Here it is – this isn’t based off any real numbers and it’s pretty basic as far as figuring out a families needs go, but hopefully this outlines a budget and how it works well enough.
I’m going off of an income of $40,800 gross yearly for this Budgeting How To.
If you’re gross income is $40,800 that boils down to $3,400 a month and $2,550 of that gross monthly income would be take home pay (assuming a 25% tax bracket).
Here’s the math:
$40,800 / 12 (months) = $3,400 X .75 (assuming the 25% tax bracket) = $2,550.
Clear as mud?
NOW. Of that $3,400 gross monthly income you can find out how much you should be paying for your rent/mortgage in order to stay above water. This comes from Dave Ramsey, and I love him, so here it is …
He argues that 26% of your gross monthly income can be used for your entire housing obligation (so if you own a home that would include your taxes and insurance, which can add a couple hundred dollars to your monthly housing costs if you don’t pay attention).
Here’s the math:
$3,400 X .26 = $884 total monthly housing obligation. Not to exceed this number.
Most of us are exceeding this number. Banks in the past would qualify you for a loan regardless of your other debt obligations (speaking of the past 5 years and reason for this housing market) and they’ll qualify you for up to 40% of your TAKE HOME pay.
I’m sure rules have changed as programs have closed, stopped or gone bankrupted from this. And I am not an expert on lending or really have any idea what I’m talking about – so if you do, chirp up.
You guys, we have to be the boss of our money or our money IS GOING TO BE THE BOSS OF US.
Ahem. I may or may not have just had a dose of Dave Ramsey.
So your take home pay is $2,550 and your housing obligations are $884 which leaves you with $1,666 to pay bills, pay down debt if you have some and feed your stomach, possibly a family of stomachs.
Around us we have a BPW, Gas company, Cable and phone company that would be pretty standard for bills. Not entirely sure what it would be by you … some times electric is separate – for us it’s not.
Let’s pretend this fictitious family is normal and has some debt. I’ll assume they spend $400 a month on debt payments, while scraping everything extra together aggressively knocking it out.
And I’m going to round and guess on some of these just for the illustrations sake:
Bills that you might be paying (insert your own numbers/scenario here):
BPW – $120 on budget plan (encompasses trash, electric and water)
Gas – $55 on budget plan
Cable – $100 because they want internet and 149 channels they don’t watch
Phone – $35 for a landline you’re not using
Cell phone – $99 on a family plan with unlimited minutes
Debt – $400
Here’s the math:
$1,666 – ($120+$55+$100+$35+$99+$400) = $857
Now you have to feed and clothe those stomachs we talked about earlier.
For a family you might need anywhere from $300 to $600 to feed them on a monthly basis, depending on size. We’ll go on the lower end of things here because we’re pretending and it’s nice to save money in fantasy land.
Here’s the math:
$857 – $300 (food for month, includes ALL eating out) = $557
Clothing … Pretend budget here sets aside $50 a month for clothes and they save up for shopping trips/needs and new shoes.
$557 – $50 = $507
Now. Here’s where you need to figure out things like insurance (cars, life, health) what are you paying a month or every 6 months. Add it all up so you have a yearly cost … then divide that number by 12. You might see that you need to be setting aside $150 a month JUST for car and life insurance.
Health insurance for a family, unless taken out of the paycheck ahead of time and paid for by a job … can cost a family $350 to $700 a month. Wowza. (and more I’m sure, remember, I’m rounding and using completely hypothetical numbers).
So here’s that math (and we’ll pretend this family has insurance provided by a job – so we’ll subtract an extra $80 from the paycheck … which I’ll do now … to cover those added costs.)
$507 – ($80+$150) = $277
And there you have it. Throw this money at your debt, in a savings account or – like so many of us – don’t do a darn thing about it and watch it leave your wallet without even saying good bye. If you don’t assign it, it’ll assign itself an exit. Most families have a car payment or two as well. Stop it. You are stupid. Buy a car you can pay for in cash and keep saving for the upgrade. You might have to upgrade 7 times before you’re driving a clean looking, yet still used, car that fits all your wants – but until you can afford those wants … cover the basics of Point A to Point B. This is my only rant. Thank you and good night.
In this exercise I’m going to say this family saved $77 – they knew tires were going to be a needed expense in a few months and put the other $200 towards the debt snowball.
***I’m sure I forgot something – but this was just meant to be an exercise in budgeting. I actually love this stuff – numbers and figuring it all out. Although, truth be told, it’s overwhelming to keep track of most of the time. So we, as a family, use a cash system because it works for us. We also tithe as a family – so our budget breakdown looks a little different than this one. Throw me some of your best ideas! How do you do it differently? Got any tips for the novice budgeters? What are you best kept budget-buster secrets? Or how about your VERY BEST money saving tip?