Living Expenses - Rule of Thumb

[Stunt]

Technically there's no right or wrong answer here as it's more a question of lifestyle and risk tolerance. Ideally we'd all have million dollar homes, drive exotic cars, save lots of money and spend to our heart's content.

But back to reality...

How much of a person's income should be spent
on a car?
on a home?
on savings?

Please state your recommendation and actual (use pre-tax figures)
Personally I don't have a recommendation but here's my actuals...

Car's value is 9% of my annual income
Rent is 11% of my annual income
Savings is 28% of my annual income

I am starting to warm up to the idea of buying car/house but looking to see what my price range should be, especially a car since i do have expensive tastes (even if it doesn't appear from the above). Should a person shop for a car at half annual salary? third? quarter? etc...

 

[Insomniator]

I think rent being 11% is reallly good....

 

[ja1484]

Roughly:

Rent: 11% of take-home
Savings: 33% of take-home
401k: 10% of gross
Other Living Expenses Combined: 14% of take-home

The rest of my take home is fun money. Car is paid off. Have no debt.

Looking at another car that would clock in around 50% of my annual gross.

Edit: This is all out of take home, except for 401k, obviously, and the estimate on the car. Edited to clarify.

 

[duragezic]

I think you are doing fine and well better than average or the recommended numbers.

For me:

Rent: 13%
Car value: 1%
Savings: 40%
401k: 6%

 

[vi edit]

Recommended:

Car: less than 10% net monthly
Actual: about 4%

Housing: less than 25% net monthly
Actual: about 17% for primary + 5% for a second mortgage on a lot loan

Savings: 20% with 25% being preferred
Actual: About 17% after retirement, college savings for my daughter, and cash savings in liquid accounts. I'd be well over that mark if I didn't have a $1000 a month day care bill

I use net because I don't think in "gross" terms. I think in what I actually have in my pocket after deductions.

 

[Stunt]

Originally posted by: vi edit
Recommended:

Car: less than 10% net monthly

So you recommend someone making $100k buy a $10k car?

 

[vi edit]

Originally posted by: Stunt

Originally posted by: vi edit
Recommended:

Car: less than 10% net monthly

So you recommend someone making $100k buy a $10k car?

I'm saying if you clear $3000 a month 'net you should't have a payment more than $300.

 

[BlackTigers]

Originally posted by: Stunt

Originally posted by: vi edit
Recommended:

Car: less than 10% net monthly

So you recommend someone making $100k buy a $10k car?

He's saying that less than 10% of your monthly income should be spent towards a car

 

[oiprocs]

My actuals:

Rent: 0%
Car: 15%
Food: 15%
Savings: 70%

Live at home FTW. GO college.

 

[Gothgar]

Car: 8%
Apartment: 25%
Savings: Not much, I like to spend, fuck saving

Soon to be:
Car 5%
Mortgage: 20%
Food: Still a shit load
Savings: not much more

 

[Zim Hosein]

Originally posted by: scorpious
My actuals:

Rent: 0%
Car: 15%
Food: 15%
Savings: 70%

Live at home FTW. GO college.

What car do you drive and what food do you consume scorpious?

 

[Stunt]

Originally posted by: BlackTigers

Originally posted by: Stunt

Originally posted by: vi edit
Recommended:

Car: less than 10% net monthly

So you recommend someone making $100k buy a $10k car?

He's saying that less than 10% of your monthly income should be spent towards a car

So financing payments...

person making $100,000 or $8,300 a month can get a car with $830 monthly car payments...over a 60month 3.5% term...$45,000 car.

Makes more sense...

 

[child of wonder]

Mortgage (P,T,I): 20.5%
Cars (2): 7.2%
Food, Gas, Entertainment, Misc: 25%
Savings: 17.2% (going up to 23% in Sept when both kids in school)

 

[oiprocs]

Originally posted by: Zim Hosein

Originally posted by: scorpious
My actuals:

Rent: 0%
Car: 15%
Food: 15%
Savings: 70%

Live at home FTW. GO college.

What car do you drive and what food do you consume scorpious?

A Civic. No car payments (was my parents car, they gave it to my older brother, he drove it until he graduated, now I drive it).

I commute to school so that 15% is all gas money.

Any food expenses I have come from me eating out (which doesn't happen often) and groceries I buy (which happens often). I can't complain about home food and not pay for it, so I'd rather stock the fridge with food I eat just in case.

 

[Special K]

Originally posted by: Stunt
How much of a person's income should be spent
on a car?
on a home?
on savings?

It is impossible to put percentages on these items that would apply universally to all people, because different people value different things. For example, I don't enjoy driving, so I bought a basic reliable car that meets my needs and will hopefully lead to a low cost of ownership, based on the reviews I have read. Others really enjoy driving and are willing to splurge on a nicer car.

Similarly, some people are willing to splurge on a nice house. As long as they realize the impact that will have on their finances, then there is nothing wrong with their decision.

The amount of money one should save should ideally be > 0%, but that will depend to a large extent on:

1. the perceived security of one's employment
2. dependents (if any)
3. one's tolerance for risk

Basically, there is no right way to break down the percentages. As long as the sum total of the percentages doesn't exceed 100% of your income, then you are technically living within your means.

 

[Slew Foot]

From what Ive learned for optimal security you should be around:

Cars: total household purchase price should be less than 2/5 the total gross income. (i.e. If two people make 100K, their combined purchase price should be 40K at the most)
Housing: Total loan should be 3-4x annual income
Food: $200/per person month at most
Savings: 10% at least

 

[vi edit]

Originally posted by: Slew Foot
From what Ive learned for optimal security you should be around:

Cars: total household purchase price should be less than 2/5 the total gross income. (i.e. If two people make 100K, their combined purchase price should be 40K at the most)
Housing: Total loan should be 3-4x annual income
Food: $200/per person month at most
Savings: 10% at least

$200 a person for food really is tough unless you eat really boring, or really horrible (for you) meals. And you don't cheat and count some things under the "entertainment" or "misc" category.

That's a little over $6 a day per person. If you have one steak dinner at home you likely just killed your budget for 2-3 days. Want any sort of nice seafood and you just killed another 2-3 days. Even cooking a nice dinner for friends or family can easily work out to be $20 or $30 in misc ingredients and that kills your budget for the week.

I think people either grossly underestimate their actual food costs or have terribly boring or limited diets.

 

[ja1484]

Originally posted by: vi edit

Originally posted by: Stunt

Originally posted by: vi edit
Recommended:

Car: less than 10% net monthly

So you recommend someone making $100k buy a $10k car?

I'm saying if you clear $3000 a month 'net you should't have a payment more than $300.

That's a bit conservative, isn't it? I think a better metric would be after-expenses income. About 65% of my take home each month is after-expenses. I choose to put about half of that in savings and take the other half to live it up. I could easily throw 20% of my monthly net at a car payment and still have disposable income left over, all my expenses paid, and still contributing the amounts I listed before to savings and 401k.

Not having dependents or debt is a pretty good move in the ol' money arena.

 

[ponyo]

Originally posted by: Stunt

Originally posted by: BlackTigers

Originally posted by: Stunt

Originally posted by: vi edit
Recommended:

Car: less than 10% net monthly

So you recommend someone making $100k buy a $10k car?

He's saying that less than 10% of your monthly income should be spent towards a car

So financing payments...

person making $100,000 or $8,300 a month can get a car with $830 monthly car payments...over a 60month 3.5% term...$45,000 car.

Makes more sense...

Change the term to 36 months and you'll get your answer. It's tough to drive $45k car on $100k/yr.

 

[ja1484]

Originally posted by: Naustica

Originally posted by: Stunt

Originally posted by: BlackTigers

Originally posted by: Stunt

Originally posted by: vi edit
Recommended:

Car: less than 10% net monthly

So you recommend someone making $100k buy a $10k car?

He's saying that less than 10% of your monthly income should be spent towards a car

So financing payments...

person making $100,000 or $8,300 a month can get a car with $830 monthly car payments...over a 60month 3.5% term...$45,000 car.

Makes more sense...

Change the term to 36 months and you'll get your answer. It's tough to drive $45k car on $100k/yr.

You guys are assuming financing the entire cost of the vehicle as well here. There are such things as down payments.

 

[ponyo]

Originally posted by: vi edit

Originally posted by: Slew Foot
From what Ive learned for optimal security you should be around:

Cars: total household purchase price should be less than 2/5 the total gross income. (i.e. If two people make 100K, their combined purchase price should be 40K at the most)
Housing: Total loan should be 3-4x annual income
Food: $200/per person month at most
Savings: 10% at least

$200 a person for food really is tough unless you eat really boring, or really horrible (for you) meals. And you don't cheat and count some things under the "entertainment" or "misc" category.

That's a little over $6 a day per person. If you have one steak dinner at home you likely just killed your budget for 2-3 days. Want any sort of nice seafood and you just killed another 2-3 days. Even cooking a nice dinner for friends or family can easily work out to be $20 or $30 in misc ingredients and that kills your budget for the week.

I think people either grossly underestimate their actual food costs or have terribly boring or limited diets.

I enjoy eating so I'm willing to spend whatever to make me happy. $200/per month is for people who view eating as a chore.

 

[ponyo]

Originally posted by: ja1484

Originally posted by: Naustica

Originally posted by: Stunt

Originally posted by: BlackTigers

Originally posted by: Stunt

Originally posted by: vi edit
Recommended:

Car: less than 10% net monthly

So you recommend someone making $100k buy a $10k car?

He's saying that less than 10% of your monthly income should be spent towards a car

So financing payments...

person making $100,000 or $8,300 a month can get a car with $830 monthly car payments...over a 60month 3.5% term...$45,000 car.

Makes more sense...

Change the term to 36 months and you'll get your answer. It's tough to drive $45k car on $100k/yr.

You guys are assuming financing the entire cost of the vehicle as well here. There are such things as down payments.

I don't buy cars based on monthly payment.

 

[ja1484]

Originally posted by: Naustica

Originally posted by: ja1484

Originally posted by: Naustica

Originally posted by: Stunt

Originally posted by: BlackTigers

Originally posted by: Stunt

Originally posted by: vi edit
Recommended:

Car: less than 10% net monthly

So you recommend someone making $100k buy a $10k car?

He's saying that less than 10% of your monthly income should be spent towards a car

So financing payments...

person making $100,000 or $8,300 a month can get a car with $830 monthly car payments...over a 60month 3.5% term...$45,000 car.

Makes more sense...

Change the term to 36 months and you'll get your answer. It's tough to drive $45k car on $100k/yr.

You guys are assuming financing the entire cost of the vehicle as well here. There are such things as down payments.

I don't buy cars based on monthly payment.

How wonderful for you. That is, however, the item germane to discussion here ain't it?

 

[Chronoshock]

Mortgage: 24%
Food: 3%
Utilities + tv/internet: 3-4%
Car: 0%
Rest is savings/401k

 

[Slew Foot]

Originally posted by: vi edit

Originally posted by: Slew Foot
From what Ive learned for optimal security you should be around:

Cars: total household purchase price should be less than 2/5 the total gross income. (i.e. If two people make 100K, their combined purchase price should be 40K at the most)
Housing: Total loan should be 3-4x annual income
Food: $200/per person month at most
Savings: 10% at least

$200 a person for food really is tough unless you eat really boring, or really horrible (for you) meals. And you don't cheat and count some things under the "entertainment" or "misc" category.

That's a little over $6 a day per person. If you have one steak dinner at home you likely just killed your budget for 2-3 days. Want any sort of nice seafood and you just killed another 2-3 days. Even cooking a nice dinner for friends or family can easily work out to be $20 or $30 in misc ingredients and that kills your budget for the week.

I think people either grossly underestimate their actual food costs or have terribly boring or limited diets.

The wife and I spend about 300/mo on food (not counting a couple dinners out which are probably about $30 each since we dont really care for expensive restaurants). We eat lots of fancy food as well, salmon, rib eye, etc... Heck I picked up a 10 pound pork shoulder this weekend for about $10, and smoked it for Easter.
Well eat that for a week or so. Raw ingredients are pretty cheap, processed foods are where the grocers get you. That and we have a decent garden where most of our fruits and vegetables come from.