How much should you spend? Here is Broke peoole vs Rich people budget

Let’s take a look at the Joneses. Here are their typical spend percentages:

They take home $4,000 each month, which is pretty dang good! Unfortunately for them, they listened to the bank’s advice and loaded up on mortgage debt. They live in a $300,000 home, drive a couple of decent cars (thankfully one of them is paid for), and dine out every Friday.

They look like they’re doing pretty good from the outside. Their house is huge, their cars are sparkly, and they always seem to be eating out at the next new restaurant. But, take a look at their savings rate….1%. And the amount of money they give away? Is none. These people are looking good, but are living paycheck to paycheck and miserable. Do NOT aspire to be this family.

So if the above budget was too lavish, what’s a better approach? Here’s a much better method for allocating your spending:

First of all, take a look at the house payment. Instead of a massive payment of $1,600. Shoot for $800 (or 20%-25% of your take-home pay). Think that’s impossible? My first home mortgage payment was $700 a month, and that was on a 15 year note!

Second, since you drive modest paid-for cars, you have no car payment (my wife and I had a combined car value of $4,000, which made it really easy to pay cash for them!).

Find out more about these budgets and more, from Derek at lifeandmyfinances.com