Do you find that you run low or out of money before the next paycheck arrives? Is your credit card full of charges that never fully get paid off, and you wish for a month with no unexpected expenses so that you can have a chance to get caught up? If you are not budgeting and planning your income, this is probably a familiar situation for you.
Many people try to create a budget a few times a year and some even stick to it, while many others find it difficult. Maybe you have even tried and found that you could not make it work. That’s because “ideal” budget percentages are based on the “average” person or family, and you are not “average.” You are a unique person, or family, with your own needs and priorities. You need to create a budget that works for you. Before we look at some tips to help you create a budget you can live with, let’s look at an ideal budget for an average household.
The median household income across America is currently $69,000. It consists of 2. 6 people—typically two adults and one child. The table below shows the “ideal” percentages that should be spent for each of the major spending categories, along with the annual and monthly amounts for each category.
| Spending Categories | Percentages | Annual Amount | Monthly Amount |
| Housing (rent or mortgage, utilities, internet, homeowners/renters insurance, phone, cable) | 36% | $24,840 | $2,070 |
| Food (groceries and eating out) | 12% | $8,280 | $690 |
| Automobiles (car pymt, gas, insurance, maintenance and repairs | 12% | $8,280 | $690 |
| Medical (insurance and bills) | 5% | $3,450 | $287.50 |
| Clothing | 5% | $3,450 | $287.50 |
| Entertainment | 5% | $3,450 | $287.50 |
| Life Insurance | 5% | $3,450 | $287.50 |
| Savings | 5% | $3,450 | $287.50 |
| Debt Reduction | 5% | $3,450 | $287.50 |
| Miscellaneous | 10% | $6,900 | $575 |
At first glance these numbers might look doable, and depending on where you live, maybe these are very realistic numbers. However, where I live, it is hard to keep monthly housing costs to $2,070. The average monthly rent for a one-bedroom apartment is $1,750. That leaves $320 for utilities, internet, insurance, phone, and cable. A careful consumer might be able to manage that. However, an average family needs more than one bedroom, making it harder to stay within the budget for housing. Automobile expenses are also challenging. Currently, the average new car payment is $719, and the average payment for a used car is $527. When you add in fuel, insurance, and repairs and maintenance, you will almost certainly exceed the $690 budgeted amount.
In order to create a budget that works for your household and one that you can stick with, you will have to make some difficult choices.
Use these guidelines to help you make the decisions which are best for you and your family.
- Determine your needs based on the number of people in your family and your career.
a. The more people in your family, the larger the home and vehicle you need.
b. Each person requires food, clothing, and health care, so larger families need to allocate more money to those items.
c. If your job requires professional or business attire, you will need to allocate more money for clothing.
d. If you are required to drive your car for work, you will need a newer, reliable vehicle.
e. Does your household require more than one vehicle for multiple drivers?
f. Do you need to allocate money for childcare while you are working? - Determine your priorities.
a. Do you want each child to have their own bedroom, or can children share bedrooms?
b. Do you want to have a short commute to work?
c. Do you want to live in a specific community? Or a community with specific amenities?
d. Is it important to you to have a new car every few years?
e. Do you want your children to attend a specific school? Do you want them in a private school which will require you to pay tuition? - Consider the alternatives.
a. You may be able to afford a larger home if you are willing to commute farther to work.
b. You may be able to live closer to work or in your preferred community, if you are willing to forgo a desired bedroom or other amenity, such as a den, garage, or extra bathroom.
c. You may have access to safe, reliable public transportation, allowing you to forgo vehicle ownership.
d. You may be able to continue to drive an older car by engaging in ride sharing to work and renting a car for longer trips.
e. You can save money on food by packing lunches and cooking most meals at home.
f. You can save money on recreation by taking advantage of free sources of entertainment and recreation.
g. If you are single or a single parent, you could save money on housing by sharing a home or renting out a spare bedroom to a tenant.
h. You may be able to telework full-time, or several days a week, which will reduce fuel expenses and perhaps childcare expenses. - Use the “ideal” budget percentages to create a base budget. Use these budget numbers to help you see the areas in which you are overspending and underspending. Then, adjust your budget based on your current expenses and your needs.
- Refine your budget based on your priorities.
- If your expenses exceed your income, you must make additional adjustments. Consider the alternatives and make decisions based on which alternatives will best meet your needs and come closest to meeting your priorities
Creating a budget is not an easy task, but it is an important one. It will allow you to meet the needs of your family and relieve much of the stress you are currently facing.
To learn more about how to honor God with your money and build treasure in Heaven, please click the Finances categories tab to find many blogs on money management, budgeting, and stewardship. My book Honoring God with Your Money is a great tool for financial money management.
Susan's Reflections 