When you look at your income how much money would you recommend should go towards things you desire, but are often not necessary (trips, cars, clothes, etc).

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Posted by Scott Rivlin (MONEY FORUMS: 4, Answers: 7)
Asked on April 23, 2016 7:36 pm
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Hi Scott,

Great question. There are a lot of different answers to this; best is subjective.

I advocate the 50/30/20 budget. These are percentages of net income. The 50% is essentials, food, rent or mortgage, etc. The 20% is total savings, retirement as well as non-retirement goals. The 30% is the discretionary you are asking about.

The discretionary amount would include any expenses above necessity. In an emergency situation both savings and discretionary could be temporarily stopped, leaving your core expenses at 50% of your net income.

Other plans will work. The more stable your income sources are the higher you can go with committed expenses. Living below your means will always help with building resources and providing a cushion against unforeseen circumstances.

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Posted by Peter Neeves (MONEY FORUMS: 1, Answers: 59)
Answered: April 25, 2016 7:20 pm
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Hello Scott,
As a rule of thumb, it’s highly recommended that part of our excess income, after covering living expenses, is used to build an emergency fund equal to 6 months’ worth of income. This fund will be essential in case of a job loss or prolonged illness. In addition, at least 10% of our income should go towards retirement savings. With a good emergency fund set aside and good retirement saving discipline, we can then use part of our excess income for our wish-list. Each individual’s financial situation and timing for achieving these targets will vary, but these are general guidelines which can be used as the basis to set personal financial goals.

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Posted by Ramona Cedeno (MONEY FORUMS: 0, Answers: 5)
Answered: April 23, 2016 10:51 pm