Family finances: When to break the personal finance rules

personal finance




Financial rules of thumb can be useful in taking the guesswork out of money issues. But there are times when the rule may not apply to you.

RULE: Don’t spend more than half your budget on living expenses.

One often-quoted formula suggests spending no more than 50 percent of your take-home pay on necessities (including housing, transportation and food), dedicating 20 percent to savings and debt and maxing out at 30 percent for lifestyle expenses (including cable, gym membership and dining out).

When to break it: This formula is a good start, but your budget should allow for breathing room when life calls for adjustments. For example, if you neglected your retirement accounts in your younger years, you’ll need to save more in your forties and fifties to catch up, says Miguel Gomez, a certified financial planner in El Paso, Texas.

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