Good Advice to Keep Debt in Check..

[13inOR]

Jean Chatzky had some good advice on how much debt a person should have as compared to their income and I found it interesting and helpful. For those of us who are coming out of BK and determined to do things differently now, its a good monitor.
She shows a pie chart type graph of how much of your monthly
income should go where, and this is TAKE HOME, not gross. The following should be no more than the percentages given for each category,according to her.

Housing (including payment and maintenance) 35%
Transportation (payments AND gas) 15%
Other (utilities,groceries, anything excluding the above 2 or cc debt) 25%
Debt (credit cards, student loans or debt thats not cars or home) 15%
Save 10%

According to her, following this guideline will keep you in check, avoid getting more debt than you can easily pay, and can build future wealth if you invest those savings in something.
Anyhow, I thought it was interesting and it does make a lot of sense. I think we will use this as a guideline before deciding on any purchases that arent cash. It seems pretty logical really.

[JeepMom]

She counts 401K as savings, we do not.

To me 401K is insvestments, different than savings. Saving to me is "oh no, the stove quit working and we need a new one" type of thing.

[13inOR]

I think what she advised one couple was investing half of their savings or something like that. But I totally agree with you, part of the key to staying afloat is having an emergency cushion for things like breakdowns and repairs,
doing so will prevent going in unecessary debt.
The main point was at least 10% needs to be in some sort of a savings, whether its investment or not.

[conan55]

She counts 401K as savings, we do not.

To me 401K is insvestments, different than savings. Saving to me is "oh no, the stove quit working and we need a new one" type of thing.

How can you not count 401k's as savings? What are you going to do if Social Security stops working? The best advice I've heard is to save for the present and future, 3 months liquid cash for emergencies, and IRA's, Roths, and 401k's for the future.

What I did/do is: I increased my withholdings to 10, I then increased my percentage into my employers 401k plan. The pre tax savings of the extra withholding money offsets what I would have to pay Uncle Sam at the end of the year on the additional withholding allowance.

There is also a withholding calculator at the IRS's website that you can use to estimate your tax liability at the end of the year.

I'm 4 months out of a 36 month Chapter 13, I'm still living like I'm broke, maybe because I got used to it. But I don't ever want to be broke again so I'll invest/save in a 401k for the future and my children.

[JeepMom]

You missed the point. We put 7%(Employer matches 7%) into the 401K, that's retirement-Long term savings. Not savings-short term.

When I do my budget it's after taxes/401K are taken out. I still put in over the % she recomends. Jean includes your 401K contribution as income, puts it into the budget then takes it out of the budget as savings. In my book you're not saving for the short term then.

[SinkingFast]

I would tend to agree with JeepMom's line of thinking here.

401K is taken out pre-tax, before you ever get paid. That money is for your retirement years. I would never again touch 401K monies. We did in the past and have nothing to show for it.

Also, the new Soc Sec statements we recently got say that SSI will probably only pay out at 75% of the amounts listed for normal retirement age. So if your Statement says you should get $1K/mo benefit at normal retirement, figure you'll actually see $750 IF SSI can stay solvent.

I think of savings as money set aside, in a savings acct, Money Market acct, CD, whatever. Something you can tap if the car breaks down, the roof needs fixed, or the fridge goes out. You shouldn't be running to borrow or withdraw from your 401K savings for those types of expenses. Same thing for a downpayment on a car or house. Save post tax dollars for those things as well.

[Gastylin]

Oprah's debt diet

Jean Chatzky had some good advice on how much debt a person should have as compared to their income and I found it interesting and helpful. For those of us who are coming out of BK and determined to do things differently now, its a good monitor.
She shows a pie chart type graph of how much of your monthly
income should go where, and this is TAKE HOME, not gross. The following should be no more than the percentages given for each category,according to her.

Housing (including payment and maintenance) 35%
Transportation (payments AND gas) 15%
Other (utilities,groceries, anything excluding the above 2 or cc debt) 25%
Debt (credit cards, student loans or debt thats not cars or home) 15%
Save 10%

According to her, following this guideline will keep you in check, avoid getting more debt than you can easily pay, and can build future wealth if you invest those savings in something.
Anyhow, I thought it was interesting and it does make a lot of sense. I think we will use this as a guideline before deciding on any purchases that arent cash. It seems pretty logical really.

This was a key component to the Oprah's Debt Diet shows (sort of funny writing "Oprah" and "Debt" in the same sentence- almost tickles! )

I've had it in mind and I'm in the transition back to dry land so between that concept, the envelopes and Quicken, I will finally get it together!~

[debtisbad]

Sinking,

I just got the same letter from social security. Almost sounds like they know it is going away. Scares me to death for the future!

[SinkingFast]

Sinking,

I just got the same letter from social security. Almost sounds like they know it is going away. Scares me to death for the future!

If they are saying 75% now, I wonder if there will even be 50% when we get there??!!

[Minnymouth]

Yep, I'm afraid there will be a lot of baby boomers that won't be retiring soon also........ won't be able to live....

Many that planned well, had big 401k plans, etc are finding themselves in financial stress due to illness, etc....

Many have had to file bankruptcy due to job loss, medical bills, etc.....

Now their so-called-retirement...... is slowly going down the tubes...

Those that have depended on just social security being there, are going to be shocked that they can't live.....on just that....

They will be dipping into their equity of their homes, just to make ends meet and when all that fails...... they too will be in a situation of having possibly to file bankruptcy.....

One thing is for sure - you come into this world with NOTHING - and you take NOTHING out of it with you...... You just hope you don't leave a MESS for your family to clean up.....

Times are changing, changing quickly....... and I don't believe they are for the good of mankind...

The young are the IN-THING and the old are shoved aside to try to make it on their own..... but the young FAIL TO REALIZE......they too will be old someday..... Hope their situation improves better than ours..... (but I doubt it) By then I would say when a older person becomes "useless to society" they will be done away with..... just like animals are....

My thoughts.....

[NASCAR20FAN]

How can you not count 401k's as savings? What are you going to do if Social Security stops working? The best advice I've heard is to save for the present and future, 3 months liquid cash for emergencies, and IRA's, Roths, and 401k's for the future.

What I did/do is: I increased my withholdings to 10, I then increased my percentage into my employers 401k plan. The pre tax savings of the extra withholding money offsets what I would have to pay Uncle Sam at the end of the year on the additional withholding allowance.

There is also a withholding calculator at the IRS's website that you can use to estimate your tax liability at the end of the year.

I'm 4 months out of a 36 month Chapter 13, I'm still living like I'm broke, maybe because I got used to it. But I don't ever want to be broke again so I'll invest/save in a 401k for the future and my children.

Jeep Mom is correct 401k are not savings. If they were "Savings" you would have a hard time keeping them out of BK. They are investments! Your 401k is for your retirement nothing else.

[Grace]

Yep, I'm afraid there will be a lot of baby boomers that won't be retiring soon also........ won't be able to live....

Many that planned well, had big 401k plans, etc are finding themselves in financial stress due to illness, etc....

Many have had to file bankruptcy due to job loss, medical bills, etc.....

Now their so-called-retirement...... is slowly going down the tubes...

Those that have depended on just social security being there, are going to be shocked that they can't live.....on just that....

They will be dipping into their equity of their homes, just to make ends meet and when all that fails...... they too will be in a situation of having possibly to file bankruptcy.....

One thing is for sure - you come into this world with NOTHING - and you take NOTHING out of it with you...... You just hope you don't leave a MESS for your family to clean up.....

Times are changing, changing quickly....... and I don't believe they are for the good of mankind...

The young are the IN-THING and the old are shoved aside to try to make it on their own..... but the young FAIL TO REALIZE......they too will be old someday..... Hope their situation improves better than ours..... (but I doubt it) By then I would say when a older person becomes "useless to society" they will be done away with..... just like animals are....

My thoughts.....

Holy cow! What doom and gloom. I don't think the situation is all roses, but I don't think it's that bad. Why would people who planned be in trouble? Did I just read that wrong?

From what I understand, baby boomers will be getting social security. Nothing much changed there. It's the next generation that has to plan on not getting anything. I'm a child of baby boomers, and I don't figure much social security into my planning.

If you don't want to leave a mess behind for family, you need life insurance. I read somewhere that the average funeral costs $10,000. I've heard people say they just want to be cremated or put in a plain pine box, but for those who have attended funerals of very dear loved ones, you know that the funeral isn't about the one who passed. It's about the living. The ones left behind need comfort, friends, closure (somewhat of a myth).

As for getting rid of the "old", that definitely doesn't apply to me. I love my grandmother. She's wise, funny, smart, and I love spending time with her.