![]() ![]() Other factors, such as our own proprietary website rules and the likelihood of applicants' credit approval also impact how and where products appear on this site. the order in which they may appear within listing categories. This compensation may impact how and where products appear on this site, including, for example. The offers that appear on this site are from companies which receives compensation. What does your pie chart look like? Tell us in the comments!Īdvertiser Disclosure: is an independent, advertising-supported service. If your pie chart looks drastically different from the ideal pie chart, check into some ways to increase your savings, decrease your debt payments, manage your insurance costs and cut your overall spending. You may even qualify for the retirement savers’ credit! And if you are self-employed, you have a number of options for saving for retirement while reducing taxes. Roth IRA contributions will not reduce taxes now, but will help you save on taxes later. Traditional IRA contributions will reduce taxes if you are under certain income thresholds and can deduct contributions. Additional 401(k) contributions will reduce your taxes the amount depends on your tax bracket. To reduce your taxes, consider deferring more toward retirement or education savings. Risk Management (insurance) and Taxes will depend on your individual situation, but in general, you should strive to spend as little as possible in both categories while maintaining appropriate insurance coverage. Look at 16 Ways to Lower Your Housing Costs if you are spending too much on housing. You should strive to be over the ideal percentages for retirement and other savings. If you can help it, you should actually strive to be under the above percentages for the housing, other debt payments, and daily spending categories. And if you want to retire at 50, you might need to save more than 10% of your income for that purpose! But in general, the chart above is a good starting point for assessing your own spending. If your house is paid off, you should be spending much less than 28% of your income on just the taxes and insurance. If you have 6 kids you want to send to college, you need to be putting more in the “other savings” category. The “ideal” pie chart I showed above might not be quite ideal for you depending on your current situation and future goals. Risk Management (life, auto, health, liability and any other insurance):9%Įveryone’s pie chart will be a little different.Housing (including rent or mortgage payments, taxes and insurance): 28% or less.He then used a pie chart to show what the average person’s income breakdown should look like: When I was taking my financial planning classes, my professor gave us some general metrics to use when assessing our clients’ financial situation. But perhaps the biggest thing you can do to change your financial situation is properly allocating your income between saving and spending. ![]() Your financial health is made of up a number of factors – your income and expenses, assets and liabilities, and future goals/spending plans. So today, I want to look at spending a little differently – by using a pie chart. But if you’re a visual person, you might find it a little harder to stay aware of your financial situation. Budgeting and tracking my spending comes easy for me because of that. I see things in numbers and fractions and percentages. ![]()
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