Humberto Cruz

Q: Would you print a sample budget for a married couple? For example, "x" percent of utilities, "x" percent for emergencies, etc. It would be much appreciated and needed.

A: Actually, such sample budget is not needed and could be misleading

It's natural to crave for rules of thumb, such as how much of our money to spend on different categories. But the only person who can make that decision is you. How much you spend and on what -- and how much you save -- needs to reflect your goals, values and priorities, not any preconceived notion or national average.

To see what the typical American spends, you can go to the Bureau of Labor Statistics Web site (www.bls.gov) and click on "Spending and Time Use" on the left-hand side of the screen.

When I did, I was surprised to learn that 5.3 percent of the money Americans spend is for eating out, not far from the 5.9 percent for health care. Does it make sense to spend that much eating out if your income is tight? Couldn't you spend more if you can enjoy it and can afford it? Should you harm your health by spending the national average $317 a year for smoking?

Thankfully, my wife, Georgina, and I don't smoke. A measly 0.6 percent of the money we spent last year was for meals out. But we don't care much for the rich food many restaurants serve (when I worked fulltime, I always packed a lunch from home). By comparison, a whopping 14 percent of the money we spent last year went into the category of "family," including enjoyable visits and vacations with our daughter, son-in-law and two grandchildren. (No such category exists in the Bureau of Labor Statistics' reports.)

My recommendation on budgeting is to cover you needs first -- including savings -- in the most economical way you can. Then use any extra "disposable" income for the things that are important to you and your spouse, regardless of what the "typical" person does.

Q: I've looked at the Fidelity Dynamic Strategies Fund and Fidelity Freedom Fund 2030. These are "funds of funds" that invest in other Fidelity funds. Would I be paying annual expenses to these two funds, as well as to the individual underlying funds?

Yes and no. The Dynamic Strategies Fund charges a management fee of 0.5 percent a year on top of the pro-rata expenses of the Fidelity funds in which it invests. The Fidelity Freedom funds, which are designed for retirement savings, do not charge any annual fees beyond those of the underlying funds.

How can you tell? If you peruse each fund's prospectus -- something all investors should do before they buy -- you'll find the information in the fee table, including any sales charges and annual fees and operating expenses. For funds of funds, the term "acquired fund fees and expenses" refers to those of the underlying funds.

Most funds of funds from no-load firms, including others from Fidelity, do not charge separate fees on top of those of the underlying funds. The Dynamic Strategies fund charges a separate management fee because, in addition to holding other Fidelity funds, its investment strategy includes buying and selling exchange-traded funds "to take advantage of short-term market opportunities," according to the prospectus. That's another reason to read the prospectus. This fund in essence engages in a form of market timing, and you need to know that before choosing to invest.

Available at Amazon.com:

The FairTax Solution: Financial Justice for All Americans

The Ultimate Cheapskate's Road Map to True Riches: A Practical (and Fun) Guide to Enjoying Life More by Spending Less

 

Personal Finance - There Is No 'Typical' Budget

© Humberto Cruz