you think we'll need more?)
MUST HAVES
Don't get monthly must-haves that you don't really need. In other words, avoid financial commitment for things like health club memberships (pay as you go), cell phone contracts (pre-pay), or credit card bills (use cash). Shop for better insurance rates frequently, and don't get insurance you don't need, don't spend more than you can afford on housing. That covers it.
SAVINGS
A clear saving plan that makes sense is outlined.
First, have $1,000 extra just sitting in your checking account. It's there for emergency readily available money, and so that you never bounce a check.
Next, pay off what they call "steal from tomorrow" debts. These include credit cards, friend or family loans, back payments, medical bills, etc. They give all sorts of reasons why it's better not to have a debt than to have the money sitting in savings. I never figured out if student loans count as "steal from tomorrow" debts, because they seem to be "invest in tomorrow" debts - but I still sure would like to be 100% debt free.
Third, build a six month security fund. Save enough money to cover the cost of all your must haves for six months.
Once you're all secure, save for retirement (10%), pay off your home (5%), and save for your dreams (5%).
Well, we've done it. The first $1,000 was easy. We've paid off all of Erik's loans (higher interest rates than mine) and we're working on mine. We've built up our security fund, and consider ourselves on the fourth step... replacing paying off our home (we don't have one) with student loans payments. We're now going to put that fund into a higher yield money market account and let it grow... or at least maintain its value with inflation and all.
It's easy to do this "big picture" budgeting.
50% toward your Must-Haves (home, food, insurance, etc.)
20% savings (details to follow)
30% fun
*This is almost exactly where we're at in our own balance right now.
FUN
They have great arguments for budgeting for fun money. First, the financially wise argument: it's a safety net. If (heaven forbid) someone loses their job or can't work for some reason, if things get tight for any reason, you actually have some spending you can do without! But also important, if you can't have fun, what's the point to begin with? They also recommend a shared income household to "divide and conquer." Each of you gets money that is your own to do whatever you want with, no questions asked. For us, this means Erik can buy video games guilt free - and while I was working, I could go out to lunch frequently, financially guilt free. (Health-guilt may be a different story.) We've actually been trying to do only 20% fun money and it's been working out well. We've even reached our savings goal for a trip to Germany! (goal=$2500. Do you think we'll need more?)
MUST HAVES
Don't get monthly must-haves that you don't really need. In other words, avoid financial commitment for things like health club memberships (pay as you go), cell phone contracts (pre-pay), or credit card bills (use cash). Shop for better insurance rates frequently, and don't get insurance you don't need, don't spend more than you can afford on housing. That covers it.
SAVINGS
A clear saving plan that makes sense is outlined.
First, have $1,000 extra just sitting in your checking account. It's there for emergency readily available money, and so that you never bounce a check.
Next, pay off what they call "steal from tomorrow" debts. These include credit cards, friend or family loans, back payments, medical bills, etc. They give all sorts of reasons why it's better not to have a debt than to have the money sitting in savings. I never figured out if student loans count as "steal from tomorrow" debts, because they seem to be "invest in tomorrow" debts - but I still sure would like to be 100% debt free.
Third, build a six month security fund. Save enough money to cover the cost of all your must haves for six months.
Once you're all secure, save for retirement (10%), pay off your home (5%), and save for your dreams (5%).
Well, we've done it. The first $1,000 was easy. We've paid off all of Erik's loans (higher interest rates than mine) and we're working on mine. We've built up our security fund, and consider ourselves on the fourth step... replacing paying off our home (we don't have one) with student loans payments. We're now going to put that fund into a higher yield money market account and let it grow... or at least maintain its value with inflation and all.
It's easy to do this "big picture" budgeting.
posted by Amberlynn @ 4/18/2006 08:50:00 PM
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