There's a reason why guests look in the medicine cabinet.
Not you, of course. Other guests.
It's human nature to want to get a peek at how other people live. (Reality TV, anyone?) It helps us to feel as if our mistakes aren't all that unusual—that our best efforts are good enough to keep up with the crowd because everyone else makes them too.
Today, however, we'll be engaging in another kind of look-see ... into other people's budgets.
Four brave souls have bared all (of their budgets) to show us how real people of different ages and financial situations budget to fit their lifestyles. All of these LearnVesters earn about $60,000 per year, and each one has reported his or her budget in percentages, which have been color-coded in accordance with the 50/20/30 rule. The rule recommends that you allocate 50% of your budget for essentials (housing, transportation, utilities and groceries), 20% toward financial priorities (retirement contributions, savings contributions and debt payments) and the remaining 30% for bonus (read: fun) lifestyle expenses.
We also asked Katie Brewer, a CFP® with LearnVest Planning Services, to review their budgets, so we can see how these folks are acing their finances—and where there's room for improvement.
Jeanette, 37, Writer and Private Chef
I'm a married mother of two preschool-age children who works roughly 30 hours a week while my husband works full-time at a law firm. I contribute approximately one-third of our family's household income toward covering the mortgage, utilities, our kids’ expenses, retirement and college savings, and all of my personal expenses. My husband contributes the bulk of our emergency fund and retirement savings.
My part-time, flexible schedule has allowed me to play a hands-on role in my children's earliest years—something that both my husband and I value. His salary compensates in the areas where I contribute less or not at all, including healthcare, car and home insurance, savings and travel. Once the kids require less of my time, I'll likely shift to working more in order to contribute more.
We'd love to be saving more, so I spend very little on clothes and personal items. We also travel much less than we did before we had kids, in part because it's more difficult, but also because it's more expensive now that four of us require airline tickets. If my income increased, that's where I would spend more!
Katie Says: It's great that Jeanette's family has managed to keep their fixed expenses low, and that the couple has started to save for retirement well ahead of time. It's not explicitly financial, but I'm also glad to see that she's found a great work-life balance. One thing that I would tell Jeanette: If you want to travel, start saving for it now by setting up a separate savings account and contributing to it a little each month, with the goal of taking a relatively affordable trip.
Isaac, 24, IT Consultant
I live in Washington, D.C., which is a city of boozy brunches, happy hours and other professional functions that can dig a serious hole in your wallet. This happens slowly over the course of a few weeks, but $10 here and another $12 there add up, and then you're left dipping into that ever-so-small savings account to buy lunch for the rest of the week. In D.C. you have to be careful not to party yourself out of house and home!
I get paid once a month, so the first thing that I cover is all of my "Must Pay For" expenses, including rent, cell phone, utilities, student loans and life insurance. Then I tackle my "Should Pay For" expenses, such as two large grocery trips (each costs about $100) and my $8,000 of credit card debt. My goal each month is to put $800 toward that debt, but I only pay off $400 of it when I get my paycheck, in case something comes up and I need that money. I hold onto the other half until the next pay period, and then I'll put whatever I haven't spent toward the credit cards. Otherwise, I'd just end up paying unforeseen expenses on a credit card, continuing the vicious cycle of debt.
The last group of expenses are "Would Love to Pay For" things. Most of this is the cost of enjoying life in the city—happy hours, eating out, shopping, parties, sporting events, concerts, cabs. The hardest part about budgeting for these expenses is that they change every month, but I try to take out about $200 in cash up front for them. If I go through that money, I may dip into the second half of the funds for paying off the credit card debit or the $300 that I have reserved for unforeseen expenses in my savings account.
Katie Says: Isaac is doing a great job keeping his essential expenses under 50%, despite living in such an expensive city. And although it sounds like he's having a lot of fun, his dining spending isn't too bad. Plus, I'm impressed that he's found a way to really distinguish between wants and needs at such a young age. One thing that might help him stick to a tighter budget is to set up two checking accounts: one for essential expenses and one for fun money. There's just one rule: The fun money account can't be replenished until the end of the month.