One of the things this recent pandemic has definitely shown us is how financially prepared we were to handle (or not handle) a crisis. Whether you found yourself in a deep hole, barely staying afloat, or you’re weathering things pretty well, you’re probably more aware of how important it is to be financially prepared. But how can you tell if you’re on the right track with your money? You don’t need to perform countless formulas and equations and crunch numbers for weeks; you can use these budget benchmarks to see where you stand.
HAVE SOME PIE! 🙂
Doesn’t that sound tasty? Well, don’t grab your fork just yet, I’m not talking about real pie. I’m talking about your budget. Sometimes people cringe at the word “budget.” You might think it’s too restrictive, or maybe you think you can do all your financial planning in your head, so you don’t need a budget. Well, whether you want to call it your budget, your spending plan, or name it Joe, the truth is, you need to know how much money you have coming in each month and how much money is going out.
Now, I promised to not use loads and loads of crazy math, but I am going to toss out a few percentages in just a bit. However, it’s easy, I promise, and it’s just to give you those budget benchmarks I mentioned; some quick figures to help you see if you’re on the right track when it comes to your financial future. We’re going to talk about it in terms that everyone loves – PIE! 🙂 (Well, most everyone likes pie, right? If you don’t then it can work just as easily with cake or pizza). 😛
Imagine you’re having a small party — it’s one that you have every month — and you always invite just a few special guests. At this exclusive party, you always serve a pie that you have made, either by yourself, or with the help of your partner or other family members perhaps.
So what kind of pie is it? It’s an income pie. That’s right, you’ve made this pie with your monthly income, and as the party host, you of course want to make sure you’ve made enough to feed all of your guests…which leads to the next question…
Who are the guests? They are your budget benchmarks, and here are their names:
Housing — (Housing brings her whole family by the way. You know them well, they are insurance, property taxes, utilities, and home maintenance).
Transportation — (Transportation always brings a few friends along, like gas, maintenance, car insurance, and sometimes tolls and parking fees).
Savings — (This poor guy, he’s that awesome person that wants to do so many good things for you, and yet, somehow he seems to get left off of the guest list a lot. The ironic thing is, this is a guest that should ALWAYS be invited to the party).
Debt — (The guest that no one really wants at the party, but always seems to get invited anyway. However, once you close the door on him for good, your parties really start to get amazing).
Health and Happiness — (These are the twins that represent a little bit of what you need and what you want – think things like healthcare, food, entertainment, and clothes. You want to invite them over and over again, even when you don’t have enough pie. In fact, sometimes, you’ll even give in and invite debt to come again if it means this important pair can come and play longer).
And now, the big question, how much pie are you supposed to serve to each guest??
Well, usually, the biggest helping goes to Housing, after all, she’s brought a lot of people with her and they’re all pretty important. Therefore, you’re going to serve her about 30% of the pie (30% of your income).
Next, Transportation; he’s brought a few friends along too, but he normally doesn’t eat as much as housing, so he gets about 15% of the pie.
Then you have Savings, he’s always wanting to be there for you, even when you forget about him — he really deserves 15% of the pie (but sadly, rarely gets that much).
Now, here come Health and Happiness, your favorite dynamic duo! You wish you could give them all of the pie, but that would leave everyone else starving, so try and resist and just give them 25%.
And finally, to your chagrin, comes the invited (but unwanted) guest — Debt. Now, even though you really, really don’t want to give this particular guest any pie, you have to. If you don’t, his big brothers will hunt you down and they are no fun. You might be tempted to give him just enough pie to make him happy, a small sliver, but then he’ll just stick around a lot longer begging for more. It’s best to get this guy out of your life for good! (We’ve all had people like that in our lives at some point, right?) So, no matter how much you may not want to do it, give Debt 15% of the pie.
Remember, these are your budget benchmarks – so this means you want to try and hit somewhere close to these marks to stay on the right path toward a great financial future. Think of them as your guides on your financial journey, helping you know if you’re on the right track.
Of course, every one is different! For example, for you Transportation might just be a little guy that only needs about 7% of your pie, freeing up extra pie for someone else that needs it more. Plan your party accordingly, but be HONEST about how much pie each of your guests needs to eat (without pigging out or stealing someone else’s pie).
A few tips for being the ultimate party host:
-If you don’t think you will have enough pie to feed all of your guests, then you need to make some changes before your next party. This means you either need a bigger pie (more income) or you need to cut back on your guest list (Health and Happiness might need to cut back on their calories for a few months, or you might need to find replacements for Transportation or Housing, you get the idea – something has to change so you have enough pie to go around without getting stressed out).
-Make it your goal to STOP INVITING DEBT! Slam the door on this guy for good! Then you’ll have 15% more pie to share with your other guests! It’s highly recommended you use this extra pie to make sure Savings gets his full share, then go ahead and serve up some extra to Health and Happiness!
–Savings always gets a seat at the table! Even if all you can serve him is a small slice in the beginning, keep inviting him! Give him a little bit more pie each time you’re able until you can give him the full 15% he deserves (and maybe even more)! Your future self will thank you! This guy loves pie and will remember how you took care of him, returning the favor by taking care of you when you need it the most!
Hopefully this gives you a good ballpark of how to divvy up your monthly income so that you can live your life while still being prepared for whatever emergencies or inconveniences come your way (because let’s face it, even though a pandemic like COVID-19 might not be a normal occurrence, life is always going to throw curve balls). Try to make a pie that lets you serve your guests their fill without letting Health and Happiness over-indulge, slowly phase Debt out of the picture, and embrace Savings for the true friend that he is.
Be on the look-out for more tips and tricks when it comes to budgeting, saving, paying down debt, and other personal finance tidbits — coming up in future blogs! Thanks for reading! Now, I’m going to bake a pie…I mean a real one, this made me hungry!! 😉
thefithouse 
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