- Education for our kids which comprises 20% of our gross income. This is in perfect harmony with our values, since we believe education helps build a solid foundation for our children’s future so they are comfortable in social settings and develop a passion for learning. Nobody knows what the future holds, and what the jobs of tomorrow will look like but I’m pretty sure that if you are comfortable interacting with others and love learning new skills you will be able to adapt to whatever that future looks like.
- Food expenses account for 10% of our gross, and this is a necessity of life because eating healthy, organic, mostly whole foods is good for our family. We are always conscious of how much we eat out and try to limit ourselves not only to save money but knowing what we put into our meals we feel is better for our health too.
- Shelter is another 20%. This includes our mortgage and utilities. This is really a basic necessity, but it’s one category that really trips up a lot of my clients. A good “benchmark” for your mortgage is no more than 28% of your gross income. I find that the higher this number gets, the closer you become to being “house poor/living paycheck to paycheck” which just limits your overall options because the more you spend on a home, the higher your utilities, typically, the higher the furnishing cost and so on, which just means less money available to spend on other things you enjoy-so less money to eat out, less money to save for future goals and needs, and so on.
- Auto and transport is another big category for us: My husband enjoys having a new car, so we are always stuck with a car payment and typically the gas guzzler he picks requires a lot of money spent on gas. This is something we talk about and discuss, but ultimately if it brings you joy and it doesn’t affect your finances significantly I say live your life, because ultimately you have to strike a balance between your future needs and being happy today! Otherwise, what is the point of life anyway?
- Saving is on auto pilot for us, and this is a combination of 401(k) contributions and Roth contributions to max out our retirement savings since we have a goal of reaching “financial independence” at age 55 and not have to work past that point. Knowing how much I love my work with my clients, I don’t plan to actually retire and quit at 55. It’s just an important milestone for us because it would be a great privilege to go to work for the pure joy of doing what we love but knowing financially we don’t have to make a living.
- And lastly, all the other miscellaneous stuff that adds up, including travel which is what we live for and we enjoy exploring different parts of the world together and exposing our children to different cultures, languages and different lifestyles around the world. We value these experiences as a family much more than material possessions, and this is a constant struggle to make sure we don’t spend a lot of money on the newest iPad, and other advertised consumerist possessions and instead take a trip somewhere as a family.
This is meant for educational purposes only. It should not be considered investment advice, nor does it constitute a recommendation to take a particular course of action. Please consult with a financial professional regarding your personal situation prior to making any financial related decisions. Investing involves risk and the potential to lose principal.
* Waddell & Reed is not affiliated with Marie Kondo.