As I work to be better at budgeting, I searched the Internet for strategies for how much I should be spending on various items each month. I like the 50/20/30 strategy which seems reasonable and maybe even do-able.
Basically, you split your after-tax, after-401k take-home income into 3 buckets:
50% – fixed expenses
20% – financial goals
30% – variable expenses
So my after-tax income (now that I’ve maxed out my 401k for the year) is $9500. That breaks down to:
$4750 fixed
$1900 financial goals
$2850 variable expenses
How August Played Out:
$1734 – fixed
$3472 – financial goals
$4294 – variable
Clearly, my variable expenses need to be reduced significantly.
I’m looking to potentially returning to grad school or changing careers and taking very low paid work, which means that I will need to live on much, much lower income (slash none at all.) While I’ll probably have to dig into my savings for a few years to accomplish this (that is the point of having savings), I still want to learn how to spend a lot less. This helps me now too so I can save more to spend when I’m in a lower income job.
Lower Salary Budget: $3k take home per month
$1500 fixed
$600 financial goals (+ whatever extra I save)
$900 variable
September I’ve budgeted $4000 total spending, so I’m $1000 over. I’m going to try really hard in October to hit the above budget. My fixed expenses are in line with a $3000 after-tax income per month spend program, but my variable expenses are out of control.
$900 variable expenses is a very small amount, but it’s a good challenge for October. In September, my variable expenses will be around $2620 (and that is cutting down significantly from August’s $4294 variable.) October will basically = no spending outside of food, basic healthcare – and walking my lazy bum to the train so that I don’t waste so much money on taxis.
If I can successfully keep my job through the end of October and hit these goals, I can save $5530 in September and $7150 in October, or $12.6k by the end of October. This will get me very close to my $400k net worth goal for the year. I still want to get to $500k before I have kids, return to school or change careers – but given I’m on the verge of a mental breakdown I think I may have to call it quits early and just try to maintain my net worth through the career change as much as possible.
