I was recently reading a Southwest Airlines in-flight magazine, and I came across an article on paying down your debt.
The article mentioned the suggested budget for expenses as recommended by Consolidated Credit Counseling Services.
According to them, you “should” spend your after tax income in this fashion:
Food 10%
Housing 25%
Utilities 6%
household 5%
clothes, personal 6%
transportation 15%
healthcare 3%
entertainment 3%
education 2%
Insurance, pension and savings 10%
debt reduction 15%
So we should spend more on entertainment than education? Almost as much on our car and fuel as we do on our home?
And can anyone manage health care for only 3% of their take home? Aren’t most insurance programs greater than that for the average income family?
The thing about budgeting is that when the numbers don’t work, some things have to go. To budget, while a financially wise idea, is also scarcity minded. The entire activity is about reducing the expenses to fit the income.
As a credit millionaire, budget to ensure proper spending, and if there isn’t enough for the necessities…then create a plan to increase income streams, so if you do have to reduce your spending and go without, you don’t sacrifice for very long.
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