Divide your expenses into fixed and variable expenses. Next, subtract your regular bills. Now, if you dont have any consumer debt and love to go shopping, by all means, go knock yourself out with your 7% per month. When it comes to how much you should spend and. The first step in determining the proper take home amount is to determine the tax bracket. Creating a budget actually gives you freedom . Be patient. The 30% rule of thumb for rent recommends spending no more than about one-third of your monthly income on a rent payment each month. It also doesnt explain what to do if there isnt money left over after contributing to debt reduction for savings growth or investing. Below are some guidelines to give you a general idea and a starting point for your budget. One of the smartest money decisions I've ever made is to pursue a debt-free lifestyle. I can afford to go to Macys and drop $50 on a pair of jeans for my son. Our partners compensate us. For example, the median home value in 2022 is $480,275 in New Jersey, but $213,360 in Ohio. If you find discrepancies with your credit score or information from your credit report, please contact TransUnion directly. You can use the above calculator to estimate how much you can borrow based on your salary. Reviewed by Alicia Bodine, Certified Ramsey Solutions Master Financial Coach. If the investment is held for more than 3 years, the gains are taxed at 20% . In these monthly budget planning worksheets, you have to write in every single row and column. He is the author of "The Complete Guide to Trust and Estate Management" from Atlantic Publishing. The first thing to consider when determining the amount of income to devote to average monthly expenses is to determine the tax bracket an individual falls into and from there the take-home pay. According to the 28/36 rule, lenders prefer the back-end ratio to be less than 36%. No matter the income, the percentages still work to assist with living within a persons means. If You Are Paid Weekly: Take your weekly pay and multiply it by the number of weeks in a year: 52. There are six different tax brackets for each federal filing status: 10, 15, 25, 28, 33, and 35. Expenses Differ This is a solid guideline, but it's not one-size-fits-all advice. Youve now burned through a substantial chunk of your income, but its crucial to give yourself room to breathe. Depending upon the need for employment internet and phone bills may also be monthly expenses. And in the long run, paying 30% on rent may be an irresponsible practice. The number of people in the U.S. who spend 50% or more of their income on housing has increased . O matter, you receive a paycheck two times a month or three times a month, you need to pen down these entries. Try tossing all of your receipts in a jar to identify areas where cash is leaking out of your budget, says Steve Sivak, CFP, the managing partner of Innovate Wealth in Pennsylvania. Meaning, what percentage of take-home pay will a person devote to what category. Debt 2. Lenders often use the 28/36 rule as a sign of a healthy DTImeaning you won't spend more than 28% of your gross monthly income on mortgage payments and no more than 36% of . It looks like this: By now it should be obvious that the 50/20/30 rule totals out to 100. And, before we get started, if you are married make sure you share this information with your spouse. Step 1: Add up your monthly bills which may include: Monthly rent or house payment Monthly alimony or child support payments Student, auto, and other monthly loan payments Credit card monthly payments (use the minimum payment) Other debts Note: Expenses like groceries, utilities, gas, and your taxes generally are not included. 20 20% of the take-home pay is what to devote to savings and financial goals. Saving for the future is important, but just like a restrictive diet, trying to hold to a budget that doesnt allow for fun in the moment isnt realistic. Those expenses should be treated separately in your entertainment spending category. The 50/20/30 rule refers to percentages. Learn More. When evaluating offers, please review the financial institutions Terms and Conditions. Get answers about stimulus checks, debt relief, changing travel policies and managing your finances. The 50/20/30 rule also works with any amount of income. Therefore, the best approach may be to pick a plan that you're likely to follow and weigh your success with that plan after a few months. Thats easier than you think if you separate your needs from your wants. That means that your monthly debt should consume less than 36 percent of your monthly income. 2. Here's how to determine what your monthly take-home income is: If You Are Paid Bi-Weekly: Multiply your take-home pay for one paycheck by the number of paychecks in a year: 26. The percentages given are the max amounts a person will contribute to the three categories with the ability to be flexible. If you can keep them even lower than 50%, like, say 40% or 35%, you'll have even more spending money for everything from food to clothing to savings. Your starting amount is your take-home income, after tax and with payroll deductions added back in. These type of expenses are paid month-to-month without changing much in amount. Use this calculation to find out how much each person (in a couple) should pay, evenly distributed according to how much each person earn. "That allows you to set aside $12,000 per . The rule as a whole is flexible, allowing it to suit the individual needs of a person. This category includes your metro, bus, Uber, car payment, parking, insurance, gas, and maintenance. National housing guidelines have contributed to the 30% rule's use as a standard of rental housing affordability. Disclaimer: NerdWallet strives to keep its information accurate and up to date. In the Display tab, choose the Report Date Range as From: 1/1/15 to 11/30/15. For example, look for opportunities to save money at the grocery store. These percentages arent without purpose, they werent chosen arbitrarily. Temporary sacrifices will always be necessary to get ahead, but that is the only way to make a plan for financial success. In that case, drinking coffee at home, DIY manicures, and more scarce visits to the hairstylist would be a wiser choice. Now that weve seen the break down lets go over some pros and cons. Thats why its essential to have a little cash for discretionary expenses. The main bills you should pay first are grocery/food, child care, and essential medicine. You need to make temporary sacrifices for the greater benefit of becoming debt-free and building wealth. This is another spending category that will vary according to income, size of your family, lifestyle, and even your profession. For a $250,000 home, a down payment of 3% is $7,500 and a down payment of 20% is $50,000. Bookmark. The problem is that if you dont have cash in the budget to pay for those, you will not have the money either to pay for the credit card bill in full. Not to get too complicated here, but I also recommend that you keep another separate savings account, also referred to as a sinking fund, for expenses such as vacations, buying a new car, or making renovations or repairs to your home. It will also have a positive impact on your health because you can control what you put in your meals. If you are familiar with Dave Ramsey, you know that he is huge on giving. Continue reading to learn how much income should go to average monthly expenses, how to average out fluctuating bills, and the best way to help build up a savings account. For example, if your monthly household income after taxes is $5,000, then a good goal for your monthly mortgage payment or rent would be $1,250. Split payment (of a bill) according to income. Next choose the report basis of your choice: accrual or cash. Here are some guidelines on setting your budget percentages: Housing: 25-35% Food: 10-15% Insurance, such as life, medical, home or auto: 10-25% Transportation or auto services: 10-15% Savings: 15-20% Entertainment and leisure: 5-10% Health: 5-10% Clothing: 5% Personal expenses: 5-10% Make Your Money Work for You The wants category includes items like your cable, phone and internet bill. That's where the 30% of "want" spending comes in. Examples are rent/mortgage, utilities, groceries, travel to and from work (car payments), and cell phone bills. You can cut back on $12.50 groceries without even feeling like you're cutting back. It may also include money for dinners out at restaurants or shopping for items . While percentages differ based on individual circumstances, 50 percent of one's income is a general figure commonly used toward paying bills. Then divide this number by 12 to get your monthly income. 3-8. Through my blog, podcast, and YouTube channel, I teach high-achieving moms how to live out their best financial futures. It's just $12.50 a week. If you earn $6,000 per month, you should try to keep your utility expenses below $600. For example, if you anticipate receiving $2,000 a month in Social Security and you want to cover at least $3,000 in expenses with a guaranteed income source, you will need an extra $1,000 a month. Now heres the kicker, for the essential monthly expenses and the variable monthly expenses those percentages (50 and 30) are the maximums. 6 And since 42% of companies match dollar-for-dollar 6, that's a benefit you don't want to pass up. Go to Customize Report in the Report menu. You may need more help if you're struggling to pay for basic expenses, like utilities. As a ballpark average, you can afford rent of around $1,200 per month on a $50,000 salary. If you are on a tight budget, you should use your income to purchase groceries. Many people wonder how much of their income they should spend on their home, vehicle, groceries, clothes, etc. Get Started With My Financial Goal Planning Workbook. That may . 20% of $45,000 comes out to only $9,000 a year which a person can contribute to savings, investments or debt reduction. This is calculated by taking your total monthly debt and dividing it by your monthly income. The following spending recommendations are based on your net income, meaning the money that you actually take home after your employer deducts taxes, health care costs, and contributions to your retirement or pension plan. What if instead of making another car payment every month, you invested $500 per month into retirement. After the 10% cut your new grocery budget amount is $450. Jerry Shaw writes for Spice Marketing and LinkBlaze Marketing. Our partners cannot pay us to guarantee favorable reviews of their products or services. We always want fewer dollars going out than coming in, says Amy Irvine, CFP, the founder of Rooted Planning Group. Why spend $50 on a pair of new pants that will be destroyed in ten minutes, when you can pay $5 for the same result. Aim to keep your mortgage payment at or below 28% of your pretax monthly income. I am all about working hard and enjoying all the things, debt-free. Ex: original grocery budget $500 a month. There are those who are absolutely brilliant at saving money, and those who seem to never have enough left over after bills to do anything with. Pay yourself first by setting aside money for an emergency fund and retirement. Click OK. So how do we make money? A poll of 2,000 adults revealed that after . Then Youll Love These 10 Money Management Apps, When Can I Start Doing My Taxes? Whether its due to a relocation to a new city or a jump in the cost of living in your hometown, your spending is guaranteed to fluctuate over time. Consider two scenarios with a monthly debt payment of $1,500 each. The amount of take-home income dedicated to average monthly expenses should not exceed 50%. But remember, the formula cant add up to more than 100%, so youll have to make sacrifices in some areas if youre overspending in others. That leaves 7 percent for activities you enjoy. A $2,000 vacation at a high-interest rate can become a $4,000 nightmare over a couple of years of dragging that credit card debt. You should cover these four necessities first: Now, les also set expectations on what is defined as necessary to live. Let's . The ideal potential tenant or tenants should make $2,700 per month (combined if more than one adult that is applying has an income). $44,446 net income. As the month progresses, keep track of your spending and focus on your bigger goal. Not enough? Transportation costs could account for 18 percent with food costs taking up 15 percent. Taxes, food, and household necessities make up the remaining amount of costs. Housing is the largest average cost at $1,885 per month, making up 34% of . If you are like me and have a closet full of clothes, but nothing to wear, you could probably eliminate spending on clothes completely. Thats a monthly total of $1,125 dedicated to non-essential (fun) expenses. In this example, you should put your upper limit for monthly payments between $1,750 - $1,800 per month. NerdWallet Compare, Inc. NMLS ID# 1617539, NMLS Consumer Access|Licenses and Disclosures, California: California Finance Lender loans arranged pursuant to Department of Financial Protection and Innovation Finance Lenders License #60DBO-74812, Property and Casualty insurance services offered through NerdWallet Insurance Services, Inc. (CA resident license no. When it comes to debt, 20 percent is typical, but that figure includes money for debt and savings combined. Ideally, you'll pay yourself between 10% and 20% of your NET earnings first so your expenses need to be no more than 80% to 90% of NET earnings. Thats how much many people spend on their monthly financing! You could need 30 or 50 percent of your income for bills and debts, more or less. If youre short on funds at the end of each month, revisit your spending habits right away. However, if your debts are $600 a month or more with that income, it goes above 37 percent and you need to readjust your budget planning. But you end up paying a whole lot more on interest! SmartMoney notes that you would have just 20 percent of your salary left to cover expenses if taxes take 25 percent, debts consume another 40 percent and you save 15 percent of your income. Another monthly savings goal is $1,000 per month, says Eric Dostal, a certified financial planner and advisor at Wealthspire Advisors in New York City. As described in a LearnVest article, you should: spend no more than 50% of your take-home pay on fixed costs: your rent or mortgage, utilities, auto loan, and regular monthly subscriptions (e.g., gym memberships, Netflix) use at least 20% for saving money and reaching your financial goals, e.g., reducing credit card debt, saving for retirement . That's about $4,100 a month that you can. You need that money to pay off your debt. A person cant go without these. Monthly that comes out to $1,875 a month for essential expenses. However, your budget will depend on many particular factors, including: For someone with a high salary, for instance, $20,000 per month, spending 15% percent on food might be too much. Its a good idea to keep your debts at the forefront of your planning at this point in your life. Overall, you should try to spend 35-40% of your annual income on housing expenses. As a trained Ramsey Solutions Master Financial Coach I believe these guidelines will help you optimize your finances. See a breakdown of your income and expenses. You can find debt-to-income ratio calculators online. (This ending date should be the last month when all bank and credit card accounts are reconciled.) So instead, you could spread that extra $800 a month . Its important to mention that the food budgeting category does not include expenses for eating at restaurants. Bankrate.com and other financial websites recommend keeping your debt-to-income ratio below 36 percent. The majority of this amount (~25-30%) will be on rent alone You should try to spend no more than 10% of your monthly income on utilities like gas, water, electricity, and internet. For example, you might decide you're willing to pay 25% of your operating budget toward rent. 50 50% or half of the take-home pay is what to devote to fixed monthly expenses. If you are following Dave Ramseys baby steps, which I totally recommend you do, then start by saving $1000 and then tackle your consumer debt. That figure determines how much you can afford to spend on everything from rent to groceries. Again, if you are in debt and have plenty of clothes in the closet but nothing to wear, you dont need to spend any money on clothes. Once you determine your personal ratio, don't stick to it hard and fast. Include in this category expenses such as your manicures, visits to the hairstylist, and your Starbucks fix. To obtain a more realistic picture of how much you have to spend, use your net, or after-tax, income to determine what percentage should go toward your debts. Get into the habit of saving at least 10-15% of your income every month. I am a journalist, financial coach, and working mom on a mission to help people get rid of financial stress to live more joyful lives. A simple 50/30/20 approach is recommended by financial experts because it makes budgeting easier to understand, especially for those who are just getting started. First, estimate your monthly expenses in retirement. You cant spend 30% of your pay on wants if you already have 90% committed to bills and savings. In this budget, you have to include and inject all sources and modes of income and expenses. It'll also make it easier to find ways to stop spending money. As hard-working moms, we should reward ourselves. But promise me that you will do everything in your power to pay off that car as soon as possible. And enjoying all the things, debt-free, is a pillar of my money philosophy. Budget between 5-10% of your income to pay for utilities. Build in room for the wants that are important to you, like spa visits (including tips for your massage therapist). It may be worth looking into refinancing a home to get a lower mortgage payment, the same goes for a car loan. Calculate your monthly mortgage payment; Compare savings accounts; More about this page. Start with the 20% for savings and debt. However, the website asserts that you also have cause for concern if your debts exceed 30 percent of your gross income. you need to be debt-free and have an emergency fund of 3-6 months of expenses saved. If this total shows that your debt consumes more than 36 percent of your monthly income, you have too much debt in comparison to income. Just focus on the necessities first and then enjoy what truly matters to you even more. The rule entails spending 50% of your monthly income on essential expenses such as rent, monthly bills, and groceries, spending 30% on non-essential purchases such as going out to eat, and putting 20% into your savings account. Their total annual combined income is $100,000 ($40,000 + $60,000). Lets break monthly expenses down into three main categories: Fixed costs, Variable costs, and Savings. The average British adult has just 276 of disposable income each month - less than 10 a day, a study has found. Paying off your house sooner than later should also become a goal of yours if youre going to build some serious wealth. As already mentioned the 50/20/30 rule is fairly simple to use and maintain. Ideally, that means your monthly mortgage payment (including principal, interest, taxes, and insurance) shouldn't be more than 28% of your gross monthly income. Then turn to debt. that are important to you, like spa visits (including, Make changes to your spending along the way, The more honest you are about how youre dividing your money, the better off youll be. Lenders usually don't want you to spend more than 31% to 36% of your monthly income on principal, interest, property taxes and insurance. For example, if your monthly household income after taxes is $5,000, then a good goal for your monthly mortgage payment or rent would be $1,250. Filed Under: Blog, Budgeting, Financial Coaching, Podcast. And that's definitely needed. Nobody likes to fill like they just work to pay the bills. Remember, always cover your four priorities: If you are married, make sure to discuss the budget with your spouse. Do this quick calculation and keep reading to figure out what percentage of your income should go to rent. To understand where your money is going and to identify ways to cut back, consider tracking your expenses for a month or two. Here are tips for reducing your monthly expenses. But, if you have children that are growing like weeds, like mine, then, of course, it will be a necessity to allocate some money to keep them from wearing highwaters, especially if they are in high school. Then we did it all over again and replaced my husband beater with a new-used truck. 5 The majority of plans require workers to save 6% or more in order to receive the full employer-matching contribution. So in this example, Person A would contribute 40% toward the $2,000 in joint bills. If you're considering moving and want to know how much house you can afford whether that's buying or rentingthis article can help. These are groceries, rent, and travel to and from work. Three years later, we bought me a used car with 38 miles. What is a good budget breakdown? 20 Common Monthly Expenses to Include in Your Budget 1. Don't wait for retirement to buy things that make you happy. According to data collected from the Bureau of Labor Statistics, the average house payment is $1,159 for a 30-year mortgage. 8 minute read. But, like with everything, there are upsides and downsides. I know, I exaggerate sometimes, but you know what I mean. That falls in line with the average American household spending on housing, which the U.S. Bureau of Labor Statistics reports as 24.96% of gross income. There is nothing wrong with saying no if you dont have the cash to pay for it, regardless of who is inviting you to join the fun. Saving is about creating the right budget for debt to income ratio, living within that budget, and ensuring adherence to the budget. Let it grow so that if you have a medical emergency or an unforeseen expense, you have a cushion there to get you out of trouble. I recommend that you only consider buying a house if you can afford the monthly payment on a 15-year fixed loan. I have to insist because most people spend money on cars, but dont save for emergencies, retirement, or college. The next tier is a debt-to-income ratio of between 15 and 20 percent. Bankrate.com and other financial websites recommend keeping your debt-to-income ratio below 36 percent. Because advice on debt management varies, it's difficult to determine exactly how much of your income should go toward paying debts. Calculate your debt-to-income ratio by adding up your monthly costs for rent or mortgage, loans and minimum credit card payments. One budget plan might set aside 30 percent of your income for housing, such as rent or a mortgage later on. Lets now take a look at breaking down what would be average monthly expenses. If you have a small income, it is especially important to keep track of where every dollar is going. With this formula, you aim to devote 50% of your. Your monthly housing payment is probably one of your most expensive bills. While you pay your car off, try to keep your transportation expenses between 10-15% of your income. 2. The remaining 20 percent would be for savings, retirement fund contributions and any additional payments you want to make to reduce your debts faster. A: Of course, this answer depends on the amount of your loan and your standard monthly payment. There are six different tax brackets for each federal filing status: 10, 15, 25, 28, 33, and 35. You have 30 percent for pleasure, such as cable TV or online services, dining or nightlife, hobbies, sporting events, gym memberships, or other entertainment activities. But when I found out that other people were doing it, and that my car was not going to break when the loan term was over, I decided to keep driving it debt-free. Sticking to a budget, precisely one designed with these percentages in mind, wont be easy. Its important to think about what we can do right now to enjoy life a little bit and then just make it part of the budget, Metzger says. $50 is a good chunk of change at the end of the month, but it isn't a lot over the course of a week. Try the 50/30/20 budget rule for needs, wants and savings instead. According to CNBC, the average person spends about $164.55 per day when accounting for expenses like housing, food, cell phone bills, etc. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Lets take a closer look at the 50/20/30 rule and what it means for breaking up average monthly expenses. Learn what to do when you can't pay your bills. Local Benchmark of Monthly Expenses: Local Benchmark: Your Expenses: Difference: Child Care : Medical : Housing : Food : Transportation : Other : . But lenders can be. A 20% down payment is ideal to lower your monthly payment, avoid private mortgage insurance and increase your affordability. For this category, I am assuming that your employer already drafted the cost of your medical insurance. Anything more is living beyond ones means. Little by little, things can get out of control. Although they are necessities, it's important to be mindful of these expenses and keep them to a minimum. Learn about. So if you earn $3,200 per month before taxes, you should spend about $960 per month on rent. In essence, this is the fun money or mad money as some may call it. This can result in an allocation of all take-home income, but still not result in savings growth or debt reduction. So, unless you have a chronic or medical condition that requires expensive treatment, allocating 5-10% of your income to health expenses is a decent amount. Ten years ago, I didnt have that perspective. Devoting 20% to savings allows for a safety net in times of emergencies. Having extra money will help you achieve other financial goals and improve your quality of life. The more honest you are about how youre dividing your money, the better off youll be. Find out how much you should spend on rent each month. With this formula, you aim to devote 50% of your take-home pay to needs like rent and insurance, 30% to wants like gym memberships and vacations, and 20% to debt repayment and savings. But, until we understand that a vehicle is not an asset and instead, an expensive object that loses value every time we drive it, well not take advantage of the opportunities that driving debt-free can offer to create wealth. So, if you have a 30-year mortgage and your monthly payment is above 25% of your income, you definitely bought too much house. get a raise, switch to a job with a higher salary or take on additional work. When it comes to how much you should spend and save each month, NerdWallet advocates the 50/30/20 budget. Utilities include electricity, landline phones, cell phones, cable TV, satellite TV, water and natural gas. Add savings to the mix, and you'll see the need to spend less than you earn. Using our previous example, if you make $35,000, a debt-to-income ratio of 20 percent means that your monthly debt costs $583.40. All of your money isn't fair game for fun stuff you have to take care of bills and debt first. every dollar of your income should be accounted for in a monthly budget. Cellphone bills are a common monthly expense that can be straightforwardly tracked with a monthly bill. Heres how to do it. . To make your current pay stretch further, find ways to. Answer (1 of 28): Thanks for the A2A, Ashley! This is one of the budgeting categories that many of us struggle with the most. The practice of Smart Spending & Intentional Living has transformed my life. The amount of money you spend upfront to purchase a home. It can leave too much room to poorly categorize the average monthly expenses into the three categories. When it comes to how much you should spend and save each month, NerdWallet advocates the 50/30/20 budget. Copyright 2022 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. Compare the average monthly costs for yourself - and for the children if you'll be receiving support - with the amount of income you expect to receive in spousal and child support after the divorce. Whether you have a high or low income, make sure that you are doing a budget every single month. Various budget plans available online can be used as guidelines, and you can readjust them to fit your needs. $3,073 will be your working number to determine how much you should spend on rent each month. , including getting support and negotiating with service providers. Click "Calculate Total." Then enter your monthly take-home pay and click "Calculate Total." Debt 1. Try to keep your mortgage or rent cost at around 25% of your take-home income. The reason for this is the seemingly impossible task of actually averaging monthly expenses. You include your recurring monthly debt and your gross monthly income to arrive at the debt-to-income ratio. Now that we have defined our necessities lets get into the recommended budget percentages. Make a list of expenses from both of your checkbooks and credit card statements. The recommendation is that you allocate 10-15% of your income for tithes, offerings, and gifts to charity. Try to buy stuff on sale, or even better, go to garage sales and thrift stores. & JUMP-START YOUR JOURNEY TO FINANCIAL FREEDOM! Most home loans require a down payment of at least 3%. If you are in debt, you should not be going out to restaurants. I find Levis jeans at thrift stores all the time, and for less than $3. Its important to think about what we can do right now to enjoy life a little bit and then just make it part of the budget, Metzger says. Read more. These may include your monthly grocery bill, gas for your car, credit card bill and any other costs that are typically variable. Tracking Monthly Expenses: The First Step to Money Success, Free Budget Spreadsheets and Budget Templates, Budget Calendar: What It Is and Why It Matters. Pre-qualified offers are not binding. Model 3 - Amount of Rent and Gross Annual Income This formula is a bit more confusing, but it combines a bit of both prior models to determine if the tenant or tenants can afford the rent. Now that the 50/20/30 rule has been explained and broken down, lets see it in action with actual numbers. Instead, they offer a range of percentages that are appropriate for each spending category. . It is the principle. However, you use your gross, or pre-tax, income to calculate this ratio, which excludes expenses for food, utilities and other necessities. Yet, if average monthly expenses equal more than 50% of total take-home income, then it may be worth looking into exactly what that money is being spent on. Determine a percentage that makes sense with your income, your lifestyle, and your family. It also provides a consistent way to pay down any debt owed. And finally, there is the ability to see exactly how much of the take-home pay will go towards the three categories of monthly expenses. Average monthly expenses are essential expenses that a person cannot live without. These items should be your first priority. Bankrate: Debt-to-Income Ratio Important as Credit Score. Before focusing on spending percentages, we actually need to establish spending priorities. The good news is that assistance is available whether that means having an . Many or all of the products featured here are from our partners who compensate us. 30% of $45,000 is $13,500 a year dedicated to variable expenses. You have only so much money to work with if you stick to spending within your means. Needs come before wants, and your specific spending figures will be based on your income. And finally, for clothing, I am talking about having the appropriate clothes for the season. Ideally, I would like for you not to have a car payment! As a rule of thumb, many landlords set a maximum percentage of 33% of take-home pay. These are the percentages that personal finance expert, Dave Ramsey recommends for your monthly expenses. How exactly does someone average the cost of something such as gas prices, groceries, and heating and power bills that fluctuate. When you are done, then focus on investing 15% of your income for retirement. This can be an issue when the goal is to build the savings account. transportation, I am talking about covering your expenses for a reliable car and gas. Just because a person makes $60,000 a year does not mean they bring home that amount. Some rough guidelines say you'll need about 60% to 80% of your preretirement income. If you make $50,000 per year, your rent should be no more than $1,250 per month using the 30% rule or $1,111 using the of net income rule. Her work has been featured by USA Today and The New York Times. Copyright 2022 Yezmin Thomas Media, LLC, 7 Tips To Improve Your Financial Wellness, The Budget Pad: Organize your Income, Track Expenses & Save Money, Our Family Grocery Expenses For February 2020. I do not consider cable, internet, Disney +, Netflix, etc., as a necessity. 30% allows for fun purchases such as going out to eat, going to the movies, or upgrading an appliance that may not need an upgrade. Pre-qualified offers are not binding. 22% Tax rate. Figuring out the percentage of your income for living expenses starts with your particular financial situation. 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