00:00 Speaker A
The average salary in the US in 2024 was around $60,000 a year according to the Bureau of Labor Statistics. That means after taxes, you likely bring home around $3800 per month according to ADP. And Yahoo Finance personal finance editor, Cassie Bond, is here to break down how someone with that salary can budget successfully. It’s a very important question. Cassie, if your take-home pay is just under that $4,000 a month as a single adult, how much should you be budgeting for necessities like housing, transportation, and food?
00:45 Cassie Bond
Sure. Well, as you can see, even though $60,000 a year is the national average, that really doesn’t translate to a whole lot of money every month, um, once you account for things like taxes and today’s inflated costs. So, um, these budget breakdowns are really based on an ideal scenario, but it’s important to point out that budgets are very personal, um, and you should absolutely feel free to adjust these numbers to meet your specific needs. Um, with that said, housing is generally the most expensive budget category for most people. And we recommend setting aside about a third of your budget for that. Um, food would be the next category at 15%. Um, that includes things like groceries, dining out, um, ordering DoorDash, what have you. Um, next is transportation, which should be about 10% of your budget. That includes car maintenance, gas, um, public transportation, rideshare. Um, and then things like utilities and healthcare should be around 5% of your budget.
02:11 Speaker A
What about savings? How does that factor into all of this?
02:18 Cassie Bond
Well, saving can be really tough, especially in today’s economy, but it’s also very important. Um, so we recommend setting aside about 15% of your income toward savings and investments. That’s going to include your emergency fund, um, saving for goals like going on vacation, and then very importantly, retirement savings. And we also recommend, if you can swing it, um, setting aside about 5% of your income in your checking account to act as a buffer. Uh, overdraft fees are very expensive, so you don’t want those eating into your hard-earned money. Um, and then it also affords you a little bit more wiggle room if an expense does come up and you don’t necessarily want to eat into that emergency fund.
03:15 Speaker A
Yeah, definitely important. Um, so we said this was for a single adult. If you have a family, if you start to grow your family, how then does that change the budget?
03:30 Cassie Bond
Sure. Well, the nice thing about being a single adult is that your obligations are probably going to be a lot less than maybe later in your career when you do start a family. Um, one expert we spoke to actually recommended, um, aiming for as much as 50% of your income in savings, um, if that’s something that you can afford to do. Um, but once you do start a family, you may be have a spouse or kids, your, um, daily essentials are really going to increase. Um, you know, you might be in the thick of mortgage repayment. You might be paying for childcare. And then your savings also needs to increase. Um, you might be paying towards a 529 plan for your kids’ college. You’re going to need a bigger emergency fund. So that really means you’re going to have to dial back that discretionary spending. Um, it’s really about making sure that you can afford today’s obligations and you’re planning for the future.
04:40 Speaker A
Speaking of the future, Cassie, how does all of this change when you retire?
04:47 Cassie Bond
Well, the good news is that once you’re in retirement, generally, your lifestyle costs are going to decrease compared to where they were when you were working. Um, you may downsize your home or relocate. Um, you’re just not going to have those same expenses. So that means it’s time to actually enjoy the fruits of your labor, um, and you can actually increase some of that discretionary spending. Um, that’s not to say that you shouldn’t still have a really solid budget in place. There are other expenses that tend to pop up in retirement, um, particularly healthcare costs. Um, but you can increase that discretionary spending, and you can dial back the savings too, because you’re now living off of your investment income that you worked so hard to generate.