If it's not a budget, what is it?
November 7, 2011 4:42 PM Subscribe
Unemployed and looking. After over a year, it's time to start considering jobs making a good bit less than I did before. How do I figure out the minimum I need to make to be able to pay rent and still eat every day?
I lived with my boyfriend and one of his kids for the past few years. He's an ex-boyfriend now, and in the breakup I wound up moving back to my parents' temporarily.
I need to put together a spending plan so I'll know the minimum amount I must make to be able to pay my bills. I can estimate costs for rent and utilities, but I keep confusing myself when I start thinking about take-home versus gross income. I'm also worried I'll forget something, like setting aside money for car maintenance and so on.
I thought I could Google "how to create a budget" and find what I needed, but what I get from that is tips for keeping track of what you already spend on various things and "where does the money go" type advice. That's not what I need. Can someone point me towards a better resource?
I lived with my boyfriend and one of his kids for the past few years. He's an ex-boyfriend now, and in the breakup I wound up moving back to my parents' temporarily.
I need to put together a spending plan so I'll know the minimum amount I must make to be able to pay my bills. I can estimate costs for rent and utilities, but I keep confusing myself when I start thinking about take-home versus gross income. I'm also worried I'll forget something, like setting aside money for car maintenance and so on.
I thought I could Google "how to create a budget" and find what I needed, but what I get from that is tips for keeping track of what you already spend on various things and "where does the money go" type advice. That's not what I need. Can someone point me towards a better resource?
A really simple way of thinking about it is this: spend 35% of your gross income on rent.
So if you're thinking $600 rent monthly, you need at least $1,715 gross, or $10.78 an hour.
Note: a lot of people say it should be more like 25% on rent. In that case, your $600 rent monthly is $2,400 gross, which is $15 an hour. I currently spend about 25% of my gross income on rent, and it's sort of comfortable.
For incomes in this range (between, say, $10 and $20 an hour in a normal state - not California or New York or something) it's easiest to think in terms of net as 80% of your pay (I think my net right now - after health insurance and everything - is something like 79.58%.)
I'm not sure what else you need. Do you want to know what people on average spend on various things?
posted by SMPA at 4:56 PM on November 7, 2011 [5 favorites]
So if you're thinking $600 rent monthly, you need at least $1,715 gross, or $10.78 an hour.
Note: a lot of people say it should be more like 25% on rent. In that case, your $600 rent monthly is $2,400 gross, which is $15 an hour. I currently spend about 25% of my gross income on rent, and it's sort of comfortable.
For incomes in this range (between, say, $10 and $20 an hour in a normal state - not California or New York or something) it's easiest to think in terms of net as 80% of your pay (I think my net right now - after health insurance and everything - is something like 79.58%.)
I'm not sure what else you need. Do you want to know what people on average spend on various things?
posted by SMPA at 4:56 PM on November 7, 2011 [5 favorites]
Response by poster: SMPA, that's exactly what I was looking for in terms of net vs. gross salary.
Instead of averages for what things cost, I'm thinking of a list of things to include. Obviously there's food and gas for the car and car maintenance, but I'm worried about forgetting some kind of detail like, say, the cost of "clothing maintenance" - doing laundry and replacing clothes/shoes that fall apart. Sort of an ideal budget, maybe, but a very complete and realistic one.
posted by Jaie at 5:03 PM on November 7, 2011
Instead of averages for what things cost, I'm thinking of a list of things to include. Obviously there's food and gas for the car and car maintenance, but I'm worried about forgetting some kind of detail like, say, the cost of "clothing maintenance" - doing laundry and replacing clothes/shoes that fall apart. Sort of an ideal budget, maybe, but a very complete and realistic one.
posted by Jaie at 5:03 PM on November 7, 2011
You could sign up for Mint, import your past spending from the last X days and see what you normally spend on each category. You can also create a sample budget - it lists many categories. It doesn't tell you what you should be spending, though.
posted by desjardins at 5:10 PM on November 7, 2011
posted by desjardins at 5:10 PM on November 7, 2011
Response by poster: That's the trouble, desjardins. Because I was part of a three-person household, and because I've been living with my parents for the past several weeks, my past expenses don't really give me much of a clue about what my expenses as a single person would be.
posted by Jaie at 5:27 PM on November 7, 2011
posted by Jaie at 5:27 PM on November 7, 2011
I'm not sure what level of complexity you really want. This is pretty detailed, but it doesn't go into laundry as a subset of clothing, for instance. What I did when I was creating my first budget as an adult with a real job not living at home anymore was Google "sample budget" and look at about forty of them to come up with my list. I feel obligated to point out that the biggest chunk of my money goes to about 6 people - my landlord, the electric company, the cable company, my cell phone provider, my bank (car loan) and the grocery store. The only large bill I failed to expect when setting things up in the first place is the cost of parking downtown in my city.
posted by SMPA at 5:28 PM on November 7, 2011
posted by SMPA at 5:28 PM on November 7, 2011
It's really not that possible to estimate things like car repairs and clothing needs because those are situational. For emergency situations like car repairs, I think it's best to make sure you have something in saving before you jump right in to living on your own again. I've found that my best practice is to have a set minimum amount of money to have in my bank account that's enough to account for anything that would be a reasonable "emergency." There aren't many car repairs that cost more than $1000, so that's a decent amount to maintain (but YMMV).
And then you also have a little buffer for when you need to spend on "not normal" expenses, such as a few new items of clothes or a pair of shoes. Just make sure that you save enough to get back to that minimum in your account, and don't dip into it again until you're evened back up.
I live by this rule and, coming from a previous job situation living paycheck to paycheck, it certainly has done TONS for my peace of mind. It has even helped me start putting money in long term savings.
posted by erstwhile at 5:29 PM on November 7, 2011 [1 favorite]
And then you also have a little buffer for when you need to spend on "not normal" expenses, such as a few new items of clothes or a pair of shoes. Just make sure that you save enough to get back to that minimum in your account, and don't dip into it again until you're evened back up.
I live by this rule and, coming from a previous job situation living paycheck to paycheck, it certainly has done TONS for my peace of mind. It has even helped me start putting money in long term savings.
posted by erstwhile at 5:29 PM on November 7, 2011 [1 favorite]
Some categories for budgets: car insurance and taxes (divide yearly total by 12 for monthly amount), haircuts and personal items like shampoo, gifts for others (birthdays, holidays), prescription medications, regular doctor/dentist appointments (have 6 month checkups? Multiply by two and divide by 12 for your monthly total), cell phone, gym membership, monthly services like netflix or music subscription services, clothing/dry cleaning, money to do fun stuff with.
You should also include money toward car maintenance and money for future savings goals and retirement.
I honestly think most people could get by on $1000 a month if they have a roomate or two, cook cheap foods at home, look for free stuff to do in their communities, use their libraries, shop at thrift stores, use parks for recreation and exercise, and combine trips to use less gas. Seriously, I'm on a teacher's salary and feel really comfortable and am able to save a lot just using these tips.
I really like the blog The Simple Dollar for frugal tips and financial and budgeting advice.
Good luck to you!
posted by shortyJBot at 5:32 PM on November 7, 2011
You should also include money toward car maintenance and money for future savings goals and retirement.
I honestly think most people could get by on $1000 a month if they have a roomate or two, cook cheap foods at home, look for free stuff to do in their communities, use their libraries, shop at thrift stores, use parks for recreation and exercise, and combine trips to use less gas. Seriously, I'm on a teacher's salary and feel really comfortable and am able to save a lot just using these tips.
I really like the blog The Simple Dollar for frugal tips and financial and budgeting advice.
Good luck to you!
posted by shortyJBot at 5:32 PM on November 7, 2011
Paycheckcity has some pretty accurate calculators to help you figure out pretty closely what your net salary will be plugging in various scenarios for both hourly or salaried positions. It includes state taxes (and I think city for applicable areas). I know that for Maryland I have to put in the % for my county tax, but it provides a link to a location where I can look it up.
I think that you shouldn't freak out about getting too granular with your budget. You have your fixed expenses (rent, car payments, utilities and ideally some savings even if it's only 1 or 2% of your net) and then you have to divvy up what's left among for your variable expenses, primarily food and transportation too and from work. I don't really think that you can get too granular with the variable expenses until you have an actual budget to work with. Hopefully some of them will be minimal. Laundry for example shouldn't be too big a deal. An average washing machine cycle in an apt. complex here in DC is around $1.50 and about the same or a little less for the dryer. Worst case scenario you can get a hanging rack and dry things in your apartment (which is also better for your clothes in the long run). So if you have to do 2 or 3 loads a week you can still keep that under $6.00 (under $10 if use a dryer). Most things that say dry clean only can be hand washed or even washed in the washer on the delicate cycle and hung to dry. Wool suits, coats, pants etc would be the exception. As for replacement, well you're probably going to have to do without for awhile. I'm a big proponent of buying quality stuff as it lasts longer and is cheaper in the long run, but there is payless, old navy, H&M and goodwill for emergency replacements on the cheap until you can set aside some money for some classics that will see you through interviews and the like. Maybe rather than setting aside a monthly part of your budget for clothing, you can (and should) set aside money for an emergency fund that you can dip into if you REALLY do have a clothing emergency. I'd also try to work in carve out some money in your budget for entertainment, because unless you are an absolute saint, you will want a beer with friends or a pizza or to go see a movie once in awhile, even if it means living on PB&J for a few days.
posted by kaybdc at 5:41 PM on November 7, 2011 [2 favorites]
I think that you shouldn't freak out about getting too granular with your budget. You have your fixed expenses (rent, car payments, utilities and ideally some savings even if it's only 1 or 2% of your net) and then you have to divvy up what's left among for your variable expenses, primarily food and transportation too and from work. I don't really think that you can get too granular with the variable expenses until you have an actual budget to work with. Hopefully some of them will be minimal. Laundry for example shouldn't be too big a deal. An average washing machine cycle in an apt. complex here in DC is around $1.50 and about the same or a little less for the dryer. Worst case scenario you can get a hanging rack and dry things in your apartment (which is also better for your clothes in the long run). So if you have to do 2 or 3 loads a week you can still keep that under $6.00 (under $10 if use a dryer). Most things that say dry clean only can be hand washed or even washed in the washer on the delicate cycle and hung to dry. Wool suits, coats, pants etc would be the exception. As for replacement, well you're probably going to have to do without for awhile. I'm a big proponent of buying quality stuff as it lasts longer and is cheaper in the long run, but there is payless, old navy, H&M and goodwill for emergency replacements on the cheap until you can set aside some money for some classics that will see you through interviews and the like. Maybe rather than setting aside a monthly part of your budget for clothing, you can (and should) set aside money for an emergency fund that you can dip into if you REALLY do have a clothing emergency. I'd also try to work in carve out some money in your budget for entertainment, because unless you are an absolute saint, you will want a beer with friends or a pizza or to go see a movie once in awhile, even if it means living on PB&J for a few days.
posted by kaybdc at 5:41 PM on November 7, 2011 [2 favorites]
I used this calculator as a starting point (eventually a excel spreadsheet) when we were looking at how much house we could afford: http://www.forsalebyownercenter.com/tools/homebuyingbudgetcalculator.aspx (which also requires a pretty through budget and thinking ahead for a few years of upcoming costs).
note: you can put $1 in the cost of the house to essentially zero it out.
A good exercise after you look at your have-to expenses is to see how much you'd have left each month multiply by 12, and then think of all the yearly expenses you have (e.g., required travel, clothing, misc oil changes etc) and see how they compare and if they're evenly spread out across the year or all in one season.
posted by ejaned8 at 6:17 PM on November 7, 2011
note: you can put $1 in the cost of the house to essentially zero it out.
A good exercise after you look at your have-to expenses is to see how much you'd have left each month multiply by 12, and then think of all the yearly expenses you have (e.g., required travel, clothing, misc oil changes etc) and see how they compare and if they're evenly spread out across the year or all in one season.
posted by ejaned8 at 6:17 PM on November 7, 2011
Definitely use paycheckcity's paycheck calculator. I always do this when I'm considering a job offer and it's very helpful.
As for figuring out expenses, I like to plan this stuff out too. I don't stick to a strict budget with specific categories, but I find it good for planning. I would sit down and list expenses you know about. Do this with a pen and paper, or in an excel spreadsheet.
1. Start with monthly expenses that are inflexible (car payment/insurance, other loan payments, any monthly bill where you're on a contract like a cell phone, etc.)
2. Then look at expenses that will be roughly the same every month but will vary based on choices you make now. This is stuff like rent, gym membership, cable/internet service, etc. (more on that in a sec)
3. Then look at expenses that will vary month-by-month based on your daily choices: stuff like food, clothing and entertainment.
Add these up and you have your monthly budget.
Figuring out expense for #2 and #3:
Food: I do think you can roughly figure out these costs by looking at past patterns (and mint definitely can be helpful). What do you like to eat? What did you typically eat for breakfast, lunch, dinner and snacks before? Do you want to be able to eat lunch out a few times/week? Maybe sketch out a weekly meal plan based on how you like to cook and what you like to eat, figure out what you'd need to buy to eat that way for a week and then add .33 to that just to be safe and voila, you have your food budget. You can do this for entertainment and clothing costs as well.
Housing: jump on craigslist and see what the prices are like for the kinds of places you'd like to live. Think about square footage, amenities and location. What do you need, and what can you do without? Look at the places on craigslist that meet your criteria. Don't just assume that you'll be able to find the cheapest place in this category you see - find a range and assume you'll be paying on the higher end of that range. If you can't afford it, see what you can do without.
Good luck!
posted by lunasol at 10:10 PM on November 7, 2011 [1 favorite]
As for figuring out expenses, I like to plan this stuff out too. I don't stick to a strict budget with specific categories, but I find it good for planning. I would sit down and list expenses you know about. Do this with a pen and paper, or in an excel spreadsheet.
1. Start with monthly expenses that are inflexible (car payment/insurance, other loan payments, any monthly bill where you're on a contract like a cell phone, etc.)
2. Then look at expenses that will be roughly the same every month but will vary based on choices you make now. This is stuff like rent, gym membership, cable/internet service, etc. (more on that in a sec)
3. Then look at expenses that will vary month-by-month based on your daily choices: stuff like food, clothing and entertainment.
Add these up and you have your monthly budget.
Figuring out expense for #2 and #3:
Food: I do think you can roughly figure out these costs by looking at past patterns (and mint definitely can be helpful). What do you like to eat? What did you typically eat for breakfast, lunch, dinner and snacks before? Do you want to be able to eat lunch out a few times/week? Maybe sketch out a weekly meal plan based on how you like to cook and what you like to eat, figure out what you'd need to buy to eat that way for a week and then add .33 to that just to be safe and voila, you have your food budget. You can do this for entertainment and clothing costs as well.
Housing: jump on craigslist and see what the prices are like for the kinds of places you'd like to live. Think about square footage, amenities and location. What do you need, and what can you do without? Look at the places on craigslist that meet your criteria. Don't just assume that you'll be able to find the cheapest place in this category you see - find a range and assume you'll be paying on the higher end of that range. If you can't afford it, see what you can do without.
Good luck!
posted by lunasol at 10:10 PM on November 7, 2011 [1 favorite]
Really all you need to figure out is your love of noodles.
But before that, you must read this for the fine details of the rest.
posted by Sir BoBoMonkey Pooflinger Esquire III at 3:17 AM on November 8, 2011
But before that, you must read this for the fine details of the rest.
posted by Sir BoBoMonkey Pooflinger Esquire III at 3:17 AM on November 8, 2011
This book helped me a LOT. Basically, the authors work from net income so you'd need to use a percentage. In Texas, I've always used net = 75% of gross for my back of envelope figurings.
The authors then suggest a 3 part budget:
50% for absolute needs
30% for wants/nonessentials
20% for savings/debt service
They discuss absolute needs quite a bit and have some of the numbers ratios you are looking for.
Is there any way you could continue staying with your folks for a few months after getting a job and put away some buffer money? A small emergency fund makes all of this a lot easier.
posted by screamingnotlaughing at 10:37 AM on November 9, 2011
The authors then suggest a 3 part budget:
50% for absolute needs
30% for wants/nonessentials
20% for savings/debt service
They discuss absolute needs quite a bit and have some of the numbers ratios you are looking for.
Is there any way you could continue staying with your folks for a few months after getting a job and put away some buffer money? A small emergency fund makes all of this a lot easier.
posted by screamingnotlaughing at 10:37 AM on November 9, 2011
This thread is closed to new comments.
posted by synchronia at 4:54 PM on November 7, 2011