The Rules of Thumb for Saving - It’s Easier than You Might Think
The turning of a new year is a time to look forward to the future with a fresh, positive outlook. The popular saying, “Out with the old and in with the new,” is especially relevant when people decide on their New Year's resolutions - certainly those with financial ramifications.
It’s not always easy in these lean economic times to budget your money. But by following a few rules of thumb and budgeting tips, you might be surprised how much more money you can save.
Rules of Thumb
Try to devote no more than 28–33% of your gross monthly income to your mortgage or rent - some experts even suggest 25%. Another way to look at it is that your home should cost roughly no more than four times your annual income.
In terms of prioritizing a budget, it’s never too early to save for the future. Start with retirement savings, then credit card debt, and then your emergency fund. Allocate 10 percent of your income to savings. When it comes to discretionary spending, plan to save 10 percent for the basics, 15 percent for comfort, and around 20 percent to escape. After your mortgage or rent, that leaves roughly 12–20 percent for the rest of your household needs, perhaps more if you’re frugal.