Your take home pay is what’s left after taxes and all sorts of deductions. In some cities, like San Francisco and New York, taxes can be as high as 30-35%. This is the recurring income you can count on. Don’t include extra income like an annual bonus or occasional overtime.
This makes managing and prioritizing easy.
• Bills (rent, car payments, utilities, and loans): Keep Bills under 5 units.
• Living (food, fuel & commute, personal care, prescriptions): Keep about 2-3 units, especially if you eat out a lot. Food spend alone will run you $300-500 a month.
• Extras (entertainment, night-outs, and impulse buys): Keep 1 unit, because having fun is an essential part of life.
• Wish List (rainy day fund, debt payoff, travels, and big buys): Keep 2 units if you can. 1 unit for savings and debt payoff, and 1 unit for enjoyment like traveling and splurge purchases.
Keep your spend on Living to $20-30 a day. Track your spend on Extras and Wish List on a weekly basis and try to stay under budget for these two money bags. If you receive extra income, put it towards your savings. You’ll be building up a nice nest egg in no time.
Your Rainy Day Fund is what you pay for Bills plus Living in a 3 months period. Think of it as your safety net. Save towards your Rainy Day Fund first. You’ll be glad you did.
$20 in living expenses a day
$70 in extras a week
$700 to save for a wishlist a month
$30 in living expenses a day
$90 in extras a week
$900 to save for a wishlist a month