Posted by Tim Stobbs on February 3, 2009
So for those that have played in the archives or been reading from the start, they may recall one of my first posts was on the 30-30-40 budget. The basic idea was 30% of your take home pay towards housing, 30% to savings/debt repayment and the other 40% for everything else.
Since it’s been years since I looked at my spending/savings that way I thought it might be interesting to check if I’m even close to those numbers anymore.
The results were:
- 28% housing (or 32% with extra)
- 32% saving (or 28% without extra)
- 40% spending
So I’m fairly close the the target amounts. So what’s the extra? Well I’m currently paying off my mortgage faster than I’m supposed to so I’m paying extra each month. Therefore if you put that as housing I jump up to 32%, but it could also be savings, so if that is the case the savings number becomes 32%. It’s more of I’m not sure the best place to put it so I put up both, but either way I’m doing fine. (Note: the savings amount does not include my pension as that is taken directly off my cheque and I didn’t remember to include it when I first did the math for this post. Also investment income was ignored due to the fact it is a bitch to figure out the after tax basis for that money.)
What I find interesting about this exercise is that we are doing fine regardless of my wife’s income is zero during her maternity leave (she’s self employed so she gets no EI money). Actually once she goes back to work according the ratios we should start spending more, but I’m not sure if that is really going to happen. Most of the money beyond the usual stuff is just going to savings and I don’t see that changing much as we already just expanded our spending amount earlier this year with a house improvement fund.
Another interesting question is the 30-30-40 really a budget if I don’t check it for years? Not really, the 30-30-40 is more of a general guideline. Despite all the talk about budgets and spending plans being a pain the reality is you just need information to give you feedback on where your money is going. That’s the whole purpose of a budget in my mind. I like the 30-30-40 as it is a quick rule of thumb check on my overall habits, but it lacks detail to do any really good planning with it.
So how do you stack up with the quick test of the 30-30-40? Or do you have another method to check? If so, please share.