Invest in Yourself
Finance 101
Financial planning is an ongoing process that is designed to limit your stress around money, through proper preparation. It is designed to address the needs of both your current self and your future self, so that you can meal your future goals.
Budgeting at Different Salary levels
50-20-30 Budgeting Rule
30% Rule
Realistically, no more than 30% of your monthly income should go towards your rent.
Any more that that then, you ma be leveraging yourself too much right now, which puts you at a greater risk during a rainy day. You want to be able to use additional income to save in an emergency fund, and to invest so that you can continue to multiple your income.
Ideally, this would be no more than 30% of your gross income. Your gross income, is how much your paycheck is before taxes and benefits get taken out.
Most people's monthly pay check if they work for a company that gives them a W-2 at the end of the year, looks something like this.
Sample Annual Salary: $22,000 (50 work weeks a year; 2 weeks unpaid vacation)
Hourly Rate: $11
Hours worked per week: 40 hours
Weeks worked this month: 4
$11/hour X 40 hours X 4 weeks = $1,760 monthly Gross Income
Gross Income vs. Net Income
The $1,760 from the sample above is your gross income. But in reality, when you get a check from your job, it's normally going to be much lesser than that. Why? It's because they have to take out taxes and other deductions.
Gross Pay - minus deductions/taxes = Net Pay
Gross Pay = $1,760
Minus Taxes and other deductions: $260 (just an example).
Taxes
Federal Withholding
State Withholding
Federal MED/EE - Medicare/Employer-Employee
Benefits
Health Insurance
Dental Insurance
Vision Insurance
Long Tern Disability
Short Term Disability
Life Insurance
Retirement Contribution
Net income = $1500
Rule: No more than 30% of your net monthly income should be spent on rent.
30% of $1500 = $450 (that's how much you should spend on rent.)
This is often hard to do considering how expensive rent can be in some cities. So here are some options:
Live with a Friend, Partner, or Roommate to reduce rent costs.
Move outside of expensive neighborhoods.
Seek governmental assistance programs.
Figure out if you can realistically spend more of your paycheck on higher rent, and research what that will do to your future potential growth.
Bring in more income by working a second job, or applying to new jobs. Don't be afraid to further your education if it helps you increase your pay.