Budgeting can be a drag. You don’t get to spend as much as you’d like on the things you want, and yet you still worry about whether there’s enough left over for essentials like saving and debt payments. But it doesn’t have to be that way. I’m going to introduce you to the one-number budget, which flips budgeting on its head and frees you to set aside money for your day-to-day spending.
How do your savings stack up?
Is saving important? Absolutely. Can a personal finance guru tell you exactly how much you need to save? Not a chance. I’ve never liked the use of formulas or bright lines as a measure of financial success. The best anyone can offer without knowing the specifics of your situation are guiding principles and habits, such as living below your means and planning for financial emergencies.
Getting Smart About Tax Withholdings
The new tax law means you likely saw a bump in your take-home pay starting in January. However, this doesn’t necessarily mean your 2018 taxes will go down. Now is a good time to review your tax withholdings and to ensure your budget leaves sufficient cash cushion to cover any tax payments next year if there's any uncertainty.
Is your investing plan boring enough?
Ten years ago, Warren Buffett bet $1 million that a passive index fund would outperform a basket of actively-managed hedge funds selected by his counterpart in the wager. Buffett was right. Boring doesn’t mean mindless. Be thoughtful about where you hold your accounts, what you invest in, who you receive advice from, and how much risk you’re willing to take.
COMMON BUDGET BUSTERS
Ho ho ho: consumer spending this holiday season hit a four-year high. Good news for the economy, right? Perhaps, but at the same time revolving credit (think credit card debt) has hit an all-time high in the U.S., while food pantries are more packed than ever (including with people who have traditionally middle-class jobs).