The “Rules of Thumb” in Personal Budgets

Yogi Berra said, “Baseball is ninety percent mental and the other half is physical.”

This begs the question:  How do we mentally reconcile all the disparate and often contradictory financial rules of thumb we hear? 

“We should have 6 months’ worth of expenses in a rainy day fund!  No, make that year.  You should spend 25% of your gross salary on this but 10% of your net on that.”

If you Google financial advice, you will surely come across the rules, but how should they apply to you?

They don’t necessarily have to apply. 

Now, in full disclosure, we say we are a “rules don’t apply to me” kind of guy.

The real problem with budgets and percentages is that they work perfectly in a closed environment like a laboratory. Yet for most everyone, they don’t work so much in an open environment, or what we scientist types like to call real life. Kind of like a lyric of John Lennon’s – “Life is what happens while you are busy making other plans.”  

Go with your gut and experiment for the best ratio!

So what is the proper ratio for you? We recommend you experiment.  Sometimes a ratio could and should vary.  It eventually may average out, but it is not always the same.  At times you may spend like there’s no tomorrow, and other times tighten the belt.  It’s what we call human nature. 

Who should you listen to?  Anyone that resonates with your core values.  Pick and choose, but don’t be afraid to question.  When you hear or read financial advice, you may assume it’s true, but it could be biased with the point of view of a bank or other investment type.

All households are not created equal.  Different starting points, different values.

What should you do then?

The next time you’re trying to find the right percentage for savings, realize that you are not average. If someone has his head in the freezer and his feet on fire, on average, he is comfortable.  Don’t be average!

All sample photos courtesy of