I know this will sound bad but I had not sat down and added up all my monthly bills in at least 3 years, the reason being is that I can pay all of my monthly living expenses (including rent) in one paycheck.
You see, a long time ago when I was a young single mom in a low paying job and I was receiving spotty child support payments, I lived paycheck-to-paycheck. Any small emergency like my car needing repairs caused me to be in debt. I also made foolish financial mistakes like buying a car I could not afford.
Eventually, I went back to college and earned two degrees, thereby, increasing my earning potential. Each time, I would get promoted and change jobs, I would live on less than what I earned. I do not live in a fancy neighborhood nor drive a fancy car. In fact, if you think about it, my living expenses is equal to 50% of my monthly take home pay.
According to the article How to Allocate Your Salary by Linda Ray, below is how my salary should be divided:
Home (rent or mortgage and the utilities)
Food and Clothing (groceries, takeout, restaurants & clothing)
Debt (credit card bills and other debt such as student loans)
Transportation (car payments and insurance, gas & maintenance)
Entertainment (incl drinks after work, concerts, sports gear, vacation & movies)
What I realized that I am only meeting 75% of my personal savings goals (this figure excludes 401K and Retirement accounts since it is automatically deducted from my check).
Here’s my Savings Goals: (Increase my monthly savings by $250)
1. Increase my personal savings to 10%
2. Set up a Dental Savings Acct (I have no dental insurance) – goal $1,200
3. Set up a Laptop Savings Acct – goal $600
I have a savings account with Capital One 360 (formerly ING) in which I have already set up an automatic savings for my new saving goals. If you look at the picture above, it was super easy for me to create a goal, calculate how long it would take to reach my goals and set up an automatic deduction from my brick-n-motar checking account at my credit union.
My ultimate goal for the Dental Savings is to eventually increase it to $4,000 but I know I will be needing another new laptop soon. So, I have about 60% of the $250 going towards the laptop and the other 40% going towards the Dental Savings. As soon as I achieve my laptop goal , I will then move 40% into the Dental Savings.