Story Published: Feb 19, 2010 at 5:30 AM PDT
EUGENE, Ore. -- In the new economy, people are tightening their belts.
But how much should you really spend on housing, put in savings or dedicate to getting out of debt?
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By the numbers Here's another way to look at it: compare your spending to how the other households on the West Coast spend money.
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"I try to just go with the flow," said Mike May of Junction City, Ore. "I don't like to worry about my money too much."
People fear budgeting is hard and restrictive -- or they don't have enough money to cover the bills they have.
"We live paycheck to paycheck," said Tim Hermann, who recently lost his job.
Does budgeting have to be about depravation?
"Absolutely not," said Colin simpson at Oregon Community Credit Union. "It can actually be freeing, I think."
Simpson, a branch manager at Oregon Community Credit Union, teaches budgeting seminars. He said the new economy is a wake up call.
"I think people have been shocked into looking at their budget and what they spend," he said.
Simpson's advice: first figure out your income and regular bills, then spend a month or two tracking how you spend what's left over. You can use a journal or a spreadsheet, a mobile smartphone app or home computer software -- whatever matches your style. You may be surprised at how much money just disappears on lattes or eating out -- or discover your car or house payment is leaving you cash poor.
"The average American spends 79 percent of their income on bills and expenses," Simpson said, "so we really should have 20 percent leftover for savings."
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Useful links How the averge american spends their paycheck |
Where should your money go?
First, pay down high interest credit cards.
"Savings accounts are not paying very high dividends," Simpson said. "However, your interest rates on your loans are going to be pretty high. Now is the best time, if you have extra money, to be paying down on those loans."
Dedicate 10 percent to savings and have the money come right out of your check before you get it so you don't miss that money.
As for the house, car and other loans, "our parameters usually for a person who is spending their money wisely is that their debt is 40 percent of what they make," Simpson said.
If you can keep other essential like food, insurance, utilities and medical to another 20 percent, you're left with plenty of room for the the fun stuff -- and a little pad for the next recession.
"I think it has really affected how people think about the security of their jobs and their incomes and that they really need to start squiring away a little bit," Simpson said.
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