We found five rules of thumb that you may want to bend— or ignore.
Financial rules of thumb circle around the internet like flotsam caught in an eddy. We scrutinized five particularly persistent ones to see how they hold up. Our conclusion: Most have merit as a starting point for setting a financial goal. But depending on your personal circumstances, you may benefit from bending the rules.
BUDGET
Spend no more than half of your income on living expenses, keep discretionary items to 30%, and save the rest.
In her 2005 book, All Your Worth: The Ultimate Lifetime Money Plan, Elizabeth Warren, then a Harvard professor, presented “the balanced money formula,” which has since been popularized as the 50/30/20 rule. Under this rule, you allot 50% of your takehome pay to “must haves,” 30% to “wants” and 20% to savings.
Must haves include housing, utilities, medical care, insurance, transportation, child care and minimum payments on any legal obligations, such as student loans, child support or anything for which you’ve signed a long-term contract. Why only 50%? Warren says it’s sustainable, leaving you with plenty of money for the rest of your life, including fun and the future. When things go wrong, you may be able to cover the basics with an unemployment or disability check or, if you’re married, live on one paycheck for a while.
The 20% for savings is automatic— debited directly from your paycheck— not an afterthought. Use the money to build an emergency fund, pay off debt and save for retirement.
That leaves 30% of your budget for your wants (including charitable giving), which allows you to avoid the cycle of binge spending and crash-diet budgeting, writes Warren. If something goes wrong, this category is the first place you cut.
この記事は Kiplinger's Personal Finance の June 2019 版に掲載されています。
7 日間の Magzter GOLD 無料トライアルを開始して、何千もの厳選されたプレミアム ストーリー、9,000 以上の雑誌や新聞にアクセスしてください。
すでに購読者です ? サインイン
この記事は Kiplinger's Personal Finance の June 2019 版に掲載されています。
7 日間の Magzter GOLD 無料トライアルを開始して、何千もの厳選されたプレミアム ストーリー、9,000 以上の雑誌や新聞にアクセスしてください。
すでに購読者です? サインイン
MAKING A DIFFERENCE IN THE LIVES OF DISABLED VETERANS
He suffered grave injuries in the line of duty. Now he helps other veterans who have disabilities.
DO YOU NEED UMBRELLA INSURANCE?
A policy can protect you from financially devastating events.
Navigating Finances as a Blended Family
Money matters can get complicated when two families unite. Planning is key.
BREAKING UP WITH YOUR BROKER
Be aware of these challenges when you move your money to a new home.
CHOOSE A MEDICARE PLAN THAT'S RIGHT FOR YOU
Consider your health care needs over the long term as you weigh costs and coverage.
Keep Faith in These Stocks
IN 1997, I coined the phrase “faith-based investing.” It has nothing to do with religion or with picking stocks at random.
OUR ESG PICKS ARE THRIVING
Despite an ongoing backlash, our favorite stocks and funds focused on environmental, social and corporate governance issues had a good year overall.
MONEY MANNERS FOR THE MODERN AGE
The customs for splitting a restaurant check, purchasing a wedding gift, tipping and more have evolved. These guidelines can help.
ELECTION 2024: POLITICS AND YOUR PORTFOLIO
Who wins the White House matters—but only at the margins when it comes to your investments.
YOUR GUIDE TO OPEN ENROLLMENT
With health care costs on the rise, it’s critical to select a plan that fits your needs at the right price.