Budget

Budget 

How To Create A Budget Using TSL

The new year has just begun, and if you haven’t put together your budget quite yet, it’s time to get started.

  If you aren’t sure where or how to begin, there is an approach that works well with many of my clients that can

 work for you as well.  It’s called the TSL approach: Taxes, Savings Life. The goal is to strive for the following

 percentage breakdown of every dollar you earn:

Taxes = 30% to the fed and state

Taxes take a big bite out of all our paychecks and it’s critical not to overlook them when you’re planning your budget. 

 Be sure that you know how much you really pay in taxes, and this includes all of your taxes: federal and state income

 taxes, FICA, Medicare, capital gains, property, and sales tax. 

Savings = 20% to a 401(k) plan or to pay down debt

Allocating 20% of your income towards savings is a significant number, but if you take into consideration the

 many tax-advantaged ways to save such as a 401(k), 403(b), 457 or a SEP IRA, you can get there a lot of faster than you think

If saving 20% seems overwhelming, just start somewhere and work up to it.  You will get there sooner than you think.

Life = 50% for food, housing, fun and everything else

The remaining 50% of your income that is left (this number may need to be adjusted based on your personal tax situation)

 is truly the money that can be used for discretionary spending.  As long as you’re using TSL correctly, it doesn’t matter exactly

 you use this money. But, if you want to make the most of this money, I suggest using it towards a life of building core pursuits,

 or as I like to call them, "hobbies on steroids."  A study that I conducted last year revealed that the more hobbies people have

, the happier they are in life and in retirement.  So, be sure to spend a chunk of your discretionary money on hobbies that will 

keep you engaged for many years to come. 

TSL guidelines remove the guilt

One of the reasons I like the TSL guidelines is because they take away the guilt factor.  As long as you are hitting your

 numbers, you no longer have to worry about what society deems wasteful.  If you are within your budget, and an Iced

 Vanilla Buttercup Triple Mocha Latte makes you happy- you have a green light to buy it and enjoy it!  Since you are being

 pound-wise, you can afford to be penny-foolish.  You can spend your pennies on whatever you want, as long as you get the big things right. 

Simple TSL worksheet

Fundamentally sound spending and savings habits- TSL- can make you the master of your choices.  Use my TSL guidelines

 and don’t get greedy.  Trust that, if you plan well and save judiciously, that you will have enough to provide for an early and happy 

retirement.  Take the first step today with the simple worksheet below.  First, tabulate your monthly income, including every single dollar you earn:

Salary =                      

Wages =                      

Tips =                      

Rental Income =          

Trust Fund Income =    

Under-the-Table Income = 

Miscellaneous =          

Total income =        ____________

Now, apply the following formula:

Total income X 30% =     ____________   in Taxes

Total income x 20% =     ____________   in Savings

Total income x 50% =     ____________   for Life

The TSL approach is a guilt-free way to spend your discretionary dollars after you have paid your taxes and

 put money into your savings.  If you already have several working years under your belt and haven't applied

 this formula yet, then there’s no time like the present. 

Follow Wes on Twitter, Facebook and at Wesmoss.com 

For valuable financial tools and information on how to set yourself up for a happy retirement, check these out:

Social Security Optimizer, Retirement Calculator, 401k Allocator, Money & Happiness Quiz, Is It Time For An Economic

 Shutdown? and You Can Retire Sooner Than You Think

Disclosure:  This information is provided to you as a resource for informational purposes only.  It is being presented

 without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and 

might not be suitable for all investors.  Past performance is not indicative of future results.  Investing involves risk including

 the possible loss of principal.  This information is not intended to, and should not, form a primary basis for any investment

 decision that you may make. Always consult your own legal, tax or investment advisor before making any

 investment/tax/estate/financial planning considerations or decisions.