Budget percentages guidelines needed

[jaminmd]

My niece is getting her first job since she graduated college. She'll be moving to northern VA. Anyway, the poor kid thought she'd be loaded since she'd be getting a "real" paycheck finally. I know. It is unfortunate that they don't teach personal finance to kids. She doesn't realize how expensive it is in this area.

Anyway, when we sat down & I made up a realistic budget for her, I thought the poor kid was going to fall off her chair. She honestly had no idea what it will cost her to live. She has expensive tastes, too, so that makes matters worse. The apartments she's looked at are around $1500/month which will eat about 40-50% of her take home pay.

Now I shared my budget with her but DH & I both work so our income/expenses are much different. I went through all the categories I could think of along with how much she'd actually be netting, not grossing.

What I am trying to find but can't seem to is a breakdown of percentages on what amounts should be allocated where. I remember housing is supposed to be around 28% of your income but I don't know if that is gross or net. Also, what about all of the other categories? Is there an average? I can't go by what I spend to help her, since it'll be her & her dog vs me, DH & DD.

Does anyone know where I can find this info? Thanks.

 

[stacielee]

There's a good one on the Crown Financial website, http://www.crown.org/Tools/Calculators/Budgeting_SpendingPlan.asp.

 

[disney1990]

My niece is getting her first job since she graduated college. She'll be moving to northern VA. Anyway, the poor kid thought she'd be loaded since she'd be getting a "real" paycheck finally. I know. It is unfortunate that they don't teach personal finance to kids. She doesn't realize how expensive it is in this area.

Anyway, when we sat down & I made up a realistic budget for her, I thought the poor kid was going to fall off her chair. She honestly had no idea what it will cost her to live. She has expensive tastes, too, so that makes matters worse. The apartments she's looked at are around $1500/month which will eat about 40-50% of her take home pay.

Now I shared my budget with her but DH & I both work so our income/expenses are much different. I went through all the categories I could think of along with how much she'd actually be netting, not grossing.

What I am trying to find but can't seem to is a breakdown of percentages on what amounts should be allocated where. I remember housing is supposed to be around 28% of your income but I don't know if that is gross or net. Also, what about all of the other categories? Is there an average? I can't go by what I spend to help her, since it'll be her & her dog vs me, DH & DD.

Does anyone know where I can find this info? Thanks.

A lot of the apartments in the DC area also charge for utilities. Be sure to check on that before your finalize her budget.

 

[mamilovesdisney]

I just looked this up the other day. According to all the financial gurus on Oprah's debt diet series, these are the numbers.....

35% Housing
15% Debt
15% Transportation costs
10% Savings
25% Misc

I think the housing is unrealistic for some cities. I think DC is one of them. Hope this helps.

Mami

 

[trip]

Would she consider getting a roommate?

Also, if she has student loans (even though she won't have to start paying them off immediately) make sure she sets that money aside for when they start.

 

[jaminmd]

Thanks, everyone. Fortunately, she doesn't have any student loans. And she refuses to have a roommate, so she'll be living on a very tight budget.

 

[richmond282]

There's a good one on the Crown Financial website, http://www.crown.org/Tools/Calculators/Budgeting_SpendingPlan.asp.

I second this one. We have used this for several years.

 

[timmac]

And she refuses to have a roommate, so she'll be living on a very tight budget.

Based on this and your comment about her "expensive tastes", sounds like she'll learn a lot about reality. I think we all have to go through that to some extent.

 

[clutter]

Thanks, everyone. Fortunately, she doesn't have any student loans. And she refuses to have a roommate, so she'll be living on a very tight budget.

Holy cow, has she looked at rental rates?!?!?!!

I hope she's working in the suburbs so that she doesn't have horrendous commuting costs, too!

And she does understand about withholding, right? She's not getting her salary divided by 12 each month? She knows how much her health insurance is costing, right?

Btw, looking at Oprah's budget, where's food? In miscellaneous?

 

[jaminmd]

Holy cow, has she looked at rental rates?!?!?!!

I hope she's working in the suburbs so that she doesn't have horrendous commuting costs, too!

And she does understand about withholding, right? She's not getting her salary divided by 12 each month? She knows how much her health insurance is costing, right?

Btw, looking at Oprah's budget, where's food? In miscellaneous?

That is what was so funny. She wasn't taking that into account until I mentioned it to her. Then she was thinking it would be about 20%! I proceeded to explain the cost of her health benefits, being taxed at the higher single rate, etc. That's when the shock set in for her. I shouldn't laugh because we all have to learn somehow but she's just clueless. And, she'll be working in Alexandria. Not exactly cheap living, huh?

 

[Inigo]

Who is the "they" that you expected to teach her about personal finance? Her parents?

 

[jaminmd]

Who is the "they" that you expected to teach her about personal finance? Her parents?

The they I was referring to actually was schools. I think it is as important as everything else children are taught since it is a basic life skill.

Now, you didn't ask and I don't know if you were implying anything by your question. It is obvious her parents did not teach this to her.

Really, I am not looking to be judgmental or start a debate. I am simply looking for a financial tool to use as a guideline to help her on her way.

 

[maleficent1959]

I agree, the question of whether a college is an appropriate place to learn basic life skills is another debate.

I often see posters kevetching about what students should learn about money in college. If it makes anyone feel better, I teach a course to new freshman called Academic Foundations. In addition to teaching them any number of things about how to succeed in college one chapter of the text is devoted to money management. It covers myriad topics, including how to open and manage a bank account, understanding credit and the dangers of plastic, avoiding and/or eliminating debt. They prepare a monthly budget, complete an exercise on compounding interest, and others.

And honestly, as passionate as I am about personal fiscal responsibility their eyes just glaze over much of the time. I won't say it applies to all of them, but many of them are just kind of in this la-la land where they believe they will graduate from college and get paid a lot of money and not have to worry about this stuff. One girl told me that only poor people have to budget and she wasn't going to be poor.

I'm glad for the students that get something out of the section, but I really feel like it's like hitting a brick wall with most of them. I honestly believe that experience is going to be the best teacher for the majority of them. If they haven't learned it from their parents, either actively or passively, over 18 years then what chance do I have over the course of one week of their lives?

Here is Jean Chatzky's suggested budget breakdown. http://www.jeanchatzky.com/budgeting/a-budget-breakdown/It's kind of middle of the road for the guidelines out there that I've seen.

Tina

 

[stacielee]

Here is Jean Chatzky's suggested budget breakdown. http://www.jeanchatzky.com/budgeting/a-budget-breakdown/It's kind of middle of the road for the guidelines out there that I've seen.

Tina

This is the same as the percentages from Oprah; again, where do groceries fall? Eating out is part of Other Living Expenses... but no groceries??

 

[Sleepingbooty]

I would direct her to Dave Ramsey's website - www.daveramsey.com. Great budgeting tools and calculators and lots of really good down to earth advice. He would never recommend, like Oprah did, spending 15% of your income to service debt. Uh.. how 'bout don't go into debt? I think Dave recommends spending no more than 25% of your TAKE HOME on housing. And I have to say, I think that is about right. When we first bought the house we are in now, our payment was about 33% of take home, and things were tight. Now that my husbands income has risen enought that our payment is around 25% of our take home, things feel much less stressful financially. I think realistically, your niece is going to need a roommate if she wants to live in $1500/month digs.