3 People, 1 Salary: How I Save and Splurge on $70,000

budget 70If you ask most people, they'll probably say that budgeting isn't terribly titillating ... unless, of course, we're talking about someone else's finances.

Let's be honest: Although you may not want to fess up to just how much of your monthly budget you blow on eating out each month, it's easy to judge the bad spending habits of others—like the next-door neighbor who just bought a second set of pricey wheels.

Yes, there's nothing like financial voyeurism, which is why we convinced three brave people, whose annual household incomes come in at around $70,000, to share the details of their monthly spending—and saving—habits.

And we do mean every detail: Each intrepid participant divided his or her budget into percentages, which were then color-coded in line 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, and debt payments), and the remaining 30% for bonus (read: fun) lifestyle expenses.

We then asked Nancy Anderson, a CFP® with LearnVest Planning Services, to review each budget to see how they are mastering their money—and where there's room for a little financial improvement.

Dave, 42, Civil Engineer

paycutI recently got a new job after being laid off earlier this year, and while I’m happy to be back at work, I had to take a pay cut in the process. My wife and I have two kids under the age of 12, so she works part-time as a teacher’s aide here in Utah. To keep our costs in check, she’s been great at reexamining our budget recently, and we’ve made cuts where we can. For example, she stopped going to Pilates, and I canceled my cable TV subscription to NFL RedZone—as much as it breaks my heart!

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I’m also tempted to remortgage our home, but we’re on track to pay it off right before my daughter goes to college—and I know that I’ll need the extra money more then than I do now. But I do worry about costs as my kids get older: Between my 12-year-old wanting to do nothing but shop, and my 8-year-old boy going through a growth spurt like every other week, it seems like we spend all of our money on clothing.

Luckily, I was able to contribute close to 50% of my paycheck to my 401(k) before we had kids, so even though I know it’s not the smartest move, I’ve scaled back on my current contributions. Maybe as the kids get older, my wife can start working more, but for now, we’re making it work.
dave budget
What Nancy Says: Congratulations to Dave for finding a new position in a tight job market! And they're doing a good job of still saving almost 10% of their income—even with a pay cut.

But instead of refinancing or cutting too far back on his retirement contributions, Dave should consider reducing even more of his family’s regular recurring expenses, like he did with the NFL channel. Do an energy audit. Set up a clothing swap with friends who have kids around the same age. Consider a ride share to reduce overhead. Dave has a great start for retirement, but he should be careful not to borrow from tomorrow for today. He can start by bumping his contributions to his 401(k) at least up to the match, and then increase it incrementally from there.

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  • Mary

    I would love to see this article looking at a 50k salary.

  • Nuna

    Wait, there will be others that will say they want to see 30K, 20K, etc. I think Learnvest came out with this article because people didn’t appreciate the simple pie chart not notating the amount (from a previous article)… I am sure they will write one- perhaps the people wanting lower income articles should write learnvest. They might be happy to feature you.

  • Vickie

    In reality $70k is a great salary… then there are those with masters degrees making $45-$50k… in California. Santa Monica at that. I’d have no issues at $70k LOL but that’s what I’m working towards with $40k in school loans and only $1k in credit card debt.

  • guest

    Kara needs to pay off her loan first. I don’t think any savings or investment (unless you are really lucky, but then it’s a gamble) is going to give a >=14.95% return. She should halt savings for a bit and then get back to it after the loan is paid off.

  • guest

    I would also love to see $40K or $50K, something more toward the national average. They can do mine! I love to see these, and think all of these people are doing great saving. Kudos!

  • JJ

    I’d really love to see a couples breakdown! Together my husband and I make $96,000 a year but I don’t think we’re anywhere close to saving and contributing to retirement as much as we should be. We’re planning to have kids soon and the added costs associated with that is really weighing on me. We stick to a strict spending budget of $140/week but have basically $0 in emergency savings since I’ve been focused on getting our student loans down and our car paid off. I read these analysis and I’m always trying to figure out how they do it!

  • Linda Goncalves

    Does anyone know whether LearnVest defines household income as net or gross? I’m guessing in this article they are defining it as gross since they are including 401K info with company match??

  • Angie

    I would please like clarification on this statement in the third example in the article: ( My company matches 50%, so my goal is to contribute the max—75% of my paycheck—through the end of the year to contribute as much as possible. ). Does this person really put 3/4 of his income into the 401K.

    • S Yiu

      I was asking myself the same thing. That statement makes no sense. The limit for most 401K contributions maxes out at $17,500. She could barely afford to pay for taxes, food, and housing if she were operating off just 25% of her income.

      • Article 3

        I can also pull from savings if I need to during this time. It’s worth it to max out the 401k. It’s like a 50% return right off the bat. I’m not getting that in my savings account!

    • Article 3

      Angie, I am the lady from article three. Yes, for the last four paychecks I have contributed 75%. Each paycheck ends up being about $320, so $650 a month. It’s hard, but worth it to contribute as much as I can to maximize the benefit of my company’s match. We are living off my husband’s income until January when I can cut back to a 35% contribution rate and still be able to max out my 401k.

      • Jaren Lutenegger

        That’s amazing that your company doesn’t have a cap on the 401k match!

  • Ali

    The fact that medical expenses are considered part of the “lifestyle” category, rather than essential or priority, says a lot about how we deal with health care in this country. (I’m assuming the medical expenses noted here are not cosmetic procedures…)

  • http://thebrokeandbeautifullife.com/ Stefanie @ brokeandbeau

    It would be interesting to see how location affects these numbers too. For instance, I live in NYC on 20-30k a year. THAT’S a tough budget to make work. Would love to see how others are doing it.

  • VBarkley

    Good for them for making a budget and sticking to it. Doesn’t look like they have credit card debt either. $70,000 is a decent salary, but any salary cut is tough if you’re used to more.

    4% on medical care? They’re going to have to beef that up in the future, thanks to Obamacare. It’s not so much the premiums as the copays.

  • Jessica

    How are medical expenses in the lifestyle category???

  • Sun Tzu

    Where is insurance on the list? It is the largest item on my budget. They should have broken it out.

  • disqus_J

    Charity? Anyone? Anyone? An income of $70,000 makes you privileged. If your giving to the less fortunate is not large enough to show up on a pie chart, something is wrong.

    • disqus_J

      And sure, there are exceptions, but this article makes it seem like a charity-free lifestyle is the norm.

  • Joshua_T

    I think two of the three example budgets given in this article are a bit inaccurate because two have spouses who are also earning money. At that point it is unclear whether the spouses income is also being considered in the pie chart. The spouse’s earnings would raise the total income amount past 70K. We need to see the real numbers if we are going to take these charts seriously.