Remember the rule – start with small goals.  What changes can you make to your budget now and what changes can you make next year?

Let’s start with housing.  A rule of thumb for housing is no more than 30% of your taxable income should go toward housing. Obviously where you live and the cost of living in that city determine that number.  If you live in New York City that percentage will be higher.  If you live in a smaller city it could be less.  It is usually your largest bucket of spending.

You have a lease or a mortgage, so housing costs can’t be changed immediately.  But if you are uncomfortable with what you are spending, investigate how you can reduce your housing expenditure.  Is it as simple as finding a way to reduce your utility expenditures or taking in a roommate or do you need to totally downsize your living arrangement?

Is where you live very important to you or is it a place to sleep and store your stuff or somewhere in the middle?  These questions may help you decide if your housing choice is appropriate for your lifestyle and your budget.

Financial fact:  In 2011, 28% of renters paid more than half of their incomes for housing.  Rising rents and falling incomes are causes. (Bloomberg Businessweek – “Harvard Study Finds:  The Rent is Way Too High”, Peter Coy, December 9, 2013)

Financial fact:  U.S. stocks measured by DJIA were up 27% in 2013.  The S&P 500 was up 30% and Russell 2000 was up 39.5% in 2013.  (WSJ Dec. 31, 2013)