DIY Financial Plan: Step 2
The second step of the financial planning process has been to analyze my cash flow. Advisors recommend aiming for a 50:30:20 ratio. This means that 50% of your after tax income is for living expenses or needs (mortgage, utilities, food, gas, etc), 30% is for working toward your goals (savings and debt payoff), with the last 20% used for fun extras (wants).
I looked at my budget after learning this ratio to see how I was doing and found that I am doing even better (A+) then the recommendation with 37% of my income going toward living expenses, 50% going toward my retirement savings and early mortgage payoff and about 13% going for my fun extras.

By calculating this with my after tax take home income, I am not including my 6% 401K contribution, employer’s 6% 401K match or my maxed out HSA contribution, which means my 50% going toward my goals is actually much higher.
A few ways Mr. Cabbage and I are keep living expenses down:
- Shopping at Aldi for cheaper groceries – it’s about half the price of any other grocery.
- Sense monitoring alerts on our electricity usage, which helps remind us be extra vigilant about turning off lights, a/c, the pool pump and all the things!
- Never having food delivered (delivery fees are crazy) and yes we are lazy but not that lazy.
- No paid TV subscriptions
- Really thinking about incidental purchases before making them
TELL ME: How do you keep your living expenses down so your cash can flow where you need it?
Categories: money, Mortgage, Retirement