Find out where your money is really going, then adjust your recipe accordingly.

by JJ Montanaro, USAA

Where your money should go is often very different from where it does go.

I spoke recently with a military spouse named Debi, who’s involved with the Accredited Financial Counselor program. She told me about a class she was presenting on her installation. At the core of her presentation was the idea of creating a “spending pie” to help figure out whether your spending habits help or hurt your pursuit of personal financial freedom.

Using an annual household income of $60,000, here’s one example of where a family’s money should go on a monthly basis:

20% Housing ($1,000/month):

This includes mortgage (principal, interest, taxes and insurance) and/or rent to put a roof over your head. This may be lower than what a lender will lend, but too many folks are house rich and cash poor. Check that, they were house rich.

16% Taxes ($800/month):

It’s easy to forget about them, but they’re everywhere. Income tax, sales tax, personal property tax and even capital gains tax (though given the housing and stock markets, it might be tough to remember what those are!).

12% Food ($600/month):

The basic cost of keeping everybody in your household fed.

11% Other Stuff ($550/month):

Can include clothes, kids’ sports, vacations, charitable contributions and any other expenditures not covered by our other categories.


10% Transportation
($500/month):

Car payments, gas, repairs-whatever it takes to get from work to home and everywhere else you go.

10% Retirement investments
($500/month):

This is money set aside for your long-term goals, including contributions to the Thrift Savings Plan or a Roth IRA.

7% Insurance ($350/month):

Life, health, auto, renters and whatever it takes to to protect you and your family put together a comprehensive package of insurance (except homeowners, which falls under housing) to protect you and your family. Health coverage is a major benefit of military service, so you may have to carve out more for this category when you leave the military.

6% Utilities ($300/month):

Electricity, gas, garbage, water, cell phones, cable or satellite TV and more. Seem low? You don’t need all the extras! This is an area where you can save.

4% Short-term Savings
($200/month):

This money should be going into your emergency fund each month for all life’s surprises – like that big veterinary bill or that water heater that just died. Set aside money from each paycheck and you can avoid debt when something unexpected comes up.

4% Entertainment ($200/month):

Who says financial planners aren’t fun? Hopefully, there’s a date night in your mix that includes whatever makes you smile.

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