Budget

[baking23]

I'm completely counting my chickens before they're hatched but I wanted to see what people here could advise.

I have an interview tomorrow for a job that pre-tax could net me approx 31,500/yr. If I did my math right, it's 15.17/hr. It would be full-time with great benefits so I figure what I loose to taxes will be more than made up for with my dr's. appoitments (I have a lot) and copay prices. Anythings better than full-price for BC every month.

So if it ends up being 26,000 after taxes, I think?, how could I bugdet that?

I downloaded and saved to my computer a lower-income budget that lists housing 35%, Medical 8%, etc...I think it was from the Color of Money, at the Washington Post, but I"m not sure.

What are the percentages that you all use?

[jIM_Ohio]

If you have "high" medical expenses, I don't think any "cookie cutter" budget will work. Each person has different expenses.

My wife insists on getting her hair colored (to hide her gray at 33)... where as some other women might suggest that is a waste of money.

I like having the sports packages on the satellite dish... but again others could consider that a waste of money.

I don't go out much for dinner or movies. To others that might be real important. Budgets are not one size fits all.

31500 is barely in 25% tax bracket. 2007 tax tables suggest that tax for you will be $4386 for federal. State taxes might be added to this. Plus FICA and Medicare need to be taken out of this.

[baking23]

Originally Posted by jIM_Ohio

31500 is barely in 25% tax bracket. 2007 tax tables suggest that tax for you will be $4386 for federal. State taxes might be added to this. Plus FICA and Medicare need to be taken out of this.

I understand most of what you're saying, this last sentance confused me a bit. Could you please explain it better? You are talking about how much approximate federal tax would be removed from my net pay, correct?

What does 25% bracket mean?

[Diolla]

31500 is barely in 25% tax bracket. 2007 tax tables suggest that tax for you will be $4386 for federal. State taxes might be added to this. Plus FICA and Medicare need to be taken out of this.

In most people's language "Gross Pay" is the total amount you get paid and "Net pay" is the amount you bring home.

Jim was saying-If your Gross is $31500 then the federal income tax on it would be $4386 according to the tax tables leaving you $27114 there would also be Social Security (FICA) and medicare taxes taken out (I forget the percentage) and state taxes if you are in a state that has income tax.

After taxes you would have your "Net Pay" which is what you would budget on. When budgeting it is usually best to take your 'fixed' (unchanging) expenses first (rent, car payment etc) then your necessary expenses (food, heat, gasoline) then divide the rest into non-essentials according to what is important to you. Don't forget to budget some savings for an emergency fund and/or retirement savings.

Clear as mud?

[LuxLiving]

Also don't forget that you can contribute to your 401-K BEFORE taxes if one were offered. I haven't read all your posts, how many people would you be supporting on this income? Do you rent? or own already?

What's the COL in your area look like?

Depending on those other taxes, HSA amounts, 401-K contributions, etc. you might choose to make you'd probably bring home something in the 1750-2200.00 range a month.

[MonkeyMama]

$26k sounds about right when you factor state and social security and all that.

paycheckcity.com has a good calculator for figuring out your pay after taxes (based on your state and withholdings).

I just had to jump in because only about $23k of that will be taxable to fed(after standard deduction and exemption) and assuming you are single the 15% tax bracket goes to about $31k. So you could make quite a bit more (like $40k) and still be in/close to 15% bracket.

[jIM_Ohio]

Originally Posted by baking23

What does 25% bracket mean?

The USA used a graduated tax system.

For every person which pays taxes on earned income the following is usually true:

single:

income between 0 and $7825 is taxed at 10% (total tax would be $782.50)
income between 7825 and 31850 is taxed at 15%. The tax in this range is 31850-7825=$3603. 3603.75+782.50=4386.25
income between 31850 and 77100 is taxed at 25%. The tax in this range is 77100-31850=11312.50+4386.25=15699.

there are additional brackets which tax at 28%, 33% and 35%. Graduated means not all income for a person is taxed at same rate.

for example, a person making 40k

pays 10% tax on first 7825 ($782.50)
pays 15% tax on income between 31850 and 7825 ($3603.75)
pays 25% tax on income over 31850 (40000-31850=8150*25%=$2037.50

their total tax bill is 782.50+3603.75+2037.50=6423.75.

Their "effective" tax rate is 6423.75/40000=16%

This does not include deductions or other tax related issues.

[baking23]

Originally Posted by Diolla

Clear as mud?

LOL! Of course, thanks for spelling that out for me. I am confusing Gross and Net pay, never very helpful. thanks!

[baking23]

Originally Posted by LuxLiving

Also don't forget that you can contribute to your 401-K BEFORE taxes if one were offered. I haven't read all your posts, how many people would you be supporting on this income? Do you rent? or own already?

What's the COL in your area look like?

Depending on those other taxes, HSA amounts, 401-K contributions, etc. you might choose to make you'd probably bring home something in the 1750-2200.00 range a month.

I'm single, no dependants, and I'll be moving four hours south of here. The cost of living seems to be less, depending on where I go. I'll probably rent first, but I'd almost rather buy so my money can go into equity instead of just rent. However who knows how long I'll be there so maybe it's smarter to rent.

I do rent now, still living at home with parents, I have no debt, no car payments. I started a Roth IRA last year, maxed it out, and have another 4 grand into a money market mutal fund for this year.

[baking23]

Originally Posted by MonkeyMama

$23k of that will be taxable to fed(after standard deduction and exemption) and assuming you are single the 15% tax bracket goes to about $31k. So you could make quite a bit more (like $40k) and still be in/close to 15% bracket.

That is interesting to know. I know I'm planning on working a second job, probably not a taxable one, but don't know how much it'll make. Maybe tutoring on the weekends or something.

Right now my only figures to worry about are rent, cell phone, CC, I have no debt. Lunch would be provided at work for five days a week. I'm fairly flexable and I don't buy a lot of things (except food). So here's the table I'd been using for three different levels of income 1500, 2000, 2500 on a monthly basis:

Housing 35% $525 $700 $875
Utilities 8% $120 $160 $200
Food 10% $150 $200 $250
Transport 15% $225 $300 $375
Clothing 4% $60 $80 $100
Personal 5% $75 $100 $125
Savings 5% $75 $100 $125
Debt 10% $150 $200 $250
Subtotal $1,380 $1,840 $2,300
Medical 8% $120 $160 $200
Total 100% $1,500 $2,000 $2,500

[baking23]

Originally Posted by jIM_Ohio

The USA used a graduated tax system.

That makes a lot more sense, thank you.

[jIM_Ohio]

Originally Posted by baking23

That is interesting to know. I know I'm planning on working a second job, probably not a taxable one, but don't know how much it'll make. Maybe tutoring on the weekends or something.

Right now my only figures to worry about are rent, cell phone, CC, I have no debt. Lunch would be provided at work for five days a week. I'm fairly flexable and I don't buy a lot of things (except food). So here's the table I'd been using for three different levels of income 1500, 2000, 2500 on a monthly basis:

Housing 35% $525 $700 $875
Utilities 8% $120 $160 $200
Food 10% $150 $200 $250
Transport 15% $225 $300 $375
Clothing 4% $60 $80 $100
Personal 5% $75 $100 $125
Savings 5% $75 $100 $125
Debt 10% $150 $200 $250
Subtotal $1,380 $1,840 $2,300
Medical 8% $120 $160 $200
Total 100% $1,500 $2,000 $2,500

All good in theory. Does this mean the minute you get a raise from 31k to 35k, you will spend 35% of the 4k raise on rent?

The reality is "housing" as a cost will be higher as a percentage when you start, but as you get raises, you won't be spending more on housing, percentage wise, you'll actually be spending less.

Utilities the same thing. Does the 4k raise mean you are going to run the AC more or heat more? Probably not.

Other logic which seams funny- as you make more money (4k in example I listed), you are willing to go deeper in debt?

NO NO NO... pay off the debt now, remove it from your budget and add that money into clothing , food or savings.

The reality is food, clothes and savings are at right spot to "start" your budget. As you get raises INCREASE the PERCENTAGE (not just the amount, but the percentage) of these categories.

For example, my first job paid me 39k and I put 6% into my 401k and another 1% into company stock. I had quite a tight budget in those days.

a $1500 raise allowed me to increase 401k another 2% 6 months later
a $2500 raise allowed me to increase 401k to 10% and buy more stuff 12 months later.

I was debt free (except student loans), but I was overpaying them from day 1, and they went away over time.

[disneysteve]

Originally Posted by baking23

So here's the table I'd been using for three different levels of income 1500, 2000, 2500 on a monthly basis:

I don't understand the point of that table. As your income rises, the percent spent on certain things should fall if the costs are stable. For example, if you are spending 10% or $150 on food when you earn $1,500, you will spend the same $150 but it will only be 6% when you earn $2,500. That allows you to direct the extra toward savings and debt reduction.

[anonymous_saver]

Originally Posted by baking23

I'm completely counting my chickens before they're hatched but I wanted to see what people here could advise.

I have an interview tomorrow for a job that pre-tax could net me approx 31,500/yr. If I did my math right, it's 15.17/hr. It would be full-time with great benefits so I figure what I loose to taxes will be more than made up for with my dr's. appoitments (I have a lot) and copay prices. Anythings better than full-price for BC every month.

So if it ends up being 26,000 after taxes, I think?, how could I bugdet that?

I downloaded and saved to my computer a lower-income budget that lists housing 35%, Medical 8%, etc...I think it was from the Color of Money, at the Washington Post, but I"m not sure.

What are the percentages that you all use?

I think you will be taking home much less than you think. I believe you forgot to take out your deductions (for example medical, dental, flex. spending account, etc.). For example, I make $35,000 a year pre-tax but I take home just under $24,000 a year. I would think you would probably take home somewhere in the $20,000-$22,000 range per year. What kind of deductions will you have if you got this job?

[baking23]

Originally Posted by disneysteve

I don't understand the point of that table. As your income rises, the percent spent on certain things should fall if the costs are stable. For example, if you are spending 10% or $150 on food when you earn $1,500, you will spend the same $150 but it will only be 6% when you earn $2,500. That allows you to direct the extra toward savings and debt reduction.

I think the table was just an idea for people that didn't know where to start. I don't, for instance, buy clothes or entertain myself every month so that money I'd put into medical expenses. Or something else.

Just becuase I got a raise doesn't automatically mean I'd spend more moeny on anything. I don't have to worry so much about the debt reduction since I don't have any. But it's nice to always keep that in mind.

[baking23]

Originally Posted by anonymous_saver

I think you will be taking home much less than you think. I believe you forgot to take out your deductions (for example medical, dental, flex. spending account, etc.). For example, I make $35,000 a year pre-tax but I take home just under $24,000 a year. I would think you would probably take home somewhere in the $20,000-$22,000 range per year. What kind of deductions will you have if you got this job?

That's a great question, I'm not quite sure. Since this is only the first interview I didn't quite ask. They did mention that I would get some dental, vision, coverage with the job, they didn't mention how much. I'll have to ask.