Welcome together, we're gonna explore our personal finances and figure out how to improve them. Whether you're just getting started in life on your finances, or you may already have a home and a car payment and you're struggling to get credit cards under control, are you getting a later start in life on saving for retirement, Reduce Debt Increase. Wealth.com is a podcast to educate those to improve personal finances, whether it's eliminating debt, or making smart investments. So let's now get started. Hello, as I promised last week, I'm gonna talk about how much you should budget for food and how much you should budget for clothing. I'm going to change my format it's spring now and instead of reading the articles to you, I'm gonna post a link in my show notes so that you can go read the article yourself and I'm gonna read the parts that I'm think it's the most important. And for food budgeting, it's the week calm. How much money should you budget for food by Alex bouncy, so how much money should be spending on food answer is far from clear cut. For starters, it helps to put food spending in context with your overall budget. The average American spends six and a half percent of his or her clothing or household budget on eating at home and love percent eating out. coming up from another angle. The largest expense of most household is housing, followed by transportation, which we covered last week, and then food, and I'm not going to give you the averages. If your food budget counts for significantly large, larger portion of your overall budget or leaps, fall gear spending in either of these other categories is probably too high. That's needless to say, if you're spending more on food and you're on housing, depending on where you live, even depending on where you live, that probably shouldn't happen. You need to go to the grocery store way more than what you're doing. Remember, these are percentages of your net income or your take home pay. But to get started with I'm going to scroll down here to the bottom because I think it's the most important so you what you start out with your spending on your food. First thing you want to do, since you've already been doing it is you need to keep track three or four weeks of your grocery bill, plus how much you spend eating out. And then you need to add that up and see how much you really are spending that. That would be step one. And if you've been listened to this podcast for a while, you should already have a budget based on what you are spending on an average. So you could look back at your average spending that you've been that you already have in your budget. Maybe you need to track it forward for the next three or four weeks to make sure how close your budget is, and then go from there. then compare the results. The anavar the national average for a dinner out is $39.40.Of Course New York City is 48.15 well Austin Texas is too low as at $25.81. For lunch out. People typically spend $10 these number can add up quickly and they outpace your spending at the supermarkets another sign that your budget is off. So what they're saying here is, you should be spending more money at the supermarket then you're spending money eating out and I agree 100% with that, it's always cheaper to buy it at a supermarket and make it yourself and if you want to get an idea and have a source for more precise guidelines, he can turn to the US Department of Agriculture's monthly report on the average costs of eating a nutritious diet. They're grouped in four different budget levels through three low costs, moderate costs and liberal. Each report withdrawals from the consumer price index and assumes that all meals and snacks are prepared at home. This is also incredibly detail. There are different costs of cost different age groups for men, women and children. And for families of two and four, It even includes guidelines how to adjust the numbers for larger families. Just get out your calculator. So you can use that as a reference to what you're spending this see if you're in line as far as your budgeting go. And then the article goes through and gives some dollar amounts. Basically, when you get done with the math, you need to look at, you know, you're probably going to be surprised what you're really spending. Now have you been you've had your budget set up for a while if you listen to my earlier podcasts, and you did an average on your spending for your food and groceries. You should have a good idea already. And also says almost 70% of Americans say they eat out too much according to a recent survey that looked in ways which we waste money. In fact, the top four unnecessary drains were all food related 32% of people cope to toss them uneaten or expired food 25% they spent too much on alcohol another 25% meant to racking up higher than ideal grocery bills. We know we're doing it so why are we doing it they should be. So ways to cut down your food budget is eat out less had you know had to be sad, pretty good comments and shop less The more you hit the supermarket the more likely to spend it helps plan your meals at least a week in advance and bring a detailed list having a list will help you avoid impulse purchases. Stay away from snacks or reduce them greatly like potato chips, pretzels, stuff like that. Because that really gets expensive in a hurry. Be sure to check your list against we already have in place. Entering freezers so you don't buy it again. That way you know what you need and you can skip buying on things you don't need. Use coupons. Buy fruits and vegetables that are in season. And the best way to tell if they're season is to buy price. Cheaper the price more in season a our peaches are usually earlier in in the summer. And apples and other fruits are usually later. Strawberries are in June. And so it's like when the price drops on a certain item, that's when you should be buying it because that usually means it says season. So that's the end of the article. They make a lot of good, common sense stuff lower the better. Remember you're already spending 30% of your net income on housing 15% on transportation, if you spent so they were at 45% if you spend another 6% You're up 51% you know, the more you're spending there, the less you're gonna have for other things. So that the grocery store you should spend six and a half percent of your take home pay, and you're eating out is generally 11%. I think those percentages are based on if that's the only place you eat. So if you go to the grocery store is the only place you get food, it should be about six and a half percent of your take home pay. If you go out to eat for every meal, it's going to be around 11% or that's why you should do a combination of both go out at the grocery stores make it a event. Once a week, once a month. You're rewarding yourself for hitting achievement cuz you're trying to reduce your debt and if you keep going out to eat and you keep putting it on a credit card, and you're just making it difficult to pay off credit cards. That's that's all I have to say about the food and eating We go on to clothing next weekly reminder. Do you know how much is in your checking account? Have you projected your expenses forward for at least one to two weeks in advance? or pay periods? whichever is greater? How's your budget coming along? Have you been updating your budget every month trying to get a better average so you have a better projection going forward? That's a key thing to do, and trying to reduce your debt. Also, have you reviewed what you're paying? Have you called your providers and try to get a better plan or lower amount? That's an ongoing thing. I mean, you got to do at least once a year for everybody. Some things you can adjust down some things you can't. If it's your heating and air in the house or your apartment, the only thing you do is set the thermostat up or down to depending on the season, you set it down in a winter, so you use less, you set it up in the summer, so you use less. So just a reminder, you got to keep at it. So that was a weekly reminder. So it's recap your housing, this should be based on your net pay 30% of your net pay for housing, 15% of your net pay for transportation, six and a half to 10% of your net pay for food. I'd say at this average that out by 8%. So you're be about what's at 45, 50 53% of your pay is housing, transportation and food. So now let's go on to the next most important or most expensive thing your spend is the number four category is clothing. And this is an article that I found it's going to be in the show notes, the The link so you can go directly to it by Jeanette Johnson, Jay's everyday fashion.com is the website how to set a clothing budget. She's been doing a budget for over five years why have a clothing budget clothing is a necessity the first and best reason to have a clothing budget close on a necessity because you simply can't leave the house without them. Every personal budget includes clothing so it's important not to overlook this category if you're organizing your finances at relieves the guilt. The first thing I noticed when I create a budget is that I it relieves buyer's guilt. I am my father's child. I absolutely hate spending any money on clothing. Even though I love fashion. This thick manatee and guilt used to eat me alive. Having a budget though can actually be great medicine for this because if it's in the budget It's fair game. I don't let my conscious guilt me any longer. It creates family peace. Along the same lines if you're married or sharing your finances with someone, having a nice set budget can be a great way to bring peace to your home. You don't need to discuss purchases with your spouse, you don't need to hide your shopping bags. If it's in the budget that you mutually agreed upon, then it's fair game. It helps with purchasing decisions. Another one of my favorite reasons for having a clothing budget that helps with purchasing decisions. If you have $200 to spend on a shopping trip, then you can view potential purchases as a piece of that pie and $80 blazer that is marked down from 300 might seem like a steal. But if it's almost half your budget, then it may not be the best use of your money at that time. A huge part of being well dressed person is being a smart shopper in my opinion. So having a budget can certainly help your style how to set a club budget, your income, most financial planners recommend set aside between two to 8% of your take home pay for clothing. Because again, clothing is a necessity. This is a great starting point for computing your personal budget. This can actually be a pretty large range though. So how you decide which numbers to go with. Keep reading for more factors to consider your family. The first thing to consider is that the budget includes everyone in your family. So if you have children, then their clothing also needs to come out of this budget. If you're single, then the budget is just for you. So yeah, just a quarterly. your job, your job is gonna be another huge factor in deciding how much money to set aside for clothes. Some jobs such as working in a law office, or a fashion magazine are going to require clothing is higher quality and a more viable pottery. Very rare really about that. Therefore you should create a larger budget. job with a uniform however should save you considerable amount of clothing since you only need clothes for weekends and fun occasions your financial goals is a huge This is another huge factor to consider are you saving money for a house you're paying off credit card debt. If you have significant financial goals or stressors, then you will want to reduce your closing budget as much as possible make room for these are other more important categories I don't recommend completely doing away with your closing budget if at all possible though, because if you completely closed off the category then you can actually eat too ill responsible and or sporadic spending your values you may value other things your life more than clothing such as traveling or donating to charities. These can be reasons to reduce your closing budget and move those funds into other categories. That means the most to you your shopping habits. Another factor to consider Do you tend to shop often or only a couple times a year. For someone who shops often I would, I would like to suggest a monthly closing budget. If you tend to shop in one or two big chunks every year or when you have a big life event such as a new job, a clothing budget, just for your shopping trip might be a better route. So what she's saying there is, if you only go to this and buy clothes, say twice a year, you don't need a monthly closing budget. You need a certain I annual clothing budget and you adjust accordingly. So if you figure 2% a month, if you go every six months, that would be 12% of that current month and was zero percent on all the other months. And if you have a larger family, then you're gonna it's going to take more out of your budget because you got more people the club So if you're single and a non professional say like me a truck driver, I got a shirt I wear I got pants I wear I did buy my pants like once a year usually when I either wear them out or outgrow them or shrink, which doesn't happen too often. It does occasionally I lose weight, how to stick to a clothing budget, keep track I'm not great with math, but even if you are it can be difficult to keep track of your spending. If you don't write it down, it can seem like you're spending way more than you actually are or vice versa. The best way to keep her self honest is to simply writing it down. carry over. If you have a monthly clothing budget don't ever press yourself into spend that month that same month. I definitely don't recommend it as a use it or lose it mentality. If you want to save some something big and carry over the budget you didn't use the previous month. Are you do what I do and save some of your budget for the best times of year to score great deals right after Christmas in late June, early July when the clothing seasons change. So what she's saying here, if you have a monthly percentage set aside for clothing, you don't have to spend it and that current month. And what she does is she by some closes, now she looks for the time of year after Christmas. And then in the mid summer, when you know clothing seasons change, he can do that a lot of people buy clothes more towards the fall back to school. It's entirely up to you if you want to set up a monthly budget and make it a smaller percentages. And then you don't use it as long as you don't overspend in other categories where you're actually using up your clothing allowance budget for other things. And you actually put that money into a savings account and you have it then you're good to go. I would just recommend put it in your budget two or three times a year. plan on when you're gonna buy your you probably have a habit of when you buy your clothes. I would look at that and then look at your current monthly budget and then adjust your clothing just for that one month or there's two months or three months. Return overages, let's face it, sometimes our eyes are bigger than our wallets. No biggie whenever this happens to me, I go through the purchases that month and pick out a few things to return. If I really really love them, then I don't take them out of the next month budget or I simply go back and buy them next month. So she overspends she actually takes her purchases returns them and as something she really wanted, she had to go back and buy it the next month. Now if you bought on sale, you probably don't want to do that. would just reduce your next month budget and hold on to it over I think there's a wide spectrum when it comes to clothing budget, some of us may be entering overspending territory on a clothing budget can help you scale it down. Some of us may be too frugal Yes, that's such a thing. I was this person. And a clothing budget can help you gain the confidence to invest in quality clothing that is more appropriate for a job and lifestyle. A clothing budget helps us find balance and I experience helps you become a better dresser brings peace of mind and saves you time and money. So that's the end of their article. I have the link on my show notes if you want to read that's pretty much everything. Not quite everything, but she made some very good points in there. And I think I've already covered that, you know, you don't have to have a it should be two to 8%. So now you're up to about 60% of your money. budget. If you go the 8% you know with your housing, food, transportation and clothing, you're gonna be close to spending 60% of your take home pay at least 40% of which 20% is going to be should be going to savings, whether it's savings for retirement member retirement is the only thing you cannot finance or savings for your children's education, savings for buying a new car, a bigger down payment, whatever, whatever your your you know, long term short term savings goals would be for whatever you want to do with it. So that leaves another 20% which I would call overreach. And you got 60% of your budget, take home pay or a budget. Remember, it's the 50 3020 so you're a got tab percent going in overreaches, which is making up that 30. So you got another 20% leeway there. So if you're young and you want to retire early, and you want to say more, you got room to do it. If you're older, and you didn't start early enough, you can increase your savings for your retirement. So you got a little bit of leeway there. Remember, these are only guidelines. And if you are over these percentages, I wouldn't worry about it. The main thing is you need to keep focused on what you're doing already. If you can get down into these guidelines, you're gonna have a lot more flexibility with your spending, which is gonna make your life a lot more easier, happier, and less stressful when things like the corona virus pops up and they shut down the economy and you're out of work. Hopefully a lot of you're working from home. So if you're out of work and you had to go on unemployment you want you have your emergency fund, build up, Deacon go a couple weeks before the first unemployment check comes in. And you can get enough to make up the difference for a month or two, until you can get back to work. Hopefully, not a lot of you're having those problems. But there's a lot of unemployment out there. I forget what it was. We're up almost 15 16% in Ohio. I think it's 16% unemployment. It's important to have that emergency fund build up and we all know why. Now, remember this episode, I use my new format where I was reading a new article, and I threw in my comments as I was reading along, hopefully you could tell the difference. I tried to relate to the author and contacts, like he or she. So you could tell I was just making comments or one when I was just reading the article. Hope you enjoy that a lot more. See you next week. That's the end of another episode. I hope you found it useful. And if you'd like to share this episode with your friends, please do so open for any suggestions for improvement or for information that you would like to talk about in future episodes. You can go to my Facebook page and leave me a message more than glad to comply. To find my Facebook page go to Reduce Debt Increase Wealth.com and click on the Facebook icon to go to my Facebook website.