How Much Money You Should Spend On Everything (At Every Age)

Let’s discuss how much money you should spend on everything at every age. This is the best budget technique to save money fast and retire early. Many people follow the 50/30/20 and 4% rule, but this technique will have you saving much faster and retiring early. This is how much you should spend at each age regardless of your income on items such as your car , house, clothes, transportation, insurance, etc.

Retirement this is something that every single person wants we all want to one day be able to do whatever we want with whomever we want whenever we want however it’s not as easy as it seems today i’m going to be talking about how we can retire within 20 years regardless of your income that’s right regardless of your income so i’m going to talk about some of

Those strategies what the most popular savings strategy is right now called the 50 30 20 rule uh what’s really great about it but i’m also going to share some ways that we can modify it and adjust it so that we can quickly begin retiring at a much faster rate you’re as excited as i am let’s hop into this hey what is up everyone my name is sean if you are new to

This channel welcome if you are all about personal finance learning how to save money pay off debts increase your income investment strategies to build wealth and essentially living life on your terms then make sure you check out some of my other videos hit the subscribe button for more videos on those topics and if you can do me a favor smash that like button

It would absolutely mean the world to me today we’re talking about how you can retire within the next 20 years regardless of your income now the other day i posted a video about how much money you should save by each age if you haven’t watched that already make sure you do so i have it in the video description box below in that video we discuss some different you

Know sections of your life and how much money should have saved but then i started thinking like well hey why don’t we actually talk about how much money you should spend or how you should budget your money so that you’re able to retire in the next maybe 20 years so let’s talk about some of those strategies right now okay so we all need money we all have to spend

Money one way or another i mean there’s things like rent or mortgage clothes groceries food eating out shopping all this stuff and it requires money to live unfortunately unless you have to be one of those lucky people whose parents pay for everything and if that’s the case are your parents adopting by any chance but with all jokes aside you have to spend money

One way or another so but i want to talk about how you should break up your spending and how you should allot your spending so that you can adequately save enough money to retire in as quickly as possible now the most popular way of going about budgeting is what’s called the 50 30 20 rule and the way the 50 30 20 rule works is this you start by taking your after

Tax income so that’s how much money is left over after you pay your taxes and you split it up accordingly 50 is going to go to your needs or the things you need in order to survive so that’s going to be things like your housing your food your car utilities and these can be simple basic things that you need in order to function and survive as a human being the

Next portion is 30 and that goes to your once so i want you to think of this as like your kind of extra expenditures your little guilty pleasures and this is gonna be money that you can apply to maybe a slightly nicer house or a slightly faster car or maybe you’re really into food and restaurants and your ability to eat a little bit nicer or a little bit better

Quality foods and the last part is going to be 20 goes towards your savings and that’s gonna be things like your investment accounts your iras stock market real estate paying down any debts that you have and creating a six months emergency plan said this is one of the most popular strategies for budgeting that 50 30 20 rule and while i do think it’s a very

Effective plan for a lot of people and it’s a great way of portioning out your stuff to make sure that you are saving the problem becomes is that if you’re only saving 20 of your income it’s going to take you about 37 years in order to retire according to the four percent rule so the four percent rule goes like this if you’re saving twenty percent of your after

Tax income and you’re averaging around a seven percent return each year on that money you should be able to spend around four percent of your portfolio every year and live for the next 30 years while maintaining the same lifestyle i have a few problems with this number one is the fact that it takes 37 years to get to the point where you can retire and one of the

Reasons why i do feel that people have a really hard time committing to saving and saving for the retirement is simply because it’s way too far down the road so let’s talk about the different categories and what i feel is a really good idea in a way that you should be budgeting out your money so not only are you saving money but more importantly you’re budging

It in a way that you can retire within the next 20 years so let’s start with the first category which is the 50 needs category we’ll talk in particularly with housing now most experts agree that you should be spending around 33 of your income on housing so you can look at this a couple different ways for every three thousand dollars that you earn you should only

Be spending about a thousand dollars on housing or another way to look at it is if your rent is twelve hundred dollars a month you should be earning at least thirty six hundred dollars a month and like i said i do think this is a good start because as a landlord who owns a lot of properties when i’m looking at tenants who are going to be renting from me i do make

Sure they have at least three times three to four times the income of their rent monthly now while i do think the 33 rules a good start i do think that if you are trying to exponentiate your savings and retire at a much faster rate your housing costs really should be around 25 percent even ideally 20 of your income now for some of you this might be quite a challenge

Especially if you live in expensive areas like i do like like in los angeles or if you live in areas like new york san francisco miami chicago if you spend more than 20 25 on your income that may mean that you need to move to a less nice area of town it may also mean that you need to get some roommates you could move back with your parents or you can get creative

And rent out some of your rooms so the next category is transportation now according to most experts your transportation costs shouldn’t exceed any more than 15 percent of your total income and then if you are buying a car your car purchase should not be more than 35 of your annual income so that means that let’s say you make 60 000 a year your car should not

Exceed more than 21 000 in purchase and it should not cost you any more than nine thousand dollars a year now i do really think this is pretty solid advice you know one expense that really causes people to fall behind in their savings rate is their vehicle and let’s face it vehicles are expensive between the monthly payments the insurance the maintenance parking

Expenses if you have those two those expenses add up and it really causes us not to be able to save at the rate that we need to now while i do agree that’s a really good rate if you want to be more extreme with it you can do the dave ramsey method for those who don’t know who he is you can check out some of his videos but his videos are simply stating this so

Dave ramsey believes that number one you should never buy a new car and that your total car expenses should not exceed more than 10 percent of your annual income and like i said for those of you who are trying to save at a much faster rate and retire around 20 years i would highly suggest that you utilize this as well now the third section is food now according

To most experts they say that your food cost shouldn’t be no more than 10 to 15 percent of your income so this means that if you’re making somewhere around 60 000 a year your food costs each month should be somewhere between 500 to 700 a month that would include groceries and eating out now the big thing to keep in mind is that as your income increases you do not

Want to match that to the 10 percent meaning that yes if you make 60 grand a year 500 to 750 a month is pretty good but if you started making over a hundred thousand dollars a year you know it doesn’t necessarily mean that you need to be increasing your food expenditures to match then you know having an occasional eat out or going to a nice dinner here and there

Once in a while it’s not going to break the bank and it’s fine so the other category is the other category and this is going to be around 10 to 15 percent this is going to include things like your insurance which should be somewhere around 5 and your utilities and for most people depending on where you live that’s probably going to range from like 50 bucks up

To like 200 a month so at this point we spent somewhere around 50 to 52 of our after-tax income so far leaving us with around 48 to 50 left now according to the 50 30 20 rule 30 of this should now be going towards our once now while i do think it’s important to have someone’s i do think 30 is way too high especially if you’re trying to retire in the next 20

Years if you’re trying to retire in the next 20 years you really should keep your wants around that five to ten percent range so what do you spend on the once thing well this is really you being able to go to town my suggestion is find one or two categories that mean the most to you that bring you the most happiness and fulfillment and spend an extra five to

Ten percent of your income on that thing and to make the process a little more enjoyable because let’s face it if you’re living in a shoe box for the next 20 years it might get a little challenging after a while so from there everything else should go straight towards savings and this is how i would go about the savings category the very first thing i would do

Is all the extra money left over should first go to any high interest debts and paying that off and high interest debts would be anything over five to seven percent so if you have any credit card debt student loans or anything that are over at least five seven percent i would highly suggest you take that money first pay off the debts as quickly as possible after

That i would then target a six-month emergency fund you know one of the things is that as you begin to grow and build yourself financially you need to make sure you have at least a six month emergency fund for any type of emergencies this can include job losses your car breaking down a refrigerator going out or anything else that life likes to throw at us after

Your emergency fund has been built up at that point that’s when the investments kick in the first thing i would target is your company’s 401k plan i would at least contribute what your company matches because at that point that’s free money from there i’d invest in things like a roth ira or an ira for a tax deductible investment and then after that you’re going

To have your investments your taxable investments that would just be like your normal mutual funds your index funds stocks real estate or anything of that matter the reason why i like this plan so much is because almost 42 of our earnings are going towards savings and this is why this is so effective and so important like i said earlier in this video if you’re

Only saving 20 of your income it’s going to take you close to 37 years in order to retire according to the four percent rule however if you are saving upwards of 42 of your income that 37 years jumps down almost to 20 years now the last piece of advice that i have for those of you who are going to follow this plan is number one is make sure you pay yourself

First so what does that mean that means that as soon as you get your check before you spend any money on anything rent or food or groceries you should have a separate account or some place that you can take that percentage of money that 42 percent and shove that money right into that account and then from there live on what’s left over remember failing to plan

Is planning to fail and if you do not budget your money accordingly your money will budget for you and that means that you will be spending more money than you plan to when things come up you’re not going to take care of them we want to make sure that we are paying ourselves first and that is the secret to making sure that you budget in a way that pushes you to

Save make sure you comment below on your favorite strategies or what savings plan or budget plan that you have for yourself and if you haven’t done so already make sure you smash that like button for me hit the subscribe channel and let’s crush it

Transcribed from video
How Much Money You Should Spend On Everything (At Every Age) By Shaun Surgener