We all grow up dreaming of a Wonderful Life. Family and friends who love us. Good job. Nice house. Plenty of food. Enough money to take care of our needs and even some of our wants. When I got married one of my friends was asked to give us some marriage advice. His advice was classic. “Tim, give Terri everything she wants.” He added, “and Terri, only want what you need.” I can still remember his wife catcalling from the background about his bad advice. But, behind his playful banter was a principle. And the principle is this; for a family to be successful the family has to be on the same page and have a plan. Particularly in the area of money. Nothing will challenge a marriage more than how to manage the family resources.
What does a plan look like you say? We use the word budget, financial plan and spending plans interchangeably. But a good financial plan brings a family onto the same page. You would never run a company or a sports team or a civic organization without a plan and yet we run our family finances without a plan all the time and our families are suffering as a result. A recent Gallup poll said that 1 in 3 have a working budget. That means that two-thirds of us are just winging it. Here are some other characteristics of a good financial plan:
- A Good Plan identifies where the family is going to spend the money they make. Below we have identified some percentages to guide you into developing a holistic spending plan.
- A Good Plan identifies what a family is going to give away. Generosity is a very important way to combat the consumptive lifestyles that many of us live. It truly is better to give than to receive.
- A Good Plan identifies what the family is going to save (short term, mid term and long term). The wise man will have resources to draw from when times get tight and attend to the needs of his family tomorrow as well as today.
- A Good Plan freezes and eliminates debt from the budget. The borrower is the lender’s slave and debt must be managed in order to get ahead.
- A Good Plan makes sure that the family has the right protections in place (insurance, will, etc). The people and things you manage need to be protected. Insurance and estate planning can make sure that your assets are protected in the event that you experience hardship.
The wonderful life you are hoping for financially may be a little closer than you think. But you need a plan!!!
One of the classic strategies is to make sure your expenditures fit into some kind of holistic system. There are a lot of opinions as to what the recommend percentages should be. Below are the ones we recommend. For the sake of clarity, these percentages are a percentage of Net Spendable Income. We calculate that by the following formula (Net Spendable Income = Gross – Taxes – Generosity – Childcare (schooling, child support)
| Recommended Category Spending (% of Net Spendable Income) | |||
| SPENDING PLAN CATEGORY | *Recommended Maximum % | ||
| Housing | 30% | ||
| Groceries/Meals Out | 15% | ||
| Automobile | 14% | ||
| Medical | 4% | ||
| Insurance | 13% | ||
| Entertainment | 5% | ||
| Miscellaneous | 4% | ||
| Indebtedness | 3% | ||
| **Savings | 5% | ||
| Clothing | 4% | ||
| Gifts (Christmas, Birthday, Friends, etc) | 3% | ||
| Total | 100% |
* We recommend these as maximum percentages of net spendable income
** Savings is the only category where we recommend a minimum of 5%
Tim Howington is a financial life coach with Journey Financial Group. For almost 10 years now he has been helping individuals and families put together plans that move them to the next step in their personal finances. Married to Terri for 30+ years, Tim lives in Rogers, AR. They have a college aged son.
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