Earned More and Kept More?

By Sun

Obvious?

Maybe not, at least according to a Money article I read today. The article showed what a money manager at Vanguard has observed from people participating in Vanguard 401(k) plan:

People with median assets of $200,000 have median income of $69,000, and

People with median assets of $38,000 have median income of $83,000

And what made the difference is people’s spending habits. The income gap between these two groups of people is relatively small, yet the asset sizes are not comparable. Those with higher income tend to spend more than those who stick to their budgets and watch every dollar they spend.

The conclusion: everybody needs a budget to reach his/her financial goal, whether it’s to retire comfortably or save for a house downpayment.

I admit that I did a poor job in budgeting and planing. As of now, I still don’t have a monthly budget and only started to track my expenses since last month, though I invest regularly. Without a expense report, I had no idea exactly how and where we spent the money and definitely there are spendings that can be cut. Since I am now taking the first step in getting organized, it will probably take me a couple of more cycles to get a better picture of our spending habits. Slowly, I will get there.

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