Financial advice columns continue to hammer away at us to ditch our credit cards and start paying down debt. But how do you get started when you’re already stretched thin? Your rent is too damn high and by the time you’ve paid for cable, cell, Seamless, yoga and going out on the weekend you are all tapped out.
Unless you are willing to give up some of those things you associate with the cost of living – and I’m talking about more than just fancy (read: overpriced) coffees — you’ll remain a caged hamster spinning round and round on your financial wheel forever. How do you break the cycle and start paying off debt and saving — even just a little bit —for the future?
That’s the subject of my upcoming class at Brooklyn Brainery on June 21 “Money Management 101: Living Within Your Means” And Brokelyn readers get first crack at enrolling before everyone else! It starts with getting real about what your basic monthly needs cost. Here are some of my tips you can start today:
RULES OF THUMB
Spend 50 percent on the basics
Spend no more than half of your take-home pay on your non-discretionary expenses. That means the stuff you have to shell out money for in order to survive: rent, basic groceries, health insurance, phone, heat, water, electricity and basic clothing (a Tory Burch tunic doesn’t count);
Spend 20 percent on the future
Use this 20 percent on paying off debt/saving for the future. Paying off credit card debt, student loan repayment, building an emergency account (even $20 at a time works), contributing a little to a 401k, all fall into this category. You prioritize.
Go crazy with the rest
The last 30 percent can be spent on … well, whatever you want really. The point here is that your discretionary spending – otherwise known as “wants” – should account for no more than 30 percent of your budget. So if you want to buy Starbucks every day, knock yourself out. It might mean that you can’t go out for dinner every Saturday night. That’s your choice. Or maybe you don’t go out as much this month so you can buy a new spring jacket. But next month you don’t buy any clothing so you can splurge on a concert at the Barclays Center. The fun is deciding how you are going to spend that 30 percent of your paycheck every month.
You may even decide to drop a 10 and two singles next month on a class at Brooklyn Brainery to get more easy-to-use advice on budgeting, saving and spending. If you do, please make sure to let me know you saw this.
Stephanie Genkin is a financial planner and television producer. She offers lively monthly classes and workshops on money topics at Brooklyn Brainery. Here is a partial listing of her past classes.
Brokelyn readers get first dibs at Genkin’s new class. Sign up here!
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In the Bronx, 58 percent of residents pay at least 30 percent of their annual income on housing. The same is true for 53 percent of Brooklyn, 54 percent of Queens, 49 percent of Staten Island, and 45 percent of Manhattan.
So according to your 50% rule, the majority of New Yorkers should pay no more than 20% (or less, depending on their rent burden) for the other basics of life: basic groceries, health insurance, phone, heat, water, electricity and basic clothing.
Do you think this is possible?