If you take the time to create a budget, you can quickly find out if you are living below your means.
There are guidelines that you can follow to check and see if you are overspending in certain areas.
When you create your budget, or if you have one already, check to see if your numbers fall within these guidelines:
- Charity/Giving: 10-15%
- Savings: 10-15%. This includes Retirement and College savings.
- Food expenses includes Groceries and Restaurants and should fall between 5-15%.
- Clothing expenses: 2-7%. This includes clothing purchases as well as dry cleaning and laundry services.
- Housing expenses should be between 25-35%. Housing expenses includes mortgage payments, real estate taxes, repairs and homeowner association dues.
- Transportation costs for gas, oil, auto repairs, taxes and registration fees should fall between 10-15%.
- Utilities: 5-10%. This covers expenses such as phone, gas, water, sewer, electric, mobile phone, cable, internet and trash.
- Medical and Health expenses: 5-10%. Of course this percentage can be adjusted depending on your needs.
- Insurance: 10-25%. This includes renters, homeowner’s, auto, disability, health and life insurance.
- Recreation expenses including vacation and entertainment should fall between 5-10%.
- Personal expenses like personal spending money, hair care, babysitting, child support, alimony and whatever you feel should go into this category should not exceed 10%.
- Debt payments should not exceed 10%. The ultimate goal is to have debt at 0%.
So if you can keep your budgeted items within these ranges, it is evident that you are living within or below your means.
If some of your categories are above the recommended guidelines, you now know which areas you need to concentrate on.
The goal is to ultimately have zero debt and reduce expenses in the other categories so you will be in a better position to give and save more.
Have you created a budget? How do you determine if you are living below your means?