This might not be an important topic, but I'm curious what other people's monthly nut is compared to their income. I know mine is too high at 1.25:1. That's net income vs. mandatory expenses.

I realize it can get complicated for those who have SARSEPs, IRAs, etc. or other tax deferred income and investments that they might categorize or look at differently. For me, I do have a sarsep I contribute to, but I'm not counting it as income or expense for this exercise. I'm only concerned with the net money I take in per month compared to my mandatory budget expenses and what I have left over from this. Obviously, if I can get my ratio higher, I'd invest more, which is my ultimate goal. Ideally, I'll like to cut down on my living expenses and have a 1.5:1 ratio or higher.

So just how much do you take in vs. what you spend? I've heard that many people are either living hand to mouth or are in a situation where they are just 6 months from being homeless. Not sure about you , but I find that pretty enlightening. That things can go from where they're at now, not living large, but certainly not having to forgo too many pleasure to have fund and enjoy life to wham! Whoops. we lost our job and now our home, and other things dear to us. Pretty sucky sucky,

I know people here are smart who wouldn't find themselves in such a position. They're too nitty, too smart, too forward looking and could cut to the chase right away. Your worrying too much about this when that's not what you really shoud be worrying about is just this. They make it so much less easy.

But I do think that people don't know how to manage their budgets in life. Something always comes up and right now I'm trying to figure out if I can afford it rght now. Yeah, I have the physical money, but that doesn't mean I can afford something. Be it a loan to someone, a get away with someone, or just something to pamper myself with say the new hybrid gold clubs this summer,etc.

Sorry I'm a little buzzed while writing this. Hopefully, you all get my gist. I think it's important to me at least. I want to be comfortable. I want to save. I want to have emergency funds at the ready should I need them. But I'm not at a point where I have a huge enough gap to not worry about it . If so, I could just take a high % and invest it. This is only about what you get and what you spend. Do you guy have any good sound rules for the rest of us? I did ratios, so that others wouldn't have to list their salary and life. So just use ratios if it makes you more comfortable. I personally don't care. My monthly income is $5k and I'm spending $4k. I don't like it. I think I can reduce my spending much more by brown bagging it to the office, instead of eating out every day. There are some service I need to ditch, because i don't need them.. I need to recognize there's a diference between needing something and wanting it.

Can someone help me out. Can we help each other out?

List your ration. And what you're doing with any surplus funds. Maybe your age will help too. I would think those just starting out with a house, family, kids, might not be able to put as much away as a middle ages person who's kids are grown and is close to retirement, but more than someone who has kids in college, etc. Anyway, I thought it would be intersting. Sorry if I'm a bit incoherent right now. I'll read and revise whatever I have to tomorrow. I just wanted to get this started. Thanks.

well you're asking about income to expenses and implying that f its 1:1 you're one slip away from being homeless. But you're not considering savings. You could have a 1:1 ratio and have 10x your annual income in liquid assets and be very safe

You should read a book call Millionaire Teacher - Nine Rules of Wealth You Should Have learned in School.
http://www.amazon.com/Millionaire-Te...8189574&sr=8-1

It is an entry level book but it deals a lot with the topic of spending. The point is that a lot of the people you see with a big house and fancy cars are in debt to their eyeballs while there are many millionaires among us who you wouldn't suspect have money. The Millionaire Next Door is another book on the same topic.
Fixing leaks in your spending is a great way to start to attain wealth. "Pay yourself first" is another great strategy. Asking yourself if you really need something before you buy it is a good start.

To answer the question, my ratio right now is about 2.5:1.

2.5:1, big chunk of my costs is paying back debt for earlier stupidities tho.

Thanks. It wasn't me. I read or heard somewhere that most people are just a few paychecks away from being homeless. I'm sure that's because like you said, they don't have savings.

You (and napsus) both motivate and depress me at the same time. 2.5:1?! NET income?! I asked the question, because I have the opportunity to work more hours. But no matter how hard I work, there's no way I can achieve a 2.5:1 ratio of net income to expenses. A quick calculation shows that I'd have to live in my car, give up health insurance, and eat nothing but rice in order to do it. I'm hoping you guys are extreme examples. 2.5:1 seems really difficult for the average person.

I realize if you have a lot of savings, it might not matter. But do you have any advice for someone like me who doesn't have a lot of saving? The second after I click on "submit reply", I going to Amazon and buying that book. I read an old book called "The wealthy barber" once. I remember it said what you did, "Pay yourself first!". The problem for me is I have too much debt in a car and house, I guess and I'm upside down on my car so I don't think there's anything I can do about that. I'm also trying to be debt free in 5 years with x in savings. At 2.5:1 That would be a sweet way to live. Congrats!

Income net after tax, health insurance, retirement payments
Expenses including food, living room, car payments, electricity etc...
Around 2:1
But that does not mean i save 50% of my earnings, its more i could save 50% and have a bad live.

I have heard the average savings in America is 1200.

This right here is huge for me. Being self employed I have to pay my own health insurance. So that's one "mandatory" expense for me that I can't get away from. There's gotta be a way for me to improve from 1.25:1 to +2:1. I just don't know how to do it. Also, I'm wondering if this is even the right way to look at it or if it's important. Thanks.

i can't help but always think i should be saving more.

if you're actually saving 20% then you are doing great compared to average. i think savings % numbers are kind of silly though. if you make 60k/year and have a family it's going to be really hard to save anything -- understandably so. if you make 1m a year and only save $200k/year, you could easily cut back.

imo, when you're young you should do whatever you possibly can to increase your top-line. learn, take chances to hit it big, bust your ass to get promotions, etc. there will come a time in your life when you have to settle down, have a family, don't have the energy or the luxury of being young and having time on your side. that is when you want to really make sure you buckle down and have a sustainable income:expense ratio.

this goes against everything people have always told me. they always told me to save as much as you can and let your money grow.

edit: i'm not saying you shouldn't save money. i'm just saying before you have kids you shouldn't really worry about it too much and rather just worry about positioning yourself to maximize your future earn.

hmm yeah i don't have a car, my health insurance is paid out of my gross salary (in europe) and i don't have a mortgage.
and i earn decent.
i don't think you should be comparing so black and white as you do know between yourself and a random poster, since you are an entrepreneur.
what kind of business do you run and what is the growth potential?
you should factor in this potential to your calculations as well. my earnings potential is very limited at this job for the coming few years, do you have big upside potential?

e: i save ~15% of my net income

saving money has nothing to do with busting your ass at work.

If I am not mistaken the average savings rate is in the low single digits -- I think 3%. I am a big advocate of enjoy life and spending liberally but I think most people live beyond their means. In my experience very few people actually have a good balance when it comes to spending -- they are either super nits who are missing out on way too much of life or they overspend and are headed for disaster.
+-

<- super nit

but then again, my expenses are so low, that I can still save a bundle and spending a few extra grand still makes the number high.

Anything you can save when your young with compounding returns is HUGE. Assuming you average a 6% return in the stock market saving 30k a year from 25-35 then leaving it alone and you end up with 1.92M when your sixty (not looking at inflation, possible losses, etc). If you start saving 30k a year at 35 and keep saving the same amount a year until your sixty you only end up with 1.77M. You've only invested 300,000 during the window from 25-35 but if you wait till your 35 you end up putting in 780,000 for less money in the end.

The ratio is just going to be all over the board and mostly irrelevant. 2.8 here, investing 5% due to an employer match and sitting on the rest.

It's really about how much you save rather than how much you make. I know way too many people who take in a ton and are underwater.

Big ways to save that most people miss:

Get rid of the car payment and/or buy used if possible. Getting a car with 20-30K miles on it saves you half off the original new price and you get a car that has 80% of its' life left. It also keeps your insurance low.

High deductible insurance plans will save you hundreds to thousands of dollars per month across your health/house/cars. Modern use of insurance is to use it as a cash-flow smoother, not realizing they're throwing so much money away every month simply because they can't afford a 5K surprise payment.
Get as little insurance as possible, with the understanding that there will be times where you need to buy it and knowingly trade money for peace of mind. Slowly up your deductible as you feel comfortable, and watch your savings grow.

Don't buy cable, use Hulu and/or some other service saves $100+ per month. Getting a season pass on iTunes for 2-3 of your favorite shows means you own the copies *and* save money each month.

Don't live in the absolute best place you can afford. (Don't skimp though either... that's where you're going to live!)

Take trips from Tuesday to Tuesday (or Wed to Wed). It saves 20-30% on the exact same trip as a Weekend to Weekend in airfare. If you're going for only a few days, Sunday - Thursday saves a ton in hotel and event costs too.

Shop at 2 different grocery stores. Trader Joe's is great for frozen/boxed goods, but far more expensive than Target for produce and dairy. Generic brands and/or stores are going to be 80-100% as good as more expensive items. Often the generic Target/Walmart brand is even made by the name brand company and just re-labeled!

Designer brand clothing outlets. Honestly, I can't find any difference between the clothes in Nordstrom's vs Nordstrom's rack, other than the several hundred dollars' difference in price.

Use rewards programs. Using our Target red card saves an immediate 5% on grocery and household items. Writing Orbitz reviews takes 5 minutes and saves 10% or more off our next hotel stay through them. Using OpenTable is something we do anyway, and we get points towards free meals. Spending with our credit card instead of the debit card saves an additional 1% on everything and only "costs" us a few clicks per month to transfer from the debit to credit account to pay it off.

Buy in bulk. Progressive gives a discount for paying a lump sum instead of monthly. Stock up on always useful items like toilet paper when there's a great deal.

Check for discounts before you buy anything online. I guarantee there's an affiliate out there who offers a discount on whatever you're buying. Google it or go to your favorite deals site, click a link or copy a code, then go buy whatever with the discount. It takes literally 1 minute to save.

Be flexible. Great deals come up all the time. Some of the time they'll mesh with your interests. We check TravelZoo for deals and have snagged a lot of great discounts. If you're in the market for something like a car/house, try to ride your current option for awhile and look for a great deal instead of purchasing when you absolutely have to.

The things listed above have an incredibly small impact and/or opportunity cost on our life. We don't skimp on anything. We love taking trips, eating out, and having nice things.