I'm still here! I'll try to post something every day until the birth so you'll know whether or not it has happened. 
One rule of thumb that gets tossed around a lot on the SavingAdvice forums fascinates me: that generally, a good way to break down where your income should go is 50% to needs, 30% to wants and 20% to long-term savings.
I've also seen it said that extra debt repay beyond the minimums can count toward the savings 20% because it's helping your future.
That's not how I break down my expenses; my categories are Mortgage/Utilities/Telecom, Debt Repayment/Savings, Spending/Entertainment/Travel, and Household/Groceries/Healthcare/Transportation. I like the idea of the simpler needs/wants/savings one even though it breaks things out differently (some of my categories combine wants and needs, such as mortgage payment and Internet access). But I've never gotten around to seeing how this plays out, mainly because my everyday budget calculations are based on take-home U.S. income, not gross of all income. I think you'd need to start with the gross to accurately calculate needs and savings, since some things are taken automatically out of our income and don't show up in the take-home pay.
I've had a slow morning at work (which portends a horrible busy afternoon, unfortunately), so I finally sat down with our paychecks and worked it out. I was worried that needs and wants would be too big and savings/extra debt repay too small.
I was partially right, partially pleasantly surprised. Here's how our budget breaks out:
Needs: 53.37% of gross income
Wants: 22.30% of gross income
Saving/extra debt payment: 24.34% of gross income
So our "needs" category runs a little higher than the ideal, but our "wants" category is much lower and our savings and debt repay is a little higher. So overall, we're doing well.
Of course, our "needs" category is going to get bigger once we start paying for daycare and baby's health insurance. But it will also get smaller as I continue to slowly eliminate debt payments. So in a year or two, I'm hoping the category will get back to this level. The "wants" category I'm comfortable with; I don't feel like we need any more discretionary spending, and I now feel that we're not spending too much in that category when you consider our total income.
Also, if or when we get raises, if we could apply most of it to savings and extra debt repay, that would help our percentages.
In an ideal world, I would like to see the "wants" stay about the same while the "needs" shrink and the "savings" grow. Since we're still in a lot of debt and behind on retirement, I feel we need to keep that category higher than the rule of thumb suggests, at least until I feel we're more caught up.
The next four months are going to look kind of bad as far as the rule of thumb goes: Our reduced income will be taken out of wants and savings, while more will be put into the needs category. I reckon "needs" will grow to about 75% during this period, but I'm not going to make drastic lifestyle changes since I know it's temporary. There's not much we can cut out of "needs" anyway, at least not quickly enough to even out our categories for those four months.
So all in all, that was a fun and fairly encouraging exercise!
Calculating needs/wants/savings percentages
March 3rd, 2010 at 06:01 pm
March 3rd, 2010 at 06:15 pm 1267640151
March 3rd, 2010 at 06:23 pm 1267640608
How do you figure out how much retirement is going to be enough?
I feel so behind the power curve and I am only 33.5 and the hubster is 42.
March 3rd, 2010 at 07:04 pm 1267643054
March 3rd, 2010 at 07:13 pm 1267643600
I think it's hard to separate out some of our "Wants" from "needs," i.e. a second car or a bigger house is arguably portioned out between needs/wants.
By the same token, one of our biggest "wants" is financial security. So I don't particularly feel deprived only having 15% of my income going to "wants." I WANT to put a lot into savings.
Of course, I view my ratios as very temporary - 7 years into having children. The "daycare days" are over this year and life resumes to some normalcy. I look forward to re-checking our ratios once we are both working again. (Now that the daycare factor is gone and we aren't looking at 100% second income to daycare/taxes).
March 3rd, 2010 at 08:05 pm 1267646718
The above rule of thumb illustrates a reasonable amount to spend on various things, but you need to then decide what your reality is and adjust accordingly.