Where can I find info on how much of my income should go to different expenses?

[karenkc]

Someone posted on another forum that the IRS site has this info but I never found it. I'm looking for something that will tell me what percentages are typically spent on food/clothes/etc..

[snafu]

Where does the money go? Statistical Averages published by
Canadian Gov't. Should not be too different from USA since our standard of living is similar. The major difference is health care [we don't pay premiums; cost recovery via gasoline tax & 4 % federal income tax], Canadians get no tax credit for mortgage interest & property tax]

Housing 30%
Auto 15%
Food 17%
Health & Life Insurance 5%
Entertainment 7%
Clothing 4%
Medical 6%
Debt Repayment 5%
Savings/Investment 5%
Misc. 6%

Easy to work out percentages of your net income and compare to your actual spending.

[jIM_Ohio]

Someone posted on another forum that the IRS site has this info but I never found it. I'm looking for something that will tell me what percentages are typically spent on food/clothes/etc..

Its best to keep things simple

first and foremost spend less than you earn. If you do this you will be financially successful on some level.

Second, set aside a fixed percentage of gross income to savings. I suggest 20%. Some of the 20% might be long term savings (retirement), some of it might be short term (new house, new car, vacation).

Third- anything not part of the 20% will depend on the life you lead. If you work at home your utilities (heat/ AC) might be higher, if you only sleep in house, your travel (gas, ordering out) might be larger.

Spend less than you earn, manage the rest.

[zetta]

The book All Your Worth recommends 50% to needs, 30% to wants, and 20% to savings. As long as you stay within these broad guidelines, it doesn't matter how your spending is divided to subcatagories. (So you might choose to pay more to live close to work and spend less on transportation, or pay less to live farther away and spend more on gas...)

[disneysteve]

The book All Your Worth recommends 50% to needs, 30% to wants, and 20% to savings. As long as you stay within these broad guidelines, it doesn't matter how your spending is divided to subcatagories. (So you might choose to pay more to live close to work and spend less on transportation, or pay less to live farther away and spend more on gas...)

This is exactly what I was going to post.

The individual category breakdowns really don't matter and they can vary greatly from person to person depending on many factors like where you live, how old you are, how many kids you have, how large your home is, what kind of work you do, how long of a commute you have, etc.

For example, if you work 5 miles from home at a job that provides uniforms, your clothing and transportation costs will be dramatically different than someone who has a 1 hour commute and has to wear a suit and tie to work every day.

Use the 50/30/20 rule and you'll be fine.

[Slug]

There's a new website that does this and let's you compare data at the zip level by income and marital status. I can't think of the name right now, but it works as a way to ballpark your expenses vs. your neighbors. If I can find it, I'll come back and post it.

[disneysteve]

There's a new website that does this and let's you compare data at the zip level by income and marital status. I can't think of the name right now, but it works as a way to ballpark your expenses vs. your neighbors. If I can find it, I'll come back and post it.

That would be interesting to play with but would really serve no useful purpose. How my spending compares to my neighbors really doesn't tell me anything for the reasons I said earlier. We all have different priorities. For example, I spend very little on clothing, maybe a few hundred per year, but we do like to travel and may spend 6-10K on that. Someone else might spend a few thousand on clothing but next to nothing on travel. I haven't had a car payment for 8 years, so we don't spend much on transportation - just gas and maintenance. For a couple with 1 or 2 car payments, their numbers would look very different.

Comparing yourself to others really doesn't tell you if you are on the right track or not, but it can still be fun so post the link if you find it.

[Radiance]

What are considered needs? I certainly can not see how I can cover needs with half my salary. I am using 70% on needs, 11% savings, 19% to pay off debt.

When I get debt free it wont be much different:
60% needs, 20% savings 10% charity, 10% wants, most likely more savings since I am late with retirement planning

[wnlbutterfly]

And we know needs and wants vary from person to person. It shouldn't really, but it does. I see a lot of people that put wants into the needs category and will refuse to even discuss the possibility of dropping that expense.

[Radiance]

That is exactly where I am getting at.
I would like to challenge my needs and see if they are really wants

Rent, utilities, those are needs, right?
I, currently, also need to pay my debt
I currently need to pay daycare... would love to change that!
I need to pay my car payment
I need to allocate $50 a month for health
I need to allocate $100 for car maintenance...

....no?

[jIM_Ohio]

needs vs wants can be subjective

I need to have AC turned on the summer
other people consider that a want

so you need to apply this to your own situation
you decide what you need
you decide what you want

and if you are trying to do that 50-30-20 thing, look at my post... its much simpler than that- spend less than you earn. Period, end of discussion.

Whether its 50-30-20
20-50-30
10-10-80
or whatever
as long as its not

50-50-0
or
60-40-0
with 0 being in savings "slot", you will be successful.

[Caoineag]

Needs and wants can get complicated. Maybe rent is fully a need, but there are some people who spend a lot to live where they want to live so it becomes more of a combo of want and need. I have internet as a need, most people don't. For me it isn't really an issue if I want to call one of my monthly billed wants a need, because I have room for it. My "needs" are any of my monthly bills. This is okay because I still look at my needs periodically to make sure I can't get them satisfied for cheaper.

[disneysteve]

Rent, utilities, those are needs, right?
I need to pay my car payment

The details can get pretty fuzzy. Sure, housing is a need. You need to live somewhere. But do you "need" the nice apartment on the upper floor with the great view or could you live just fine in a cheaper apartment on the other side of town with no view?

Same for the car payment. What kind of car? Transportation is a need but that doesn't mean you need to be leasing a 7 series BMW.

If your needs are consuming 70% of income, you may want to sit down and review them item by item. Perhaps there are places you can trim expenses. Maybe you could get a cheaper auto insurance policy, for example. Maybe there are ways you could reduce your food spending. Maybe there are things you could do around the house to conserve energy and lower your utility bills. Are you really spending 0% on wants or are there wants mixed in with your needs? Do you not buy anything that you don't absolutely need? Never go out to eat? Never pay for any form of entertainment? Never travel? Never even drive anywhere that you don't need to go? Donate nothing at all to charity?

[Beppington]

And we know needs and wants vary from person to person. It shouldn't really, but it does. I see a lot of people that put wants into the needs category and will refuse to even discuss the possibility of dropping that expense.

Ding-ding-ding!!! This is America's problem! And, worse, they borrow $ to get those wants.

[zetta]

I wrote ablog post about All Your Worth that describes what the author considers needs vs wants vs savings:

Booknotes: All Your Worth: Zetta's Striving to Get Rich Slow

For instance, the minimum payment on your debt is a need, if you pay extra it counts toward savings.