3 Households, 3 Budgets: How We Divvy Up Our Paychecks

budget paycheckIncomes vary—but so do spending habits. Even if you earn a huge salary now or in the future, if you don’t learn how to budget your paycheck responsibly, you may never achieve financial freedom.

But let’s face it: Budgeting isn’t easy. Juggling your needs (home costs, transportation, groceries) with your wants (entertainment, vacations, eating out) is a constant challenge. Plus, racking up charges on a credit card for things that you want right now is often a lot more tempting than saving for the future.

But it’s important to take a monthly snapshot of your budget to make sure that you’re on the right track. As you'll see, that’s exactly what we asked a family of five, a single woman—and even me and my husband—to do.

To determine if we're all on the best financial course, we also asked Stephany Kirkpatrick, a CFP® with LearnVest Planning Services, to weigh in on what we’re doing well—and how we can boost our budgeting even more.

The Newlyweds

Jane Bianchi, 30, and Bill McGibony, 29
Location: Brooklyn
Occupation: I’m a journalist; Bill is a software consultant.

When we take the time to actually sit down and do the math, I’m delighted to see how much we are saving—buying a house and a car within the next few years are top priorities for us, so we’ve been socking away as much as we can. I’m also glad that we stopped paying for cable TV, and bought a $20 antenna for network shows—since we mainly watch Netflix, it was a waste of money. We also cut corners by avoiding gym memberships, and instead running in the park and doing exercise DVDs indoors. And we’re also very lucky that we have no student loans.

It does pain me, however, to see how much we pay in rent. Living in New York City certainly isn’t cheap, but it would be possible to find a more affordable place. If the money were going toward a mortgage, which is an investment, I wouldn’t worry about it. But when we rent, we feel like we’re just throwing our money down the toilet. That’s a big reason why we’re trying to buy real estate as soon as possible—we just can’t afford the down payment yet.

Looking at our budget, I also notice how we could spend less eating out for lunch and dinner. We’re on-the-go so much that’s it’s all too easy to grab a slice of pizza on the way home from work or order an appetizer when we’re at happy hour with friends. If we cooked more, and brought leftovers to work, we could save a lot more.

What Stephany Says: Holy savings, Batman! This is fantastic. Many New Yorkers find it hard to save money, so I’m thrilled to see that Jane and Bill are setting aside funds for future priorities—they should just make sure that part of this money goes toward an emergency fund and that it’s not all allocated for a house and a car. Trust me, the minute you drain your savings to buy a home, an emergency will come along—it’s Murphy’s law!

RELATED: 7 Reasons You Need an Emergency Fund

Although it's an area that concerns Jane, paying 28% of your income for rent in the city actually isn’t too bad. Their overall essential expenses (housing, utilities, transportation and groceries) are under 40%, which is less than the 50% we recommend. Keeping these costs low means that they have extra room for savings. So even though she feels like they're “throwing money away” on rent, they likely wouldn’t be able to buy a similar place for the same monthly payment, especially when you figure in property taxes, insurance and maintenance costs.

Setting aside a portion of your income for non-monthly expenses, like gifts and travel, is a good idea for anyone. You can do this by setting up a “personal escrow” savings account for such things. Jane and Bill should take a look at a calendar and map out planned expenses for the next year. Once they have this ballpark amount, they can divide it by 12 to figure out how much they need to set aside in a separate account each month to pay for these anticipated expenses.

RELATED: Personal Escrow 101: What You Need to Know

  • Keisha

    It would have been nice to see a single parents budget represented since that is definitely a common profile. Its great to see families, but at the same time a lot of single parents like myself are always trying to find ways to create a budget that is comfortable to support a family of 3 or 4 or whatever on one income as well.

    • Ellie

      The second profile was a family who survives on one income, so that might be of help to you. It is a family of five, but only the husband works.

    • Clementina

      But the family that was profiled is a single-income family, so from a financial perspective, isn’t that basically the same as a single-parent family?

      • Guest

        Not if child care is one of your largest expenses. Single-income and single parent families do have very different profiles in some areas of their spending. And there’s the fact that if one parent loses their job, the other can enter the workforce; single parents do not have that option.

      • Keisha

        This hits it right on the head! Single parent budgets and Single income
        household with 2 people budgets look very different. Daycare is a huge
        expense for a single parent and there is NOT an option to not work.
        Great response.

  • tracy

    Keisha, I wanted to see numbers as well. Yes, a low income family would have been nice. However, great article, it is interesting to see how people prioritize. I think the single teacher is at a time when she can go out, once she is back in school, she will have less free time, so those expenses will go down. I think it is nice to see different seasons. I would have also liked to see a retired person’s budget, it is tough to get an idea of what is realistic. Especially since most people will not have pensions, and social security will most likely be changing, it would be good to see the basic expenses for both a married and single retired person. I would love to see a follow up to this article.

    • Keisha

      Tracy, yes a low income family profile would have been nice, but I was more interested in a single parent income (whether it be low or middle or high). But a single parent’s budget looks drastically different because there are other factors that are taken into account like daycare. Yes, it was a great article, but it would have been helpful to have included a more common profile.

  • Dee

    This article is useless without knowing how much money they make. Ratios are only relevant when used in combination with income. It’s not that impressive for a person making $1 million a year to save 30% of their income, but it is impressive for a person making $25k to save 10%. If the participants did not want to disclose their income they should not have been featured.

    • erica o

      I think the percentages is what makes it easy for the reader to understand how each family/individual divide up their finances. You are right in your example that it is impressive for someone making 25k to save 10% but it depending on their expenses it may not be. Percentages help one understand the commonality between people with varying incomes. I also believe that’s why you often hear people using percentages when setting ‘financial guidelines’

    • vicki

      I too would have liked to see hard numbers. Essentially from teacher’s budget, if she made $50k/yr, she spends $625/mo on rent. I’m in SoCal. The places you can pay $625 are not areas you would want to live in if you can even find it.

    • steve

      I agree that this article is unhelpful without actual dollar amounts. I was very disappointed in looking at the charts because I realized I had no way to relate to the percentages since the income I bring in is probably quite different from what these people bring in. This means I don’t know if I’m spending much more or less than they do on, for example, groceries.

  • vballdavid05

    Very disappointing that LearnVest couldn’t find people willing to share their actual numbers. Give us their income and actual dollar expenses on categories. I’d be willing to share my financials (I track every expense we make in a month, so we have an accurate picture of where our money is going). 27 & 25 year old couple, living on $58,000 in DFW Texas.
    I appreciate the intent of this article, but it really didn’t have the meat the readers wanted.

    • tokoloshi

      What is even more disappointing is this: Why does the expert Stephany not comment on the total absence of health insurance, lifeinsurance et al? Only the youngest , the single woman, does set aside a small insurance for life insurance. all the savings of the first couple will be gone in an instant, if they don’t provide for medical emergencies. or are they all 100% covered by their employers? that would only emphasize the point made earlier, about the missing of actual figures.

  • Susan

    I too wonder why in 3 scenarios, not one person had anything budgeted for health insurance and health care. The teacher did have 6% for “fitness and wellness”. My husband and I are both self-employed, in our mid-50s and pay a combined $1025 in monthly health insurance alone, which is as much as our mortgage payment. We may be in the minority but I know very few people who are 100% covered by their employers. And EVERY family has the occasional doctor visit, mishap, etc. that falls under the deductible. What gives?

  • george_porg

    I am 61 and have saved about 10% of my income since the age of 30. I made the very deliberate decision that to save 20% would cost me too much in missing life experiences like visiting faraway family, go on vacation with my family, school trips, etc. I still have sufficient retirement funds, but I have to manage them very carefully. I would have been pretty well off if I had saved 20%, but the loss of life experience would have been too high a price to pay.

    Statistically about 1 out of 6 30 years olds die before they reach 65. If you save so much that you can’t enjoy life you may never enjoy the money.

  • Guest

    I think the single parent scenario would be interesting as well as a two-income family (where both parents are required to work). Daycare costs with one child equal 13% of our dual income and exceed our grocery and eating out budget.

  • Noticed

    the budgets laid out work for these individuals, but I do not see any one of them budgeting for health care premium expense…..