{"id":2131,"date":"2008-10-27T01:00:39","date_gmt":"2008-10-27T08:00:39","guid":{"rendered":"http:\/\/getrichslowly.org\/blog\/?p=2131"},"modified":"2019-08-02T00:30:21","modified_gmt":"2019-08-02T07:30:21","slug":"the-balanced-money-formula","status":"publish","type":"post","link":"https:\/\/www.getrichslowly.org\/the-balanced-money-formula\/","title":{"rendered":"The Balanced Money Formula"},"content":{"rendered":"

Building a budget<\/a> is one of the basic tasks of personal finance. But not everyone can keep a budget. As much as I’d like to, I don’t feel comfortable with detailed planning. I continue to use a spending plan<\/a> as a rough guide to my future, but a traditional budget just doesn’t work for me.<\/p>\n

Last night I stumbled across the Balanced Money Formula proposed by Elizabeth Warren and Amelia Tyagi in their excellent book, All Your Worth: The Ultimate Lifetime Money Plan<\/a><\/b><\/i> [my review<\/a>]. Like my spending plan, the Balanced Money Formula is an alternative to traditional budgets<\/b>. Though I considered this concept a little “light” in the past, it really hit home yesterday. It helped me to realize that my own spending has become unbalanced.<\/p>\n

<\/span>The Balanced Money Formula<\/span><\/h2>\n

The Balanced Money Formula is based on your net income (your income after<\/i> taxes). Warren and Tyagi say that, ideally, no more than 50% of your paycheck should be spent on Needs (and keeping them below 35% is best). Of the remaining amount, at least<\/i> 20% should be devoted to Saving, while up to 30% can be spent on Wants.<\/p>\n

Here’s what it looks like:<\/p>\n

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That’s it. Simple. Three categories. No detail. This is the sort of Big Picture budget that I find useful<\/b>, and in this case I could see that there was something wrong with my Wants. Here’s how the authors define these terms:<\/p>\n