TODAY   |  July 22, 2013

Investing 101: How to budget for investments

Without a household budget, chances are slim you’ll have enough money left over to invest. TODAY financial editor Jean Chatzky give advice on budgeting so you can get started investing and saving for retirement.

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This content comes from Closed Captioning that was broadcast along with this program.

>>> this morning we're kicking off a five star series, vinest investing 101. we're starting with your household budget . jean is here to get us started and play a game.

>> nice to see you.

>> what about me? am i chopped liver?

>> nice to see you too. nice to meet you.

>> she's star struck .

>> oh, stop it.

>> yes. financial spice right over here.

>> there you go. we need some of that.

>> the most responsible. we all know we should have a household budget but how many of us sit down and do it?

>> only a third actually do it.

>> really?

>> which leaves 2-thirds of people wondering where their money is going and that's a problem. when you don't know, you don't save and your future is a mess.

>> you're not investing.

>> exactly.

>> you've got a little game for us. we're going to break down a typical household budget .

>> this is my budget pie chart . i have five categories. each one goes with the segment of your budget and i want you to start with housing and tell me what slice of your budget should housing represent? you guys can stick that right on there. housing not just your mortgage or rent. it's your taxes, it's your insurance. it's your maintenance. where do you think it goes.

>> that's 25. that's what i was going to say.

>> we're going right there.

>> yeah. okay. let's -- let's talk about transportati transportation.

>> you're not going to tell you. transportati transportation. not just your cars. tolls, maintenance.

>> 15.

>> life. this is everything else.

>> 35 for that one.

>> it's your gifts and it's your --

>> living expenses.

>> food and living expenses, clothing and all of that stuff.

>> other debt repayment. credit cards , student loans , personal loans , where does this one go.

>> what's the other one before -- so we can decide between the two.

>> this one is the big, it's savings.

>> feels like 15 should be savings so let's do that, 10.

>> i think we have done really well.

>> i think so too.

>> you've done -- i'm going to move this little table. sorry to the props guys. you have done fairly well.

>> so housing is actually 35%.

>> is it really?

>> it really is.

>> that feels like a lot.

>> it does but if you're talking about your mortgage payment and all the other cost of living there, taxes get incredibly expenses.

>> do you do this for yourself?

>> i do this. i save all of my receipts. i categorize them in a computer. i know where my money is going.

>> i save receipts but i don't categorize them. that's very, is that ocd.

>> the key is to know where your money is going because especially when it comes to life people get messed up. they don't know how much they're spending on eating out or gifts or other clothing expenses and once you understand where your money is going, then you can make changes about where you want it to go and then the budget starts to fall into line. this is the other one. so other debt repayment, student loans .

>> so we did terribly. we got them all wrong.

>> we got all of them wrong. you just rearranged the whole board. we were crap at that game.

>> i applaud the fact that you wanted to be saving 15%. anybody that can save 15%, that is awesome. most people can't even get to 10%. so get to 10% first. that includes the money that goes into your 401(k) and once you got it saved you can move on and start actually investing it.

>> i don't think you're that serious. i think you let your hair down on a nighttime. because she looks quite proper and all in the financial world but i reckon, those are the people you got to be careful of because they go nuts.

>> with my life budget. i go a little nuts.

>> i think jean and mel b. night on the town.

>> i got a show tomorrow i can't.

>> take your life budges together and go out and see