Money Management, Budgeting, & General Distribution of Funds

[elime]

Ok, so I'm letting my inner Jew shine and attempting to prepare some kind of money management/budgeting system for myself.

Essentially, how I can spend what I earn in the most efficient way possible.

As you'll see, my take on it is pretty basic. So I'd love to hear some commentary on how you guys organize and distribute your spending.

I started off with living expenses, first and foremost. ie, how much do I need to earn monthly in order to avoid being homeless. Turns out it's really low ($1500). God, I love being young, male, and single. I actually rent a pretty nice place too.

So bills, food, gas, etc. are taken care of and not part of this equation. I consider anything earned that exceeds my living expenses as 'profit.'

I'm earning quite a bit of dough that I don't have to dedicate to survival. I don't really have any expensive hobbies, and there really isn't any big ticket item out there I want to buy. Chalking that up to my inner Jew as well.

I'm going to get a new savings account sometime next week and put around 6 months worth of 'living expenses' into it and forget it exists. I think I'll sleep a lot easier this way, considering the often unstable nature of the industry.

So I was thinking of breaking down the other income like so:

50% - Reinvest into business. Things like outsourcing, domains, hosting, software, etc. Essentially anything that will be a sound investment to make my work life easier and/or more profitable. Does anyone think 50% is too low? Too high? (note that I don't consider PPC costs a reinvestment in this case).

30% - Stock market / some kind of investing. I'm basically a newb to any form of true investing, so this part will require some research. Fortunately I understand the basics and have an uncle who is more than willing to point me in the right direction. I think that in the long run this can't be a bad idea.

20% - Fun. Money that I don't have to feel guilty if I spend, it's there to be enjoyed. Stuff like recreational activities, clothes, intoxicated ebay sprees, prostitutes, etc.

Any suggestions on the rough idea I've sketched out above? How you break down your revenues?

 

[chatmasta]

Make sure you keep that 20% separate from everything else so you don't have anything spilling over.

 

[audax]

Having an emergency fund, like you are planning, is deifinitely smart. For the typical wage earner, 3 months of reserves is sufficent but for us self-employed types, 6 months can help you sleep at night.

Personally, I follow the 60/20/10/10 rule for budgeting:
- 60% of income goes to necessary items like rent, food, taxes, bills, etc.
- 20% goes to long-term retirement savings like an IRA
- 10% goes to short-term savings for those unexpected expenses
- 10% for fun stuff (sushi, sporting events, etc.)

With running a business on top of that I try to pay myself as little as possible (but still meet the 60% rule for living expenses) and keep the rest of the revenue in the business accounts. I'd suggest you try to keep your personal and business budgets separate... makes taxes and record keeping that much easier on yourself and your CPA.