I’ve mentioned several times before that I’m incredibly focused on paying off my debt as soon as possible. Today I want to go more into detail on what that looks like on a monthly and yearly basis. My goal in sharing this with you is to show you how I prioritize my spending.
First of all, all the numbers and percentages are based on my take home pay from my full-time job in mental health. My husband and I have separate finances and so my example will likely look differently than your situation.
I am paid biweekly, totally a magical 26 payments throughout the year. I have several automated savings plans set up to come out of my account as soon as I am paid. First, I have $500 transferred to a different account for my student loan payment. This is typically $1,000 month, with a rare $1,500 month. This totals $13,000 for the year. That’s over 34% of my annual take-home pay and my overall salary.
I also focus on saving a moderate amount of money. With another automated savings plan, I have it set to transfer $50 each week ($2,600 each year). I also contribute 3% of my income to my 401k, and contribute $20 a week to my IRA ($1,040 each year). Altogether, my savings accounts for 12.6% of my annual take-home pay.
If you’re keeping track, my savings and debt payments total 47% of my annual take-home pay.
That leaves me with 53% of my take-home pay for everything else, including other savings goals I have, household necessities, dog food/grooming/vet care, medications, office supplies, cell phone, entertainment… EVERYTHING.
How I Do It
I mentioned earlier that my husband and I have split finances, so instead of pooling our money, we keep our money separate and split the bills. I start by making sure all of my bills are paid up front, such as car insurance, home insurance, Netflix, Hulu, Audible, and my cell phone. That way, I know exactly how much is left over.
After that, I withdrawal $150 every 2 weeks for our grocery budget. We’re not allowed to buy food outside of this month.
I make sure I have at least $150 cushion in my account for gas, commuting to and from work.
Finally, I don’t buy things I don’t need. I’m not saying this to sound preachy or make anyone feel bad. I just don’t buy things that I don’t need to spend money on. Honestly, I already spend plenty of money on monthly bills I don’t need, like Netflix, Hulu, Audible, and Amazon Prime. I justify this because we do not have satellite or cable, and Audible allows both of us to have much more enjoyable commutes to work.
If something comes up, I have an emergency fund to cover it. Otherwise, I’ll add it to my wishlist for a while, come back to it, and see if I still want it. Most of the time, I don’t.
I’m also that person that walks around Walmart for 20 minutes holding the same item and ultimately ends up putting it back on the self. That trick has saved me some money over the years.
How Its Helped
Since I took the time to calculate my percentages, I’ve been better able to keep my spending in perspective. I know I have 22% of my take-home pay to spend on my “wants” and so I try to remember this when I’m making superfluous purchases. Or some not-so-superfluous purchases.
For instance, I recently purchased a $7 notebook for my blog (don’t judge). At the time, I thought this was an absurd amount of money for a particular item, especially when there are so many less expensive options. However, I knew this was an investment because I’ve used the less expensive options and seen them fall apart in just weeks. And even though it’s $7, I knew that I would have to make some sort of change to my wants spending to compensate for this purchase, such as not buying lunch one day (this is a serious problem area for me).
I hope you take the time to look at your budgeting percentages. If you want more information on general percentage guidelines, check out my post on 50-30-20 budgeting. I hope you take the time to look at your spending habits and examine your financial priorities.
If you need further assistance with budgeting, check out my complete guide to creating a successful debt repayment plan.
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What is your most important budgeting category?