Just as there’s no one nutrition plan that works for everybody (“…but my friend lost 10 pounds on the Paleo diet!”), there’s no one save-and-spend formula that fits every family. But there are some general guidelines you can follow.
We know our mortgage, utilities and property taxes shouldn’t exceed about one-third of our household income. What about personal spending on things like groceries and entertainment?
To create your own boundaries, Laurie Campbell, CEO of Credit Canada Debt Solutions, suggests looking at out-of-whack items in your budget (such as too many dinners out) and asking yourself if there’s a way you can save 10% of that amount (by limiting restaurant meals).
Financial experts do recommend saving at least 10% to 20% of your net income for emergencies and investments. That means if your pay after taxes is $40,000 a year, you should have $4,000 to $8,000 socked away in savings. If that seems steep, don’t get discouraged: just save what you can. “Start with 2% or 5% and work your way up to 10% so at the end of the year, you can say you saved something.”
Read on: How to make a family budget>
A version of this article appeared in our November 2012 issue with the headline “Making a budget,” p. 74.
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