I have found this has helped me a lot more, as having a bigger amount of 'spending' I am more likely to eat out, buy stuff impulsively "Because the money is there" having a smaller number is better for me, and also allows me to have separated savings accounts which I like. Use it to hose down financial fires!)ġ0% Smile (saving for things that make you smile - holiday, wedding, concert, mum's 50th birthday)ġ0% Splurge (lunch, dinner, drinks, clothes whatever - this way you need to save if you want a big purchase) He is 60% everyday - including car services, tyres, rent bond etc instead of taking those things from savings accounts you end up with a nice buffer in your daily account (great for those unexpected direct debits!)Ģ0% Fire extinguisher (AKA Emergency fund - he calls it a fire extinguisher cause his house burnt down. I actually do the barefoot investor style (and Aussie guy). I definitely reallocate and combine budget buckets based on living circumstances (live where you don't need a car? That money can be reallocated to your upper limit for rent). I do agree completely on the 70% "combined" bucket idea if you follow that approach- 70% is flexible between needs (rent, utilities, food) and wants (concert tickets, eating out, etc.), though needs shouldn't go too far past 50% as it tends to impose a reduction in flexibility (a 10% pay cut during a recession could drive your 60% needs bucket to almost the entire 70% "flex" bucket, for example). So in that case you would add back in your tax advantaged savings to your actual take home pay for the year (before benefits are deducted) so that you can see the true savings rate. I would also say that your savings rate should be determined based on your take home income, not pretax income. There are a ton of tricks for getting access to your 401(k) or to IRAs, but it's typically better to not have to raid them for that purpose. Having a nice, accessible stash is useful when you decide to change careers, or when you want to work a bit less and focus on other goals (family, volunteering, starting up a business, etc.). I don't know that it's inefficient, especially if you are playing catch up with savings or are looking to retire early (or just build in some flexibility into your work schedule in general). Last thing, I got my math for $101,000 by adding the tax advantaged limits (HSA IRA 401k) (6750,5500,18000) and dividing by 3/10. Could save it and index fund it or pay off mortgage, but just illustrating that the 30% savings rule kind of is null after that point for the purposes of being a wise budgeting tool. If you have a fully funded emergency fund, there will come a point where maxing your 401k HSA and IRA will be less than 30% of your income (that point is at $101,000) and at that point I would argue you certainly do not need to be saving more than that, it would be inefficient actually because your tax advantaged options are exhausted. I'll admit the whole thing is pretty conservative though and not always necessary. So if I have a 100% of 5% match and a 5% pension, that doesn't mean I now have a free ticket to only save 20% since I'm making up the other 10% from employer contributions. Basically what I'm getting at is 30% of your income does not include pensions or employer matches. Also this is a total of 100% of your pretax income box 1, as opposed to box 5 or otherwise. In my head though categories 1 and 3 are interchangeable. I like this as well, though I am a 50/30/20 guy. Here, please treat others with respect, stay on-topic, and avoid self-promotion.Īlways do your own research before acting on any information or advice that you read on Reddit. Get your financial house in order, learn how to better manage your money, and invest for your future. Banking Megathread: FDIC, NCUA, and your cash.Private communication is not safe on Reddit. Scam alert: Ignore any private messages or chat requests.
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