Budgeting and the 60% Solution

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The 60% solution is a budgeting method I’ve seen mentioned on a couple of blogs. The basic concept is to limit your committed expenses to 60% or less of your total income.  Then commit 10% each to retirement savings, long-term savings, short-term savings for irregular expenses, and fun money.  Looking at my budget for last month my committed expenses are quite easily under the 60% limit.  I don’t actually follow the 10% guidelines for what to do with the rest of my money but as the article indicates once you have your committed expenses at 60% it is simple to save money.

Since I have a lot of debt to repay I don’t think the 10% guidelines work too well for me.  Right now I just put as much extra money as I can towards debt.  Since I’m frugal I don’t worry that I’ll waste my money without specific guidelines on where to spend it.  I use Pear Budget to do my budget and it works fine for my simple needs.  I use it more as a way to track my income and expenses than as an actual budget.

What’s Happening Now

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No, I’m not talking about the sequel to the 70’s TV program “What’s Happening” featuring Rerun and his friends. I’m just updating a few things that have happened since I last posted.

I got a ticket on Friday which will cost me $126. If I go through diversion to keep the ticket off my record it will be an additional $20.  I plan on doing that since I haven’t had a ticket in the last 10 years and I would like to keep my MVR spotless. I probably could have avoided this ticket if I would have just agreed with the officer and not argued with him but I thought the officer was wrong and still do.  I’m not sure if being right is worth $146 though.

I’ve decided to go ahead and pay off my credit card even though it is at 0%.  My balance is down to $424 and I think I should be able to pay it off next month. The ticket and some other extra expenses I have next month will make it tight to have enough money to pay off the card though.  If I can’t get the card paid off next month it isn’t a big deal since the card will be at 0% until January.

I bought clothing for the first time this year yesterday.  I bought a couple pairs of swim trunks to double as running shorts at Target.  They were on clearance and the total for both of them was right at $12 with tax.

My Emergency Fund is Tempting Me

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Now that I have my emergency fund established I am tempted to spend it on non-emergencies. My credit card debt is down to $724 and I could eliminate it if I tapped my emergency fund. That isn’t what the emergency fund is for though and since the credit card debt is at 0% and my emergency fund is earning 5.05% it wouldn’t make sense to pay off the debt.

I do however have a private student loan that has 11.75% interest. That loan balance is almost $2,000 so I couldn’t pay it off with my emergency fund but it would certainly help me pay it off faster. It does seem somewhat illogical to keep money in savings at 5.05% when you are paying 11.75% but I like knowing that I have the emergency fund available. I’m considering being even more illogical and paying off my credit card before the private student loan simply because I can pay off the credit card faster and have one less debt. As long as I am making progress I’m not going to be overly concerned with whether I’m doing the thing that makes the absolute best financial sense.

The Confidence to be Frugal

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A recent post at Make Love,Not Debt told of a scenario where Him walked out of a restaurant after realizing the prices were higher than he wanted to spend. He noted being rather uncomfortable doing so. I used to be the same way. I would worry that other people would think I was cheap or otherwise think less of me due to my frugal habits. I’ve come to realize thought that frugal is what I am and I have no shame in being who I am and doing what is right for me to do. I can’t control what other people think of me and I’m not going to worry about it.

Three Questions That Can Change Your Spending Habits

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The personal finance book that has had the most influence on me is “Your Money or Your Life” by Joe Dominguez and Vicki Robin. If I had faithfully followed all the steps in the book from the time I first read it I could be retired by now.

 One of the most powerful steps in the book is the Three Questions That Will Transform Your Life.  These three questions should be asked when evaluating your spending. They are 1. Did I receive fulfillment, satisfaction, and value in proportion to life energy spent? 2. Is this expenditure of life energy in alignment with my values and life purpose? 3. How might this expenditure change if I didn’t have to work for a living? By applying these questions when evaluating your spending you most likely will not only reduce your spending but change the thing you spend your money on.