Angelina Jolie & Household Budget

Won’t say Angelina Jolie is expert at budget, especially after hearing that her marriage ceremony with Brad Pitt cost millions, but this caught my eye when she said this in an interview with CNN in 2005-

“Save one-third, live on one-third, and give away one-third.” – Angelina Jolie

Now, I am a huge fan of her for her acting, direction, philanthropy and her works on cancer awareness and my respect towards her grew a bit when I saw this comment of hers on the internet. We all know how spoilt these celebrities are and especially when this week  I saw Rakhi Sawant addressing a press conference with a ceiling fan, calling PM Modi to ban ceiling fans. But here is a gem of a word from a fabulous personality praised, idolised and worshiped by millions across the countries.

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If you analyse her comment, is this kind of budget possible and rational in real life? Maybe not, I agree but yes- ratios may differ but this how money should be spent… in real life. Few people may have crazy income figures that they can give one-third as charity and can live king size life on one-third but the middle class has to balance charity and living. The real take away is:

Living on one-third

Or maybe 40 % or maybe half of your income? It has really become a characteristic of being middle-class to spend 80-90% of income in first 15 days of the month. After 15^th of the month, the vehicle gets petrol bought on the credit card as cash has evaporated and you live on salary to salary basis. “I will plan for retirement next year” or “I will start SIP when I get next increment is how people react”.

It all shows a problem in your monthly budget. You need to learn to live on a fixed budget and should have a contingency fund to cover large and unexpected expenses. You should be aware and able to fix where your monthly budget is leaking. This is key to everything financial in life- to have money in your hand.

Saving the one-third

That’s the best part of your income that a financial planner loves. Saving means similar to “paying yourself” maybe after a few years. We have always advocated that savings should come first before expenses. You should save what is being agreed upon between you and your financial planner and then whatever remains is your budget for expenses. For this, you should have an Automated Savings Plan in place. My personal take is depending on liabilities and professional risks, a rate of 30% plus of savings over a long horizon is healthy.

Charity

I don’t think we Indians need knowledge on Philanthropy. All I can say all religions have prescribed how one should deal with his income when it comes giving away a part of back to the society. Be it anonymous or a loud one, make sure to donate to the needy ones and causes.

So What’s the Ideal Budget

I will just put some real budgets for you, but the best budget is one which you and your financial planner agree with.

Some forms of budgets in real:

• The 50/30/20 Guideline — 50% towards fixed costs, 30% to financial goals (saving/investing/debt payoff), 20% to all other flexible spending (wants, likes, charity, leisure money). This is one of the most popular methods.
• The 50/20/10/10/10 Guideline — 50% towards expenses, 20% to retirement, 10% to long-term savings, 10% to short-term savings, 10% fun money. This is how secure job investors budget mostly.
• The 35/15/10/15/25 Guideline — 35% for housing EMIs, 15% for transportation, 10% for saving, 15% for other debts, 25% for life. A typical metro-living, living in house/flat (recently purchased) budget.

And as per Dave Ramsey’s – The Total Money Makeover:

• Charity: 10-15%
• Savings: 5-10%
• Housing: 25-35%
• Utilities: 5-10%
• Food: 5-15%
• Transportation: 10-15%
• Clothing: 2-7%
• Medical/Health: 5-10%
• Personal: 5-10%
• Recreation: 5-10%
• Debts: 5-10%

And before I end a small story on budgeting:

A man was walking along a deserted beach at sunset.

As he walked, he could see a young boy in the distance and noticed that the boy kept bending down, picking something up and throwing it into the water. Time and again he kept hurling things into the ocean.

As the man approached closer, he was able to see that the boy was picking up starfish that had been washed up on the beach and, one at a time, he was throwing them back into the water.

The man asked the boy what he was doing and he replied,”I am throwing these washed up starfish back into the ocean, or else they will eventually die.”

“But”, said the man, “You can’t possibly save them all, there are thousands on this beach, and this must be happening on hundreds of beaches along the coast. You can’t possibly make a difference.”

Without pause, the boy reaches down, picks up a starfish, and throws it into the ocean. As it hits the water, he says, “I made a difference for that one!”

So, there are a lot of ideas on budgeting and it can be simple or complex as one wants. But final applaud to Angelina Jolie for being a money head. She has a beautiful mind.

Share your comments and stories on budgeting below.