While many Americans struggle to make ends meet, budgeting can be a daunting task. Liz Miller, certified financial planner and founder of Summit Place Financial Advisors joined TheStreet to share her simple yet effective budgeting formula.
Transcript:
CONWAY GITTENS: And so if someone wants to create a budget, what is your advice for an easy plan that they can stick to?
LIZ MILLER: That’s so great. I can tell you as a professional, I have a million of these detailed spreadsheets that someone thinks you’re going to hand to a client and say, write down for the next six months how much you’re going to spend. And there are a few people who love that, but most people can’t stick to that. What we say is a great starting point is to remember the 50, 30, 20 rule. See that money that’s coming in that we talked about, 50% of that should go to your essentials. Now, if you live in New York City like we do, that might be a little higher because housing costs are so high here. So if you’re in a major city, don’t worry if it goes a little higher than that, particularly when you’re starting out.
But 50% should be your rent or your mortgage and those fixed payments that you can’t do anything about, then 30% should be the things you choose to spend money on. How many streaming services do you want every month. Maybe you need to cut back on one or two, right. Going out with friends. What does weekly brunch cost. That’s your 30% All those ones where you’re making choices do I go out this weekend or do I buy new clothes. And then 20% should be your target to be putting aside every month for savings. And some of that may be paying down debt, but some of it definitely should be funding your first account that we call an emergency fund where you’re building enough money that should anything happen unexpected, you’ve got some money put aside for those emergencies.
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