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Review
the example itemized below and the explanation for each expense that follows.
Then, based on the example, create a budget of your own using your actual
numbers. Typical Beginners Example MONTHLY INCOME & EXPENSE SUMMARY INCOME Wages
2080
Interest/Dividend
Income
20 Other
Income
0 Total
Income
2100
EXPENSES: Cash Payroll
Taxes
FICA Tax
160
Federal Withholding Tax
180 Rent
or House Payment
350 Utilities
125 Telephone
45
Auto
Fuel
105
Health
Insurance
100 Groceries
& Toiletries
150 Dining
Out
90 Entertainment
90 Media Services
50 Miscellaneous
50 Accruals Auto Insurance 100 Auto
Repairs
75 Auto
Replacement/Loan Payment
100 Health
Costs
30 Clothing
40 Furniture
& Equipment
50 Gifts
30
Vacations
25 Total
Expenses
1945 Net
Income/Financial Freedom Money 155
Note
all income and expenses have been rounded to the nearest 10. The example assumes
that you have a roommate to split the apartment expenses.
On that basis an explanation of each expense within the example follows: INCOME: Salary: $2080
$12/Hour x 2080 hours per year
divided by 12 months. Interest/Dividend
Income: $20 Assumption:
Starting out with savings of $5,000 as security for unforeseen circumstances x
4.8% interest. If that seems like
too much money, then maybe you need to rethink the whole moving out thing. If you can’t accumulate at least $5,000 while living at
home without
most of the expenses detailed herein, then you need to readjust your income
and/or expense levels before you move out, not after. EXPENSES: Cash Expenses Payroll
Taxes
You can’t cheat Uncle Sam, unless you
would like to be called by a number instead of by your name, so let’s get this
one out of the way first. FICA Tax: $160 FICA
taxes, consists of 6.2% Social Security Tax and 1.45% Medicare Tax for a total
of 7.65% must be paid on all earned income up to a maximum you probably won’t
reach till much later in your career. Therefore,
FICA Tax = $2080 x 7.65% Federal
Income Taxes: $180 Federal
income taxes are calculated by taking your annual
income of $25,200, reducing it by your standard deduction of $5,000 and
your personal exemption of $3200
resulting in a taxable income of $17,000. This
is taxed at 10% for the first $7300 and 15% for the next $9700, for an annual
tax of $2185/12= $180 per month. If
you own a home your standard deduction may be exceeded by your deductions for
interest and real estate taxes, thereby increasing your deductions and
decreasing your taxes. Rent/House
Payments: $350 Basis: Estimated rent of $700 per
month/ 2 roommates= $350. At this income level, you are probably renting, but if
you are fortunate enough to start out purchasing your own home, then you’ll
have to budget for a mortgage payment, real estate taxes, insurance, homeowners
association dues and maintenance in lieu of rent. In addition, your utilities that you will pay will increase
from just heat and electric to include water and trash removal. Utilities:
$125
Basis: Heat & electric. Water
& trash paid by apartment complex.
$3000 per year/12 months/2 roommates = $125
Add water and trash removal if you own or rent a home. Telephone:
$45 Basis: Landline telephone service $40
& Cell phone service $50 divided by two roommates.
You could eliminate either if you would like to save further.
Auto
Fuel: $105
Basis: 10,000 miles/year/20 miles/gallon x $2.50/gallon
=$1250/12months
Intelligently choosing the right type of car will minimize your cost in
this area. Health
Insurance:
$100 Basis:
Young and healthy. High deductible policy. Will vary hugely by circumstances,
health, gender, coverage and deductible chosen. May be paid in whole or part by employer.
Don’t even think of going without health insurance. Even
if you’re the picture of health, accidents do happen and health care costs can
be astronomical. Health
insurance can be very expensive. Try to have your employer pick up all or most
of the cost for this. If you must
pay for your own coverage, shop it extensively, as the cost will vary greatly
from insurer to insurer. It is
better to self-insure to some extent by assuming the largest deductible you can
afford. Then Basis:
Modest tastes. $35 per week. Buying and stocking up on sale items can keep this
figure at a very reasonable level. It
can be fun finding bargains and saving yourself a great deal of money in the
process. Stores
use different deep discount items to lure customers into the door each week.
Their intent is to have you purchase the few great deals advertised and
then also purchase the regular relatively high cost items.
Aside from absolute necessities, try to only buy the ‘low ball’ sale
items from each store in as much bulk as is practical.
Almost everything goes on sale. If
you’re only buying the low cost ‘loss leader’ items, your costs will be a
fraction of what they would otherwise be. Eventually,
you will build up a rotating stock of everything you normally use at a huge
discount. This is a risk free way to make money. Dining
Out: $90 Basis:
$20 per week. Can vary greatly with personal tastes, number of visits, gender
and marital status. Availing yourself of coupons, booklets and specials can
easily cut this figure in half or more. Obviously,
this category is highly elective and can be reduced to zero if necessary. Entertainment:
$90 Basis:
$20/week. Movies, theatre, drinks,
games, golf, dues, subscriptions, DVD’s, CD’s, movie rentals, etc.
Whatever turns you on. Highly variable in accordance with your tastes and
priorities. Coupons and specials
can lower the cost. Like ‘dining
out’, this category is also elective and can be sacrificed to increase the net
income from ‘ You, Inc.’ if necessary. Media
Services: $35 Basis:
Cable or Satellite TV $50 and Internet Service $20 divided by two roommates. Miscellaneous:
$50
Basis: All the little stuff that you can’t think of, but that just
keeps coming up. IE; Coin laundry, parking, tolls, snacks, pets, dry cleaning. | Bargain Buying | Land Lording | Protest Taxes | Net Contributor | Optimist | | Social Security Outrage | Timeshares | Next | ©2011
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