By Patricia Uceda, Spring 2015 Graduate Research Assistant
Once you know how much you generally should be saving per month for retirement and where you will be putting that money, it’s time to do the hard part: Save! One way to make this easier is by setting a budget for yourself. Be aware of where your money is going and assess what areas you can cut back on, whether it’s giving up that Starbucks cappuccino every morning or eating out less. You’d be surprised how fast those little purchases add up.
The simplest way to budget is to simply create a spreadsheet listing your monthly fixed costs, your flexible spending costs, and your financial goals. Your monthly fixed costs will include bills and expenses such as rent or mortgage payments, car payments, or utilities. These don’t change much, although ideally they should take up no more than 50% of your income.
No more than 30% of your income should go towards your flexible spending costs. These are expenses that vary from month to month such as food costs, shopping, personal upkeep, hobbies, entertainment, etc. This is also the area that you will probably need to cut down the most on.
Lastly, at least 20% of your income should go toward your financial goals. Financial goals include your retirement savings plan, paying down debts, and building an emergency savings fund. Eventually your debts should be paid off, and this 20% can consistently entirely of savings.