Featured in Ijamsville Stroll Magazine: Spending

Happy New Year!

 Hello everyone!  I hope you had a great holiday season, full of merriment, happiness, and glory!  Welcome to 2024.  A New Year and possible time for reflection. Certainly a time to dust off those New Year resolutions from last year and see what worked for you and what didn’t work for you.

 Most issues that get people in trouble financially seem to involve some sort of spending problem. So this month, let’s dig into that paycheck and where people should be spending their money (by general percentage).

 Let’s look at taxes first.   Social Security and Medicare will take 7.65% (up to your first $168,600 for 2024).  For State and Federal Income tax, that figure will vary widely based on your lifestyle and income and how well you use the various tax programs of your employer.  Let’s use 20% here.

 Next are your four major necessities of living (housing, utilities, food, and transportation)

 Before the era of credit scores, the housing industry used the 28% to 36% guideline to justify a reasonable housing expense.  28% to be the percentage of income to use for housing (the front-end ratio) and 36% to be the percentage of all debt including housing (the back-end ratio).   Let’s use 28% here.

 Food (including carry-out and restaurants).  I’ve seen various targets to use across credible sources.  The Bureau of Labor Statistics (BLS) reports this at 12.8%.   Let’s round this off to 15%.

 Utilities (Including cell phone and internet).  It’s a little harder to get this number because most government statistics round this into the housing cost.  Bankrate reports this at around 7%, so let’s use that.

 Transportation.  Let’s use the BLM number of 13%.   It does cost a lot to get around in America!

 Looking at these major blocks of expenditures adds up to 90.65%.  Of course, these are just guideline numbers to use.  Categories of modern life that we have left out (and reasonable numbers to use) include healthcare (8%), insurance and pensions (11%), and entertainment (5%).  

 Conclusions? Adding all these figures together total 114.65%.  Obviously, that’s over 100% of your paycheck.  Nobody spends more than their paycheck for very long without running into major troubles.  The reality is folks make adjustments to these numbers to make things work.  

 Nobody is average but together we make up average!

 Have a good month, everybody.  See you next time!