what's affordable?

Michelle Singletary's column in the Washington Post has some useful advice on personal budgets from a non-profit service organization called Money Management International. The piece is It Pays to Do the Math In the Budget Game. Here are some excerpts:

Your rent or mortgage (including insurance and taxes) should be about 27 percent of your income, minus taxes. If yours doesn't fall at exactly 27 percent, don't worry. The range typically is 20 to 35 percent.

What about your transportation costs (gas, insurance, maintenance)? They should be about 8 percent, Money Management tells its clients.

Here is a list of budget allocations MMI recommends, including comfortable or affordable ranges:

· Personal debt (credit cards, personal loans), 14 percent, with a range of 10 to 20 percent.

· Plan to spend about 3 percent for health care, including dental visits, prescriptions and eye care.

· Housing , 27 percent. Range: 20 to 35 percent

· Food , 21 percent. Range: 15 to 30 percent.

· Transportation (including car loan, insurance, gas, etc.), 8 percent. Range: 6 to 20 percent.

· Utilities , 6 percent. Range: 4 to 7 percent.

· Clothing , 4 percent. Range: 3 to 10 percent.

· Miscellaneous (travel, child care, entertainment, gifts), 1 percent. Range: 1 to 4 percent.

· Savings , 7 percent. Range: 5 to 9 percent.

· Insurance (health, life, disability), 6 percent. Range: 4 to 6 percent.

· Personal care , 3 percent. Range: 2 to 4 percent.

· Health (prescriptions, eye care, dental), 3 percent. Range: 2 to 8 percent.

Keep in mind that these percentages and line items are just guidelines. The ranges and categories will depend on a lot of factors, including whether you're married, have children or live in a high-cost area. If 60 percent of your income is spent on housing, transportation and food, you've got to make the remaining 40 percent work by refiguring the percentages.

Using a percentage method to budget helps you remember how much you can spend in any one-expense category and overall. If you budget this way, you will have financial freedom and peace of mind.