How Much Extra?

>> 1.25.2011

I haven't gone into any details about my personal monthly budget lately so I figured it was about time to revisit things on the blog. Now that I'm engaged, things work a bit differently. Nate uses his cash back rewards card  for all of our food and entertainment purchases (and pays it off each month) while I cover the housing related bills. We split up payments based on which accounts make sense (ex. the mortgage is in my name), but really consider the money we bring in to be "our money."

Here's how a typical month's budget breaks down: 
 As you can see at the top, I consider 100% of the budget to be the amount we take home after paying taxes and contributing to retirement accounts.

In the end of each average month, there's a surplus or extra of 54.3% (and 63% if we needed to really tighten up)... meaning if one of us lost a job or wanted to become a stay at home dog-mom, it would be okay. Usually that money goes into fun things like new roofs, emergency vet bills, or future savings. Although we aren't rich by any means, our cautious spending allows us to live relatively stress-free during these tough economic times.

...and here's the big butt but: I don't know how much extra a budget should have. Obviously we're doing just fine now, but what about the future needs/ wants (*cough* house)? What kind of wiggle room do you think a budget should have?


kim January 25, 2011 at 12:44 PM  

First off, I've heard numbers like 5-10% of your take home money (after retirement and things like you mentioned) should go to savings.

Second, holy crapoli, I would kill to have over half my money unaccounted for each month! Good for you!

Though as I look at my own budget, I realize that I fall into a camp where I "name every dollar." So yes, 40% (ouch) of our money goes to student loan payment. However, this is because I've taken a whole bunch of our "extra" money and tacked it on to that payment so that we can kiss it goodbye! So there's probably about 20% of our "extra" money hiding there. We also typically have large project goals in mind, so I just create line items in our spreadsheet/money market key and either create a set amount that we pay to ourselves, becoming a "bill" in my mind in terms of the budget rather than "extra" if it's time sensitive - buying a new car or water heater for example - or I distribute any leftover money in these buckets - if it's not time sensitive, like a dream vacation or designer something-or-other - and our emergency fund.

Apologies for my large run on sentences, but my basic point is that personally, I feel better with a small amount (5-10%) as pure savings for emergencies, and many other amounts that are destined for a larger future goal. Though clearly, you need no money advice from me! ;)

Kasey at Thrifty Little Blog January 25, 2011 at 12:58 PM  

Thanks for sharing Kim! It sounds like you're doing an amazing job paying off those student loans... I know quite a few people who would use the "extra" for fun instead.

Oh, and don't worry, that 50+ percent in my "extra-" it usually gets used somewhere (the roof ate it up quite quickly!), it's just not promised to any one bill.

kim January 25, 2011 at 1:39 PM  

Ha, thanks Kasey. We're working on it - though, note to current and future grads - it would have been really amazing not to rack up, oh, six figures of student loans! How to avoid this outside of robbing a bank or finding a trust fund I'm not sure, but it will sting later to pay more in student loans than you do for a mortgage+taxes+insurance!

Hannah January 25, 2011 at 2:00 PM  

Oh fantastic! I'm with Kim (I think) in terms of I budget more of my income for the things you have lumped into the 54.3% savings. I have a household category for example, that I roll over each month so that when I have to make big purchases, they are already accounted for in that area (I hope this makes sense). About 10% goes to savings automatically, but if my checking account gets too flush (i.e. if I haven't had to use that rollover household/travel/whatever budget in a while) I move the extra (usually when it gets to around $500 or so) into savings. Those one-off additions add up to about another 5% in savings.

I'm happy with this 10-15% level b/c since every dollar has been otherwise allocated, I can treat it as true "emergency" savings and I never have to dip into it.

Margaret January 25, 2011 at 3:42 PM  

Just found your site - love the budget breakdowns! (just had a "thrifty wedding" myself ;))

Am right there with you on not knowing how much extra we should have. We try to put away about 20% in savings (after taxes), but this includes emergencies, big purchases, etc. Of course, what makes this trickier is that I'm unemployed right now... but whenever I find a job, I'd love to keep living on the same budget and just put more into savings.

Wow, only 8.2% on food? Makes me feel like we should tighten up a bit. We spend around $300 per month (no eating out allowed :/), which is more like 15% of our budget.

What sort of retirement plan do you guys use? I'm trying to figure that out next and it's really confusing me.

m @ random musings January 25, 2011 at 4:00 PM  

I'm right there with you - an ideal budget should allow for the family lifestyle to be relatively unchanged in the case of short term unemployment or other emergency.

But I also assign part of each month's 'savings' to big-ticket items that I know are down the road (e.g. a new roof, etc). Not that this money isn't available if another priority comes up, just so that I know what I will be sacrificing if I do.

One thing I've picked up over the years is to keep a mindful eye on the end state - and what size emergency fund - is necessary to support that. For example, as a renter, I can realistically expect that my monthly housing expenses won't go up by more than 10% in a given year. As a homeowner, I may face a $5000 bill one week or no maintenance expenses over the next 6 mos - so I should probably have a min amount in the bank at any given time.

Kasey at Thrifty Little Blog January 25, 2011 at 4:37 PM  

@Margaret~ I think that you can eat out and eat well for $300 per month! Cut back on meat and packaged foods, plan meals, buy in season/ on sale, and don't over-buy at the grocery (your fridge should be near empty at the end of the week). Try Groupon or for eating out. Don't order alcohol and spend the minimum on the gift certificate. We consider having a night out as a replacement for entertainment so it saves on movies, concerts, etc. in the long run.

For retirement, I'm currently maxing out my Roth 401k and Nate is contributing to an IRA and his state retirement account. I can't say that we're perfect on that yet, but I researched a bit on recommended contributions by age and it looks like we're on track. Plus, we're planning on buying the next house with the intention of paying it off fully over the years (instead of selling it as soon as we can afford an upgrade) so I'd consider setting up mortgage-free living a good piece of retirement.

Kelly@TearingUpHouses January 25, 2011 at 5:18 PM  

this might interest you:

(note, that we have an emergency fund already in place.)

this is such an interesting topic!


Amanda @ Little House on the Corner January 25, 2011 at 8:31 PM  

I'm so impressed at your broken-down budget. I'm awful at crunching our numbers and having an actual monthly budget. I'd like to think we're pretty responsible with our money, but honestly I don't really know how much "wiggle room" we have, or should have. It's a little embarrassing!

Kim @ NewlyWoodwards January 25, 2011 at 9:30 PM  

We've been trying to work towards the big 50% number for savings. Right now we're a little under this because of having two houses and a rental. Hopefully that will change soon. I'd like to figure out our exact percentages, that'd be interesting to know.

Sara @ Russet Street Reno January 25, 2011 at 11:23 PM  

Hm, I will never have 50% of my money to save! Although, if you consider my automatic savings and 401k/Roth IRAs as savings (instead of counting it before the 100%) I might be close.

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