![]() Let’s say you earn $75,000 in a year after taxes. Following the “Conscious Spending Plan,” you should be setting aside 10% of your take-home pay for retirement purposes.įor example, you may want to contribute to your Roth IRA pr 401(k). The next step is to understand your retirement goals. ![]() Average out the past three to six months’ worth of statements to get an estimate of your monthly expenses. If your spending fluctuates from month to month, take a look at your recent bank statements or credit card statements. In fact, you might be better off keeping it simple by including only a few of the bigger categories that make sense to you. You don’t have to worry about adding every little thing you spend money on. That way, you’ll be able to see how it influences the percentage of this category. For example, if you don’t have debt, but you regularly spend money on your pets, you can add something like “pet fees” as a line to your calculations. It also includes a separate row for food, clothing, subscriptions, insurance, utilities and so forth.Īs Sethi points out, certain expenses are not applicable for all individuals. Using the Excel spreadsheet can make this process easier because it already accounts for many common expenses like rent or your mortgage payment. As fixed costs can include a large variety of expenses, take some time to sit down and really think about what you spend your money on each month - aside from investments, savings and guilt-free spending. The next step to creating a conscious spending plan is to do the math and figure out how much you spend on the largest category: fixed costs. I’m a Financial Advisor: Here Are 6 Things My Clients Don’t Like to Hear - and Why I Tell Them Anyway Figure Out Your Fixed Costs For example, you might need to spend less money on guilt-free costs in order to invest a higher percentage to meet your other goals. Keep in mind that your situation and goals might be different from someone else’s, and that there is some flexibility in how you allocate your money. It includes activities like going out to eat, watching movies, purchasing clothes and other things you want.īy filling out this spreadsheet, you’ll get a better understanding of your current financial situation and what you should focus on next. Guilt-free spending: Accounting for no more than 20% to 35% of your take-home pay, this category is essentially for fun and recreational purposes. ![]() You should allocate between 5% and 10% of your take-home pay to this category.
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