How CAN anyone live on a Budget

[BadlandZ]

I'm looking for work right now, and I am looking at various job offers trying to see the actual impact each might have on our lifestyle. So, I tried to work out a budget.

For the life of me, I can't figure out why it just doesn't work out. For example, $46k is median household income in 2005, I'll throw that number into the calculations. Assume a family of 3 has to live on $46k, and all normal reasonable expences exist. It bearly adds up! I'll comment on some I think are way out of line below.

Take 25% out for Social Security, and all the State, Federal, Local taxes.
Then devide it by 12 months, to get the monthly total, $2875/month.

Item Percent Income Dollar Amount
Housing Rent/Mortgage 21.00% $604
Housing Repairs 1.00% $29
Housing Insurance 1.25% $36
Housing Property Tax 1.25% $36
HOA Fees 0.50% $14
Phone (home+mobile) 2.50% $72
Electricity 3.00% $86
Water 1.00% $29
Gas (heat) 2.00% $58
Trash Pickup 0.50% $14
Cable/TV/Internet 2.00% $58
Car Payments 7.00% $201
Car Insurance 6.00% $173
Car Maintenance 2.00% $58
Car Fuel (Gas) 5.00% $144
Groceries 5.00% $144
Student Loan Repayment 6.00% $173
Retirement 15.00% $431
Life Insurance 3.00% $86
Entertainment 1.00% $29
Clothing 0.50% $14
Medical 2.50% $72
Education/Tuition 0.00% $-
Personal Care (Haircuts, etc) 0.50% $14
Gifts Given (Birthdays, Christmas) 0.50% $14
Savings 10.00% $288
$-
100.00% $2,875


$604/month? I honestly don't know anywhere in town a family of 4 could safely live on that, unless it's some little depressed midwest farming town. If your looking for a "safe" neighborhood, not California, not even Arizona or Nevada, I'm sure almost no where on the East Coast.

I don't know how anyone could have 2 working cars for $201/month, and that insurance amount is WAY below what my wife and I have to pay (granted, she's young, but her car is worth like $800 and she just pays liability now!)

We can alternate months we get haircuts I guess... And our parents can pick Christmas, Birthday OR Mothers/Fathers day to get 1 present a year.

No high speed internet AND cable for that price...

Even the utilities seem like really low numbers...

I hardly think this is an outrageous lifestyle, it seems rather modest, but it leaves NO room for error, and it seems like a very very very tight budget. Am I making some mistake, or overlooking something? Is this real? Is this all we can expect?

The savings is high (10%), but making $48k year, the monthly rent still leaves you lliving in a 1 bedroom apartment at $600/month for 5-10 years before you could save up the down payment on a house...

What am I doing wrong?

[PRICEPLUS]

It does get interesting at times trying to make ends meet. It is hard for kids to move out. I think what you'll soon seeis three or more generations under the same roof as back in days of yore. Putting resources together seems to be the solution I think!

[poundwise]

When one's earnings are such so as to make a budget that tight one can definitely see the importance of avoiding debt. Even in the scenario you paint above, imagine the relief if there was no car payment and no student loan.

If I was that person, as is, I would stop the 15% into retirement and probably ditch cable TV until I had those debts paid off. And/or, seek better employment or a second job.

Still, I see your point.

[MonkeyMama]

For one, if you are only living on $45k, you probably don't need to pay 25% into taxes. Can you check your withholdings???

I made that much and took home $3500/month, and it was plenty for a family of 3 in a very high COL area. The difference is we had no debt or car payments. (Paid cash for a nice $1k car).

& we bought a home as soon as possible. IF we hadn't of, we would be hurting. our mortgage is $1300/month for a beautiful home and most people I know are paying more to rent an apartment (plus we have oodles of equity to boot). Plus we get the really nice tax break. which is probably a big part of the problem. You aren't getting the tax break so maybe you do have to pay in 25% for taxes.

That is just my overall advice how to get by on less.

Putting away $700/month is pretty aggressive. I agree - pay off the debts! IT makes things SO much easier. Then save aggressively for a home, even if it means a 2nd job. THen you will be able to stretch your money much further...

[BadlandZ]

There are a couple mentions of “pay off your debts.” But the only debt is a single student loan, one of the lowest interest loans going. I actually (mistakenly?) thought not having any credit card or other revolving debt was already a fairly good start.

The only other thing considered debt, $201 a month for TWO cars, isn't going to go away with a paid off. Cars don’t last forever. Even with paid off cars, that money would have to go into a "car fund" because it would be a couple years to save enough to buy completely modest used reasonably reliable vehicles.

About taxes, 25% was taken as a grand total of all withholdings, for federal, state, and local taxes, plus social security, disability, and all other withholdings. What would be a reasonable number?

I’ve spent a lot of time moving numbers around on a spreadsheet now, and honestly, it’s hard to find any percentages to change that would significantly improve other areas of life. My wife and have been looking at it for a while now, and it’s depressing no matter what numbers we put in.

I’d honestly like to see a budget with percentages and details like this for someone who earns $30k to $40k a year. How do they survive?

I’m not trying to be rude, I’m just trying to figure it out. And elsewhere there is advice that one should have an “Emergency Fund” of ~6 months pay, at this savings rate, that will take over 5 years.

[poundwise]

Originally Posted by BadlandZ

There are a couple mentions of “pay off your debts.” But the only debt is a single student loan, one of the lowest interest loans going.

You are correct that not having carrying credit card balances or other lines of credit is a good position.

And, you are also correct that even without a car payment you would need to be saving money for when it came time to replace a car otherwise you would then have a car payment. However, most people perpetually have a vehicle loan and loan payments. Though the term is five or six years, people seem to hardly ever be rid of a payment. If you pay cash for a car, you can set aside money for five years for the next one and then continue to drive the current car for several years after that. During that time, you do not have a car payment, you do not have to continue to put back money for the next car, and you can earn interest on the money saved. Either that, or knowing these things to be true, you can continually put back money at a lower level per month, each month.

As for the student loan, there is where I strongly differ with your approach. You point out that the loan is a low interest loan so, in essence, what's the big deal. The point is, the listing you give above shows a problem that it is not really a debt and interest problem, it is a monthly cash-flow problem. And, the loan is costing/using $173 month that, if paid off, would certainly be a nice addition to another category or two.

Just because a loan is low interest doesn't mean you should keep it around. I know people who will say that they are earning more by putting money into a money market instead of paying down the loan, and they are almost certainly right, however, there is some peace of mind in knowing that you only need x amount each month for your bills and debts and the more debt is gone the less x is. In the case you outline above, the more money freed up, the better.

[creditcardfree]

Well, at one time we did live on less than 40K...maybe around 36K about 3 years ago. We did not have cell phones, cable tv (never have had it), we saved only 6% in a 401k, our auto insurance was less ($1000 deductible), no extra for savings or giving. Our grocery bill and house payment were higher.

I'd say the net you describe was about right for us as well...includes health insurance coming out of the gross. We have always had a couple thousand dollars in our savings account. I was always looking for things to sell, rebates, cashing in our coins, saving gift money and OT money for the stuff that one doesn't alway predict. I bought most of the kids clothes at goodwill or consignment stores.

As far as the EF being 6 months pay...I would first strive for 3 months of expenses. The truth of the matter is, it can be very difficult to move ahead at this level of income. One way to get ahead is to increase your income over time, by finding another line of work, or a way to get promoted or get a 2nd job to get the EF funded.

Sorry I don't have a budget to give you. Great thread!!

[poundwise]

Originally Posted by creditcardfree

Well, at one time we did live on less than 40K...maybe around 36K about 3 years ago. We did not have cell phones, cable tv (never have had it), we saved only 6% in a 401k, our auto insurance was less ($1000 deductible), no extra for savings or giving. Our grocery bill and house payment were higher.

I'd say the net you describe was about right for us as well...includes health insurance coming out of the gross. We have always had a couple thousand dollars in our savings account. I was always looking for things to sell, rebates, cashing in our coins, saving gift money and OT money for the stuff that one doesn't alway predict. I bought most of the kids clothes at goodwill or consignment stores.

As far as the EF being 6 months pay...I would first strive for 3 months of expenses. The truth of the matter is, it can be very difficult to move ahead at this level of income. One way to get ahead is to increase your income over time, by finding another line of work, or a way to get promoted or get a 2nd job to get the EF funded.

Sorry I don't have a budget to give you. Great thread!!

Good points. :

[living_in_oz]

$604/month? I honestly don't know anywhere in town a family of 4 could safely live on that, unless it's some little depressed midwest farming town. If your looking for a "safe" neighborhood, not California, not even Arizona or Nevada, I'm sure almost no where on the East Coast.

LOLOLOL! I'm rolling on the floor! I live very nicely on a very similar budget but I guess I live in one of those "little depressed midwest farming towns" so what would a hillbilly like ME know???????????????

Oh, I know! I live in very safe community where I can actually send my children to a safe and GOOD public school. I also know that the COL is low so I can afford a modest quality home without paying half a million for it! I also know that I live within the midst of many good, honest, hard workers that don't care so much about what kind of car the Joneses drive.

Hmmmm. I guess I DO know a few things, even though I live in a little depressed midwest farming town

Stepping down off of my soapbox now....

[PrincessPerky]

Making less thatn 30K last year in the middle of charlotte I can tell you it is perfectly possible.....(for a family of 5)

This year life is easier, nice raise (bout 40K expected this year)

anyway how..bills (house payment, utilities, car payment/insurance) comes to 1500, yep that was it, the rest is food gas and fun...

As for the exact numbers, well quick glance, gas costs less...we don't go out much (can't afford it anyway .) matenence is less...newish car, no matenence really needed..except for oil, and levels of other stuff...which we change/ect. ourselves. Insurance is also less, I don't drive, so I have no insurance, just him, and it is 400 twice a year.

housing is more, though the insurance is tied in with car...good record helps. PMI is not it is tied with payment...we really need to work on that.

also retirement is less, sorry. no life insurance, yeah we know, sorry.

trash is zero, local recylce center/shared trash. hair is zero, I do our own if I do it....yeah well, we get rave reviews so I don't worry to much. electric is less, we just use less than average. gas is less, water is less than your number. internet is a bit less (no cable) we would drop it if we had to. Clothing is zero, if we need something we ask for it for a christmas present..but in general we have all we need, and then some (whoever has two coats let him give one to someone in need or something like that) Phone was less, but this year we have two phones (and used them in a recent emergency)

food on the other hand is more than your total, we spend the remaining 500 on it every month (well food and gifts and such)

Anyway, you would be amazed at what you can do if you need to, and we need to do some, other things..like not flushing, we don't do. And most of the time we remember to praise God that we don't have to! lable em luxuries....take pleasure where you can, and realize you don't need most of what you want.

oh yeah, no student loan, paid off his and I never had one.

[LuxLiving]

We live fairly well on a VERY modest income. Have a nice home, it's about 1/2 of your payment and it sits in a nice community about 10 minutes from a major metro area. Go figure. Must be the cost of living in your area OR could it be that your expectations are too high for the income received? I'm just saying/wondering??

Safe is also a slightly subjective thing. All 'those people' who are living elsewhere in your town are they not still alive and kicking? Unsafe how? I'm sure there are some high crime areas around but surely the only safe places can't come at a premium????

I'd like to live a higher level lifestyle too, but our income doesn't allow some things, but still there are luxuries that could still be cut if needed OR if I want more I could go out and work and/or figure ways to earn more money. It's all about each of our priorities I guess. Not sure how you think the rest of us 'po folks are making it???

We make sacrificies, we save up, we do without, we repurpose items, we trade, we barter, we shop smart, we work harder and some things just aren't worth it.

We don't mall crawl, we don't do full price movies, we don't eat out often or do the drive thru very often. My kids weren't in thousands of activities and we don't do department store clothes.

I don't know how everyone else does it, that's just how we do it at my place.

[disneysteve]

Originally Posted by BadlandZ

Retirement 15.00% $431
Savings 10.00% $288

What am I doing wrong?

I think there are very few people in any income range who are saving 25% of their income. Certainly, folks earning 46K probably aren't. Knock the total savings down to 15%. Take the other $288 and put it toward debt repayment - first the car loan, then the student loan. Once those are paid off, you can put that money into savings for the next car or for emergencies.

[BadlandZ]

Originally Posted by living_in_oz

LOLOLOL! I'm rolling on the floor! I live very nicely on a very similar budget but I guess I live in one of those "little depressed midwest farming towns" so what would a hillbilly like ME know???????????????

First of all, I’m sorry you feel insulted. That is not the intent.

I think you missed the point, and made a joke out of it. Some jobs don't exist in those towns (mine for example), and so they aren't something possible without a significant career change.

Not everyone is up for small town life. Not everyone can find work in a small town. And, if you can't, or won't, that is not enough money to pay for a small apartment.

I didn't make a dig at small towns; I said they, along with tiny apartments, were the only options. Neither work for me, because my background tends to be focused (high-tech, big company, science based), and I have no marketable skills in a small town. Yet, can't afford a place where I can get a job.

We have been trying to figure out the apartment thing, but we have 4 pets. I've had my oldest dog since 1995, and the rest seemed to be "left with me" by ex's. I know it's not budget friendly, but it's a very very difficult thing to part with after 11 years, they are a part of the family.

Adding a much reduced employment outlook, a probably pay cut, and a few thousand dollars of relocation expenses in order to consider a smaller Midwestern town do not seem to make working out this budget any easier to me.

[BadlandZ]

Originally Posted by LuxLiving

We live fairly well on a VERY modest income. Have a nice home, it's about 1/2 of your payment and it sits in a nice community about 10 minutes from a major metro area. Go figure. Must be the cost of living in your area OR could it be that your expectations are too high for the income received? I'm just saying/wondering??

Maybe. I will consider options like this, I am not aware of any. Where are these places you can still buy "a very nice home" for $300/month, no down payment, "in a nice community about 10 minutes from a major metro area."

If the exist, I really would like to know, because I will look for work there!

[BadlandZ]

Just to put this in perspective… So you know WHY I’m trying to figure this out, I’ll fill you in on some details.

I had a very nasty divorce, and the judge felt I would be ok with the house and the debts. Now have over $520k in debts. Before you start to lecture, BEFORE the divorce, I had a house that appraised for $418k, my only debt was a $230k mortgage and a $25k student loan. All the debt came about by way of my ex-wife, lawyers, and the judge during the divorce.

The only real asset was my house, which has been on the market now for over a year, and after numerous price reductions is down to $350k, and still hasn’t sold. 401k’s, savings, everything GONE to fund what my lawyer of 20 years experience called the nastiest divorce on my wife’s part, and strangest rulings by the judge she had seen.

Add to that, I lost my job 6 months ago.

Regardless, all part of the past now, I have no choice but to start over. And, after trying to avoid it for a year, I’m going through a bankruptcy.

First off, I’m pushing 40, no retirement savings. I know 15% seems a lot to people in their 20’s, but in reality even that won’t get me back to anywhere near where I use to be.

Next, no savings, and no credit. No deposit for rent, no down payment for a house, no backup or rainy day savings. The car is a lease, no equity, a payment for another 18 months. So, putting 10% away for savings might not be enough, knowing I’ll need a car in 18 months, and my wife’s car might not last another 6 months, and we will have to move SOMEWHERE and put down a deposit.

So, at my age, unemployed, starting from zero, I’m looking at the percentages in this budget with a very serious eye. I have no choices here, and I don’t see much flexibility. Simple things, cutting phone and internet, will significantly impact job searching.

I’m trying to make these add up, and it really doesn’t seem to add up well. If there is anyone else who can put up honest percentages of budget spent who lives on a $30k to $45k income, I’d LOVE to see it. I know it happens, someone is living on $30k, which would seem to me to say living on $45k should be easy?

[disneysteve]

Originally Posted by BadlandZ

Life Insurance 3.00% $86

This is way too high. I don't know how old you are, but I just checked and a 30 year old non-smoker can get a $400,000 20-year term policy for under $20/month. That would be over 8 times income (8-10 is the usual rule of thumb).

[greedy4chips]

why 2 car payments if you are divorced?

$144 in gas is 60+ gallons of gas per month...you do alot of driving if you have a decent gas mileage car.

This post hits home with me and the wife because I am looking at getting a job for $35k and we have 3 kids, $1470 mortgage, cable, cell, etc and we are wondering if we can make it on my income alone (along with both of us donating plasma for $500/month and my website earnings of approx $700/month) = a total of $50k

so your numbers are close to ours except we have no car payments.

[LuxLiving]

badlandz - it does sound as if you've suffered a hard hit.

Try:
http://www.forbes.com/2005/10/31/kar...1liverich.html

[sarah]

I live on close to 46K a year and I can make it. It is sometiimes hard with the mortgage but I know many peopple who live on less.

[BadlandZ]

Originally Posted by greedy4chips

why 2 car payments if you are divorced?

Remarried. 2006 Jetta Value Addition, $225/month lease, 18 months to go. 1992 Subaru Impreza w/ extensive body damage (worth about $500?) still running, but is getting to need maintenance pretty regularly.

Originally Posted by greedy4chips

$144 in gas is 60+ gallons of gas per month...you do alot of driving if you have a decent gas mileage car.

Sadly, we're probably looking at ~5000 miles a month right now, counting both cars and job interviews and trips to banks and lawyers. We live just outside of town, so everything is a 15+ mile trip each way. We are working on cutting back on that, combining trips, car pooling.