HomeMoney"Finances are so complicated"

“Finances are so complicated”

How many people have you heard excuse their lackluster personal finances because managing their cash flow seems like too much work. I’m afraid I know a handful of people that are so intimidated by their finances, they choose to ignore them completely. Guess what?! Managing your money is really, really, really simple. Even more simple than this maze…

There are really only three things that can be done with money.

1) Spend it

2) Save/Invest it

4) Steal it

4) Give it

For the love of all that is holy, don’t try and make personal finance more complicated than it should be. Your goal should be to have less than 100% of your money in the “spend” category. Ya got issues if you are spending 103% of your income every month, sadly this is more common than we all realize.

To keep this post short I’m gonna post up the percentage of my income that gets allocatted to each category every month….

Spending: 60%

Save/Invest: 30%

Donate: 10%

So that is the breakdown of my numbers. Keep in mind it is an average, some months my spending was 35% of my monthly income, and other times it was 140%, so it’s important to try to think over the course of a year or so.

Now it’s your turn sucka, why don’t you post up a quick snapshot of your “Spend, Save, Give” percentages. Try to be honest and accurate. There really is no “perfect” breakdown as each of us is unique and has our own perceptions of what is important to us.

p.s. don’t do drugs (yeah, I know that has nothing to do with finances, but I just thought you mind need a friendly reminder :))



  1. The percentage of our after tax income breaks down roughly like this:

    Spending: 50%
    Giving: 14%
    Saving: 37%

    Our savings looks a little skewed right now because it includes savings up money to take mission trips and to start paying off DH's student loans after his 6 months is up after graduation in May. If we took that out the Savings percentage would be closer to 22%.

  2. OK, here goes:

    My net is 62% of my gross.
    10% of that gross goes to the 401(k).

    Of that 62%:
    10% goes to liquid savings or the Roth IRA as I see fit
    10% is a reserve always kept in checking
    21% to the mortgage and maintenance on my co-op apartment
    19% to other monthly bills like insurance, phone, gas, utilities
    15% to food and incidentals
    25% is discretionary and can include donations (I don't donate a fixed amount each month).

    Basically what I do each pay period is:
    a) Put the allocated amount into savings
    b) Pay all bills
    c) Subtract the amount to be kept in checking as a reserve
    d) Divide the balance by the number of days in the pay period. That's the average amount I can spend each day.

  3. We're not saving right now because we are working hard on getting out of debt. We do have a small emergency fund which we will increase once the consumer debt is gone. But right now, I estimate we give about 15% and spend 85%. Once we're debt-free, the spend percentage will be reduced and the save/invest percentage will increase.

  4. Everyone knows the quickest way to make money is to deal drugs. And everyone knows a good drug dealer doesn't do his own stuff. Duh!

  5. Ninja says: "There are really only three things that can be done with money."

    No, four. Paying taxes is #4. You can't get an accurate assessment of your money habits unless you clarify if you're talking about your net or your gross (as 401k or 403b investments are taken tax-deferred from your gross and spending and Roth IRA investments are allocated from your net). And each year your taxes paid are adjusted up or down when you file your returns.

    • Taxes are consider spending money. They represent your share of public services and consumption etc… That being said, taxes wash out of the equation because if you talk about EBIDA than taxes are an expense, if your talking about EBITDA then you have made them net out.

  6. So true finances isn't complicated but you know what is? Knowing that your income cannot support your expenses. This is what causes headaches and so some persons prefer to ignore it. Wonderful article.

  7. Agree, personal finances really is very simple when you put it in small terms. You make money, you spend money, you save money. Don't spend more than you make. Pretty easy concept yet many people don't follow this practice and make it difficult when they don't have to.

    • Freckles, a little googling revealed the answer. The riddle itself is decieving, as it says each man has now paid $9 for the room. While this is true from their individual viewpoints, as far as the motel is concerned each man has paid $8.3333 for the room, because part of their reimbursement was pocketed by the bellboy. A third of a dollar times 3 equals a dollar.

      • There is no reason why

        (amount of money the customers paid) + (amount of money pocketed by Bellboy)

        should equal

        (original cost of the hotel rooms).

        The correct equation is

        (amount of money the customers paid) = (final cost of hotel rooms) + (amount of money pocketed by Bellboy)


        27 = 25 + 2.

  8. Our break down is 20% save and 80% spend. We contribute the max into our 401(k) and IRA's (approx $43M/yr). As a banker I find it difficult to leave idle money earning interest that is a net loss to inflation. One of our unencumbered properties has a HELOC that provides an emergency fund if needed. Spending goes to bills, living expenses, entertainment, and additional principal payments on debt.

    Your question makes an assumption that all your readers agree on making fixed monetary donations. I don't like that assumption. I would almost always choose to donate my personal time over my family's income. Also, I feel that immutable giving leads to less accountability which is one of many moral hazards not-for-profit organizations fall into.

  9. One other comment. I like the don't spend more than you make concept. I think the variable in that is time. How long of a period are you measuring that rule against? For someone like Ninja who is seemingly stabalized with regards to income, it probably works on a monthly basis (sans large expenses like an engagement ring:). For a recent graduate or a new business owner, you might have to measure that rule over several years. This allows an increase in debt (hopefully for good reasons) until your income and life situations stabilize. Than you can begin measuring shorter periods until monthly or quarterly makes sense.

    I just wanted to say that because if you are always concerned with net positive numbers, you might stall and get frustrated with your finances vs. lifestyle and opportunities.

    The best thing for everyone is to understand what you're doing, while you're doing it. Don't worry about paying cash for your education or home, but stop financing TV's and video games!

  10. Platypus: "Your question makes an assumption that all your readers agree on making fixed monetary donations. I don't like that assumption. I would almost always choose to donate my personal time over my family's income."

    Good point. It should be also mentioned that you can donate goods like used clothes, books, etc., and if you can itemize your deductions, you can deduct the fair market value of these items.

  11. Based on 2009, we split 65|35 spend to save (after taxes). The 35 got split up between 16% Retirement, 10% debt reduction (mortgage principal payments), 9% cash savings. I thought we were saving less since the retirement comes off the top, and in the monthly budget we view the entire mortgage payment as an expense, when in reality over half is going to principal. Of course 2009 was a good year for us.

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