Here are suggested percentage guidelines based on net income compiled by Dave Ramsey, author of Financial Peace (Viking, 1997, $21.95) which he says are only estimated recommended percentages and will change dramatically if you have a very high or very low income. For instance, if you have a very low income your necessities percentages will be high. If you have a high income, your necessities will be a lower percentage or income and hopefully savings (not debt) will be higher than recommended.
Planning a Solid Budget is Easy Now
Creating a workable family budget can be difficult, and it's sometimes hard to know exactly where the money is going. Most people have a fairly good handle on the necessities, and are well aware of the monthly costs of their rent or house payment, their utilities, and even their food costs. But other financial concerns also shape the family budget. How much is spent each month on transportation? How much on clothing, health care, recreation, and charitable donations? And more importantly, how much money can be devoted to savings for that inevitable rainy day? Each of these factors makes creating a monthly budget frustrating and often confusing, and when we extend that over the course of a year the tension really mounts. But creating a family budget can be made easier with the Budget Planning Calculator. This free tool will help you to see where your money is going, and how you can save for the future.
Necessities, like housing, utilities, food and clothing, typically make up the bulk of the family budget and are easier to plan for. Depending on income, the percentage of the budget set aside for a family's necessities may be higher or lower. Families with a limited income will find that their monthly and annual household necessities take up a large portion of their budget, and there will likely be less money left over for savings and discretionary spending. Alternatively, families with a higher income should find that the percentage of their household budget devoted to necessities is lower, and that more money is available for savings, personal expenses and charitable donations.
Secondary Budgetary Considerations
Secondary budgetary considerations, such as medical expenses, transportation and recreational spending, are more difficult to gauge. Annual medial costs will largely depend on the size and the health concerns of the family. Likewise transportation costs will rise or fall depending on the size of the family, and general work habits. Still, that being said, some general percentage values can be applied as general rules of thumb to help families build a better budget.
Savings and Debt
A family's ability to save money is in direct proportion to their outstanding debt. Where more money is devoted to debt removal, less can be devoted to savings. Again, these percentages will be greatly influenced by the family income. Those with higher incomes should be better able to balance their debt to savings ration, while those with lower incomes may find saving more difficult.
The Budget Planning Calculator
The free Budget Planning Calculator will help families better understand where their money is going, and create a budget that works for their financial situation. The calculator can be used to create either a monthly budget, or an annual budget buy simply entering the net income value in the appropriate field. The calculator will then figure estimates according to the general percentage values associated with a workable family budget. With this information at hand, it will be easier to develop a budget that covers all household essentials, while allocating money for discretionary spending such as charitable donations and recreation. The budget calculator will also help families establish their savings to debt ratio, and help them to take proactive steps to pay off any outstanding debt and increase their personal savings.