Spending percentages example

“I busted out the calculator to check my spending percentages. Let’s just say I didn’t quite meet the guidelines. But it was a good starting point. And I’m going to do my best and keep them in mind as my financial situation continues to change, hopefully for the better.”
Antonio, Carson City

Jose Smith makes $40,000 a year. Let’s go through the spending percentage guidelines for Jose.

HOUSING (Guideline is 35%)
Jose should spend about $1,166 a month on housing If Jose is trying to save for a house, he may want to spend lower than this and save money for a down payment. ($14,000 is 35% of $40,000. $14,000 divided by 12 is $1,166 a month.)

DEBT (Guideline is 15%)
Jose should keep his debt payments to $500 or less a month. These payments should be making a dent in the debt. The goal is to pay off the debt and put this money toward something else, like savings. ($6,000 is 15% of $40,000. $6,000 divided by 12 is $500 a month.)

TRANSPORTATION (Guideline is 15%)
Jose should keep his transportation expenses to $500 a month. This includes car payments, gasoline, insurance, and maintenance.

OTHER (Guideline is 25%)
If its not a housing, debt, transportation, or savings expense, it should go into the “Other” category. Jose should spend no more than $833 on his other expenses. ($10,000 is 25% of $40,000. $10,000 divided by 12 is $833 a month.)

SAVINGS (Guideline is 10% minimum)
Jose should be saving a minimum of $333 a month for retirement, future financial goals, unexpected expenses, and emergencies. When high interest debt is paid off, he can apply the money in his debt category to savings. ($4,000 is 10% of $40,000. $4,000 divided by 12 is $333 a month.)

On to the next section!