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Can you use percentages to help gauge finances?

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Do you know what percentage of your net income your debt and living expenses should fall under? Most people do not. Financial experts recommend that you find out. Are your budget categories worked out according to the percentages? Setting amounts higher than what is recommended will place a toll on those unplanned or emergency expenses. With these costs an involuntary variable, how much control will you have in the end?

Budgets need to balance. If you have one category too high and another one lower then it will all work out. Too many heavy sided categories will deflate any attempts to manage money.

There is no exact science behind these percentages. The numbers will vary depending on what part of the county you live. It is best to use them as a guide according to your financial situation.

Housing expenses - A mortgage should not consume more than 25% of the monthly household income. Another 10% of the income will be eaten by insurances, property tax, maintenance and repairs. Pay attention to the added expense when purchasing a new home. Make sure you can afford the neighborhood.

Consumer debt - 10% of the household income should contain credit card debt, student loans and medical debt. This is a crucial piece of the budget. Most often, it is this piece of the budget that creates the most trouble. Have you ever added your total credit card debt? Have you taken every necessary step to make student loans more affordable? Government loans offer many relief opportunities, especially those with income-based payments. Any consumers using payday loan help to support a budget is too often a result of this category being off the percentage target.

Utilities - This category should fall under 15% of your monthly net income. Electricity, gas, water, oil and trash disposal should all fit; even on the most expensive months.

Transportation - This 15% includes vehicle payments, insurances, gas, parts and repairs. It also includes any rental or public transportation needs.

Savings - 10%...just do it!

The remaining 25% will go to everything else. It includes your food and clothing, medical co-pays, health insurance and prescriptions. Entertainment, gifts, school supplies and children’s activities will fall into this group. This percentage seems big until you try to fit it all in, including everything unmentioned. When credit cards are used to balance out this category, it tilts its own category. You have to keep it balanced so you don’t go into default, charged late or overdraft fees, or fall into the path of payday loan help.

Use these numbers as your guide. It is important to figure in all costs so there is no room for error. Take the time to plan for larger purchases rather than charging and paying more in the end.

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