The Carr Report: Budget Sculpting

by Damon Carr, For New Pittsburgh Courier

When it comes to your money, you should know where you are, where you’re going, and how you’ll get there. This
all starts with the dreaded B-word, BUDGET. The very mention of the word budget sets off a feeling of
confinement, restriction, limitation and loss of control. I admit there is a sense of confinement, restriction,
and limitation associated with managing money—but it has nothing to do with a budget. What confines, restricts
and limits us is our income! So if you want to spend more, have more, and save more without sacrificing your
lifestyle, you simply need to earn more. A more formal definition of a budget would be a plan for spending,
saving, and investing money. The importance of making a budget and sticking to it is to save for future goals
while meeting present obligations.

Nobody wants to be tied down and confined—especially when it comes to our money. Most of us hold the position
that it’s my money and I’m going to do as I please. You showed up to work, bust your butt and earned it. I’m
with you—do as you please! Just do it on purpose with a plan that includes your needs, goals, desires,
responsibilities, and commitments. Otherwise doing what pleases you today without planning can be the catalyst
for what will destroy you tomorrow—financially speaking.

Now that we have a basic understanding of why a budget is important, how do we know that our budget is
something that needs to be followed or something that needs to be changed? If you’re barely making it month-
to-month or have “too much month left at the end of your money,” the telltale signs are evident—SOMETHING HAS
TO CHANGE. But what is that something? How do you quickly identify the area in your budget that’s causing you
problems? What if the telltale signs are not so apparent? You pay your bills on time each and every month. You
have a few dollars left after the dust settles. Are you moving in the right direction? You manage to get the
numbers to balance, but are you sacrificing your children’s college fund, your retirement plan, your
entertainment and recreational activity or tithing? If you’re currently doing well financially, wouldn’t you
like to do better? A healthy budget recognizes that there are a lot of things we need, want, and desire in
life—all of which have a price tag attached to them. A healthy budget does not limit or restrict you to pursue
the things you desire in life. It simply helps you to understand that money is finite. There’s only so much of
it that will flow through our hands and we have to make the most of it.

I’ve compiled some budget percentage guidelines that will help guide you to ensure that as you spend money and
obligate yourself to payments, you have considered that there are other things you want to do in life that
require money. These budget percentage guidelines will ensure that you’re not overspending or under funding a
particular category.

• Tithing/Charitable Giving—10-15 percent
• Housing—25-35 percent
• Food—5-15 percent
• Utilities—5-10 percent
• Transportation—10-15 percent
• Clothing—3-7 percent
• Savings—5-15 percent
• Medical/Health—2-7 percent
• Insurance—5 percent
• Personal—5-7 percent
• Recreation/Entertainment—5-10 percent
• Child Care/School—5-10 percent
• Debts—5-10 percent

These are guidelines and are not the universal standard. They are flexible and can be manipulated to line up
with your priorities. The important thing to understand as you slice your money pie is that a bigger slice in
one category will require a smaller slice in another category. For example, you can cheat up on the housing
category allocating 40 percent of your income as long as you reduce your transportation category down to 5

Here’s how it works. You want to total the amount of money you bring home in your paycheck each month. We’re
only concerned with our take home pay (net income) since what we take home in our paycheck is the only thing we
can spend. From there you want to look at what you’re currently spending on a particular category. To calculate
the percentage of a specific budget category, all you have to do is divide the amount budgeted for that
category by your net income. For example, let’s assume that your net income is $2,000 per month. Each and
every month you bring home about $2,000. Let’s further assume that your house payment is $900 per month, your
car payment is $450 per month and your debts (personal loans and credit cards) are $300 per month. By dividing
housing payment of $900 into your net income of $2,000 you calculate housing to equal 45 percent of your net
income. By dividing car payment of $450 into your net income of $2,000, you calculate transportation to be 23
percent of your net income. By dividing your debt payment of $300 per month, you calculate debt to be 15
percent of your net income. By comparing these percentages to budget percentage guidelines, you see that
you’re over spending in each category. By adding up the percentages in these categories you’ll see that
housing, car and debt accounts for 83 percent of your net income and you still have to buy food and pay
utilities among other things. This leaves very little if any for tithing, savings, entertainment and other
things you aspire to do with money.

Leave it to me to use an example that paints a grim picture. My example is a close depiction of what’s taking
place in most households. They camouflage their reality by using credit to finance the rest of their lifestyle.
Like money, credit is finite, at some point you’ll max out your credit and be forced to accept the wisdom in
the budget percentage guidelines. I’d rather heed the advice now and begin to sculpt my budget to align with
my priorities, values and goals and get the biggest bang for my buck.

(Damon Carr, Money Coach can be reached @ 412-216-1013 or you can visit his website @

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