What Should Your Monthly Housing Costs Be?

housing costsHow much of your salary should you be spending on housing costs? What do you actually spend? We decided to devote a post to this topic after seeing an interesting discussion about readers’ rent/mortgage payments as compared to their incomes.

Before getting to specifics about housing: The general 50/20/30 rule for budgeting is still commonly accepted advice. The guideline was made popular by Senator Elizabeth Warren (who happens to be a bankruptcy law expert) in her book All Your Worth: The Ultimate Lifetime Money Plan. As described in this LearnVest article, you should:

  • spend no more than 50% of your take-home pay on fixed costs: your rent or mortgage, utilities, auto loan, and regular monthly subscriptions (e.g., gym memberships, Netflix)
  • use at least 20% for saving money and reaching your financial goals, e.g., reducing credit card debt, saving for retirement, creating an emergency fund, building a down payment
  • spend no more than 30% on flexible costs — variable expenses like dining out, groceries, entertainment, clothing

This advice varies slightly according to the source — for example, Mint designates the 50% proportion as “absolute necessities,” i.e., not Netflix or the gym, and Feed the Pig (American Institute of CPAs) labels the three categories as “your needs,” “your wants,” and “your savings and debt repayments.”

Looking at housing costs specifically, the classic advice has been along these lines: spend up to 25% of your take-home payno more than 28% of your gross incomeless than 30% of your income, etc. This rule of thumb has increasingly come under scrutiny, though — it’s been called, for example, “almost meaningless” (Bloomberg) and “an arbitrary holdover from the New Deal era” (Fortune). (HUD actually points to the 1969 Brooke amendment as its origin.) Besides, it’s becoming harder to stick to this sort of guideline for housing costs when rents are rising by 3.5% each year, the median rent for a 1BR apartment in NYC and San Francisco is more than $3,000, and the median home price in San Jose has reached $1 million.

Readers: What’s it like for you? Do you try to follow guidelines like the 50/20/30 rule, or the rule about not spending more than 25-30% on housing? Is it even possible in your city? What percentage of your monthly income goes to your rent or mortgage payment? In general, are there any other budgetary guidelines you try to follow (or know of, but purposely ignore)? 

Pictured: Pixabay

 

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Comments

  1. That sounds about right… our mortgage is about 23% of our take home pay, savings is about 25%, and the non-negotiable payments in terms of car loans, insurance, utilities, etc… is probably another 20% or so.

    Hah, this post made me feel unexpectedly secure about my budgeting!

    Although, in a few months we’ll be adding daycare to this equation and I’m curious how much, as a percentage of their take home pay, you all spend in that category?

    • Almost 23% of our take-home. Wow. That’s the first time I ever calculated it and I want to throw up a little.

    • 16% of take home goes to childcare for one child. And we’ll be doubling that soon with kiddo 2. Wow, I had never calculated it either…Makes me feel sick too.

    • We pay the exact same as HSAL: 23% of our take home pay, which pays for our au pair and part-time preschool. My oldest is now in kindergarten. I take comfort in knowing that with what we spend on child care, we could pay tuition and fees (but perhaps not room, board or books) for both children to attend our in-state university.

    • Anonattorney :

      I don’t even know how to calculate my take-home pay. I always measure off of gross. My take-home is impacted by my mortgage interest deductions (which are significant), pre-tax contributions to my 401K (again, significant), and pre-tax contributions to FSA. My housing is 24% of my take-home pay, but without factoring in all those items. It’s only 13% of gross.

      Re: childcare – we spend 8.5% gross pay on childcare for one kid. Roughly 15% of our take-home pay. But, again, take-home doesn’t factor in that we will get a $5000 check from our FSA at the end of the year for childcare expenses.

      • You can use your FSA for childcare? Any idea if this is a special part of your account or if this is generally allowable?

        • If it is a dependent care FSA then you can. Check with your employer to see if you have that option.

        • Yes, a dependent care FSA is different than a health care FSA. Also note that there are income maximums to qualify–I believe $110K, but that is for an individual. My understanding is that if you make $300K, but your spouse makes $100K, he can still max out the dependent care FSA. (Also, it will decrease the amount you can claim in the childcare tax credit. IMHO, still worth it)

          • Anonattorney :

            I don’t think that there is an income cap on the dependent care FSA. There is for the dependent care tax credit.

  2. I spend nearly 50% of my net pay on a (rent-controlled) studio in DC, which includes utilities. Altogether I probably spend just over 50% of my take-home pay on fixed costs as I don’t own a car and have a very inexpensive phone plan. I’m able to live comfortably, but my savings are paltry, and I’m looking forward to a raise to help me keep my head above water.

    • I spend 50% of my take-home pay on a 450ft studio in DC, including utilities, wifi, & parking space. Glad to know I’m not the only one.

  3. A good friend got divorced and can’t afford his mortgage on his sole income. He kept the house, the ex got an apartment. The bank sent a letter to initiate foreclosure proceedings, but his attorney negotiated a $15K buyout. His plan is to pay that and then sell the house. He’s not underwater on the mortgage. He’s asked me to borrow about $4K, which I have in my emergency savings, with the offer to return with interest once he sells the house.

    I want to help, but I also don’t want to get burned. I’d want to draw up a contract. Thoughts on this plan?

    • Not unless you want to give him the $. If he can’t get it from credit card advances / family / 401K loan (which would be perfect) / some other means, consider it a sign that your $ is a gift and unlikely to be repaid.

      What does he need it for that wouldn’t allow for some sort of credit / installment plan / not taking a credit card?

      • Edit: why won’t the bank just take the $ from the proceeds when he sells? Can’t they just tack it on to the loan? They already have the security of the mortgage.

      • As I understand he owes $15K in back mortgage, which he needs to pay back before he can sell the house. His attorney negotiated the deal to keep him out of foreclosure. He is borrowing $10K from a family member, has $1K, and asked if I can contribute to the remaining $4K which he needs to pay by the end of the month if the deal holds.

        He told me his credit card and home equity lines were frozen because his credit score dipped as he’s 9 months behind on the rent. That seems truthful to me. I asked him a lot of personal financial questions, which he answered willingly/not in a sketchy manner.

        I appreciate any and all thoughts because…where else can I get neutral opinions. I’m the person who likes to help others, but I recognize this is my friend’s problem, not mine.

    • Don’t help. You cray girl? He sucks at managing money and is in debt because of it.

      • Anonymous :

        OP here. I hear that! Part of me has the same reaction.

        • Anonymous :

          Like, I’m appalled he dare ask you for this. He hasn’t paid his mortgage in 9 months and can still only scrape together $1,000? Where’s his money going? To bad so sad he will figure it out.

    • Can you afford it?

      How close a friend is this?

      I would consider it if you care about him/close friend, accept that this may be gift, and you can afford it. Sure, have some sort of contract, but I would view that as symbolic.

      • This is a close friend who I respect a lot. I know he generally is responsible and think he got in over his head by keeping the house in the divorce, so I don’t think that by bailing him out, I would set a precedent.

        I can afford it as a gift in the sense I could build up the $4K savings in 3 months, and I have steady income. I won’t suffer or have any change in lifestyle without it.

    • Anonymous :

      I only lend money to friends if I’m okay with never getting it back. Because people rarely pay back. Just be aware of that.

      • +1

        Some years ago my dad gave me the advice that I should consider any loan I make to be a gift, and decide on that basis if I would be willing to spend the money. Getting paid back should be thought of as an unexpected bonus.

        I don’t love any of my friends to the tune of $4k, sorry I’m not sorry.

        Also, OP, as someone who has successfully sued on an unpaid note and had to go through the collections process on behalf of a client, I don’t think it will make much difference, if any at all, to get a contract if you do decide to loan him the money. The collections process is difficult, can take years, and is unlikely to result in actually collecting all of the money owed. The contract will be worth approximately the paper it’s written on.

      • Agreed with this, and needing money can do strange things to people. I lent $3,000 to my best friend of over 30 years (which I was ok with her not paying back), and she stole an additional $1,000 from me. Whatever you do, DO NOT give him your CC Number to pay his bills no matter how much you think you can trust him… Lesson learned on my end!

      • Anonymous :

        Agreed! +1 it may make people feel “better” to have a contract, or it could make it worse if the friend always feels he has that unpaid contract hanging over his head.

    • Never again :

      Do not do this. I have been in your shoes. Same exact situation where there was a divorce and the keeper of the house did not make the mortgage payment or property taxes either as we came to find out. I did make the loan so that the house could be sold. We drew up a contract and I had to chase that person down every single month for payment. So not worth it.

      Is his ex still on the mortgage?

    • If he’s a very close friend and your comfortable with the possibility of not getting the money back, go ahead and do it. My personal policy is to never lend money with the expectation of getting it back (even if that’s the “agreement”). You’re basically investing in a stock (and a risky-sounding one in his case based on “past performance”), so you may lose the investment, break even, or get a return. Ultimately, if your not comfortable GIVING him $4K, don’t do it. Money lending is an easy way to destroy/strain a friendship (e.g. What if he doesn’t pay you back but you see him spending money on discretionary items? What if he perceives you as haranguing him for repayment or judging his spending? If you draw up a formal contract, are you willing to take him to court if he doesn’t meet the terms–and lose the friendship?). Also, beware of putting yourself in a financially precarious position if the $4K is an essential part of your own emergency fund. I’m not saying don’t/do lend, but do consider all the potential outcomes.

  4. eyeballing #s :

    A family member going through a divorce was asking whether she can afford her house (good school district, convenient to her likely job when she starts working again, good and affordable after-school care options).

    Mortgage pmt, which includes taxes and insurance = X
    Alimony + child support (all of which decrease) = 4X

    I think that the answer is yes. Or at least it’s not an automatic no. Maybe she sells after a while, but doesn’t have to immediately. She doesn’t think she’ll work for at least a year (when youngest goes to FT kindergarten).

    • That’s nice alimony! Wow…. Sounds like she can make it work. Agree that downsizing is probably a good idea.

      She should start looking for a job now and even consider part time work, and then definitely she can afford it.

      • I hear you. The alimony is more than I made for at my first and second post-law-school jobs.

        BUT I think she lost her credentials due to years of not working, so she is going back to school now to get recredentialled (and being non-credentialled, I think her daycare cost may equal her earnings). No reason it shouldn’t work out if this is the result she wants.

        • Sounds like she is ahead of the game that she already has a discipline, training in the past, and a re-training option. Yes, she will lose a lot to daycare in the short run, but she has a very good alimony cushion, and it sounds like things may improve with more years on the job.

          She can do this.

          Working will also help her recover psychologically from her divorce. She really needs a sense of accomplishment/success in life, and work can sometimes do that.

          • Anonymous :

            She has no idea, really.

            She was very much a “Doctor’s wife” as her whole world. And was on the Mrs. Degree program in her training, so wasn’t really ever planning to work (and worked maybe 2 years 15 years ago?). It doesn’t really compute at all — she was been of the view is what women do who don’t win the marriage lottery and is very disdainful of the whole thing, like we only work b/c we are losers and working is the worst thing that could happen to someone.

            It makes me yearn for the Dowager Countess (unrelated: Lady Mary now seems to be on a show where she kills people)

          • Well, I would never wish divorce and life upheaval on anyone, but I think her, her child, and society will be a little better now if she gets a slap in the face.

            Time for her to do her part.

            Throw some love at her child.

  5. I’m in Alexandria, VA, so fairly high COL, but not NYC or SF. My mortgage and condo fees and all that is juuuust under 35% of my take home pay. Savings is not nearly as high as I would like due to early life stupidity and now digging myself out of credit card debt, but my retirement savings is about 13% of my pre-tax. I still enjoy my life for sure, but most everything is going towards paying off that debt.

  6. Living in a HCOL city, I’m fortunate to have (relatively) low rent, so fixed costs (rent, utilities, transit) are about 40% of take-home. I’m paying down some debt and saving aggressively, so 30% goes to that, and we live off the remaining 30% with some left over every month. Also, since I’m paid biweekly, I’m not counting the two months with “extra” paychecks.

    I lived for years on much less, so tend to be cautious without focusing too much on the percentages. It’s mostly by feel, honestly. I need to see a certain balance in my discretionary account to feel comfortable, and if it’s dipping below that, I cut back for a while.

  7. 23% of my take home goes to child care.

    JFC.

    • That number is insane. I’d happily give extra tax dollars for better child care options. Probably better off moving to Paris for a few years until the nugget ages out of their creche system. Oh well… one can dream.

      • Anonymous :

        creche system?

        I am thinking of leaving babies in the Baby Jesus location of the Christmas creches, but perhaps this is something wildly different (and not resulting on a social services visit)?

        • pugsnbourbon :

          I believe in France, child care is subsidized; kids are taken care of in state-run nurseries called creches.

          • Anonymous :

            Are they good? I would be very hesitant to use free govt childcare here, esp for children <1.

          • Aunt Jamesina :

            They’re fantastic quality, but can have long wait lists.

    • When I worked as a full-time nanny in a HCOL area, the mom’s salary basically paid my salary. She joked that her company should have just paid me directly.

      • Even in my MCOL area, many people with really good jobs have daycare costs that are > housing costs, esp if they have >1 child.

        • Anonymous :

          Yep, our mortgage payment for a 4 bed/3 bath house in a LCOL area is $1200/month and daycare is $1400. To be fair, that’s the price for the best one and for infants, older kids are a little cheaper. But still.

          • I’m in a LCOL area, and our childcare for one kid in daycare is 17%, and our mortgage (PITI) is 22%. When we had 2 in daycare we definitely paid significantly more for daycare than housing costs, even if I also included home maintenance and utilities into the housing costs.

            We’re lucky now to have retired family members plus a cheap after school program available, so don’t pay all that much for my school age son – around 3-4%.
            I factored the $5000 I have taken out for my daycare FSA back into my take home, since I get that money back, but not the money I’m putting in an HSA since we have a high deductible plan and will probably wind up using most, if not all of it, this year.

            But neither H or I are contributing much to retirement pre-take home right now, so those percentages would go up if we did. On the other hand, we pay more than 15% of our *gross* salaries on our health insurance + HSA contributions to equal our deductible (which we will hit this year), so I’d say that’s one of our major expenses.

            And since we’re in a LCOL area, we also don’t benefit from deducting mortgage interest – it’s not enough to push us over from just taking the standard deduction.

            In terms of absolute dollars spent this year, here are our biggest budget items:
            1) Health Insurance + medical expenses (if we hit deductible, which is likely this year)
            2) Mortgage (PITI)
            3) Childcare
            4) Income Taxes (federal, state and city)

            I’d say over the years those top 3 have always been neck and neck, depending on whether we had more childcare, medical or home repairs that year.

      • Sydney Bristow :

        My brother and his wife are having a second child. They were on the fence for a long time because of the childcare costs. It seemed like one of them would have to quit their job because childcare cost more than their salary. I wonder what they decided to do about that. I know they both love their jobs so I guess it is possible they’ll both keep working and just bring home significantly less money.

    • Yep, I responded above before I scrolled down and saw yours. It’s awful. It’s more than my mortgage and student loan payment combined. Luckily next month it’ll be going down to 21%. Yay?

    • Anonymous :

      ~25% here. Ugh.

    • SuziStockbroker :

      Yes, when we had a full time nanny for our 2, and then 3 children, it costs more than our mortgage payment.

      We are down to a half time nanny/housekeeper now and it makes a big difference.

      In 2 years we will be mortgage free and we will only require childcare at all for another 3-4. So we’ll go from spending scads of money on the mortgage and nannies, to having neither of those payments within 5 years.

  8. Oh boy, this always makes me feel vaguely panicky.

    Our mortgage is 30% of my pre-tax pay (45% of post-tax/withholdings for retirement/daycare).

    All our fixed monthly expenses (incl mortgage, daycare, house maintenance, life insurance, tiny college savings for the little one) together are 35% of my pre-tax pay (55% of take home).

    Once I add in our average utilities and gas for the car and all that nonsense that varies but is on some level unavoidable (take out, Trader Joes, therapy) I’m up to 50% of pre-tax (or 77% of my post-tax) … which I guess explains why we always feel like “omg where is the money going?” (Especially this month, when we took a nice vacation and our credit card bill is stinging.)

    This is the first year we’ve owned, and we knew it would stretch us financially, but I’m hopeful that there will be a good tax refund coming up to bolster our very thin savings (and I’m also hopeful that my husband will get a part time job, shh).

    I am really trying to frame this as stretching while we’re starting out (like, our house was a STEAL for the ‘hood even if it’s a stretch for us now, and I have a contract which will have my salary going up for the next 3 years at least, and husband fully intends to get a job and make at least some money…) and then hopefully feeling a bit more comfortable down the road. :-/

  9. My mortgage is about 30% of my take home (which already has 12% out for 401k). Utilities on top of that are a few hundred more, and I also have a roommate…it ends up being about 20%. I’m not sure how I afforded that before refinancing and getting a raise, recently! But I also figure the remaining amount may or may not be huge % wise…but is still plenty of money. Whereas when I was 22 and spending $500 a month on my apartment, the remaining % was a lot fewer actual dollars…

  10. Anonymous :

    35% of my take home pay covers my mortgage, taxes and ultitlies. I’m okay with that because I live in a very low cost of living area so it only amounts to $700 a month and I’m comfortable paying that.

  11. Sydney Bristow :

    Our rent on a 1-bedroom rent stabilized apartment is about 22% of take home, sometimes less since my paycheck can change dramatically with overtime pay.

    My husband and I were just scared-joking about this last night. Rents have become so high in NYC that we can’t ever get divorced because neither of us could afford to live alone. If we did, our apartment would be 40% of my take home and my student loans are about 30%. So I’d already have spent 70% of my take home pay and wouldn’t have even bought food or paid for electricity yet.

    This does remind me that we need to get term life insurance though…

    • A lot of us are still living alone and in the same financial boat as you. You’d make it work.

      • Sydney Bristow :

        I’m sure I’d go back to living with a roommate and could make it work. And crossing my fingers for a lot of overtime.

  12. AnonLondon :

    London, Big Law, currently spend ~15% of my take home on my share of rent/utilities/joint household expenses. (This is about what I spent before my other half and I moved in together, as my salary went up, but I pay more of our joint expenses). If/when we buy, I expect that %-age to go up, but not by too much. I save like a squirrel though.

    • Sydney Bristow :

      You sound like you are doing awesome. Saving like a squirrel is a great metaphor.

    • Anonymous :

      I’m saving like a squirrel too! (I’ll have to start using that metaphor). I’m in DC BigLaw, and my fixed expenses are about 25% of my take home, spending money is about 20%, and savings/debt replacement is about 55%. likely, I’ll be done with student loans by the end of the year and will get to start banking all of that money instead of only part

  13. I work in NYC, live in Hudson County, NJ. Last year, I bought a 3 family house in a middle class immigrant neighborhood. Although my mortgage P&I, taxes & insurance are >50% of my take home, net of my tenants’ rent, my monthly payment is 31% of my take home. My nanny lives in one of my units. Her pay is about the same percentage of my take home. If you’re in the tri-state area and you are willing to assume the risks of being a landlord, I highly recommend this arrangement.

  14. We spend about 16% of our gross income on housing about an hour outside NYC. I am suuuuper conservative, though, and we owned both this house and our old home for 6 months, which was scary. We spend another 10% on childcare for a 6 year old (afterschool care + YMCA summer camp) and a 3 year old (year-round daycare/preschool).

    • We did that only with owning a house and renting an apartment at the same time. Very scary, but we also looked at it as a trial run for paying for daycare/children.

  15. I feel like childcare throws this advice out the window. Our mortgage + property taxes (we live in NJ, so about 1/3 of this cost is taxes!) are 25% of our take home pay; childcare is 13%. Other fixed nonnegotiables (auto and home insurance, medical bills on our high deductible health plans) are at least another 7%, which brings us to 45%. And that’s because we have only one child. If we add a second child, even we’re over the recommended figures–as people who are in the top 10% of households for earnings. I spend a lot of time wondering how other families make ends meet.

  16. Kansas City, DINKs in Healthcare IT. We’re at 15% for the rent on our house (god bless low COL cities) and follow Feed the Pig’s definitions for the 50/20/30 rule. We’re actually at 39%/ 26% (not including retirement/34%. We’re aggressively paying down our debts and will put 20% down the next time we buy a home with the idea that if one of us feels that we want/need to stay home when we have kids, we are prepared to do so financially. I love the ratios, but also track individual areas so we don’t get too lopsided (say spending too much eating out rather than on travel / other important things)

    On a related note…does anyone have any recommendations for determining how much you should save % wise for your retirement and/or if you’re on track for your current age? We are in our late 20s and have around 150k saved not including the pensions from our previous jobs and I’m at a complete loss on how to figure out what to set our monthly savings at.

    • I hear you on being unsure how to calculate retirement savings rates. There are a number of online calculators you can try, but those only get you so far, and are based on the assumptions you plug in. I’ve decided that it’s time for us to have a few meetings with a fee-only financial planner, to get an outside opinion on the subject.

  17. Fixed – 25%
    Student Loans – 25%
    Savings/other debt – 20%
    Everything else – 30%

    although I admittedly don’t have much other debt at the moment so it’s been more like 15 % savings and 35% fun…

    401K and taxes of course come out before this number

  18. sbux bean counter :

    Two incomes, very similar, but we don’t figure my bonus and commissions into our budget since they’re sporadic and unpredictable. We have 1 kid together (1st grade, private school + aftercare + summercamp) and two from his first marriage, approximately 7% to school, 6.5% to child support for the teens. Our PITI is about 18%. Total fixed (including min. student loan pmts, cars, phones, groceries not dining out) is 45%. Our net income (net of all payroll deductions like taxes, 401k/roth 401k, ESPP, DCFSA, HSA, parking, insurance premiums) is about 64% of the gross.

  19. single mom :

    Housing: 19% take-home pay (incl. child support)
    Daycare: 20% take-home pay
    Loans: 48% take-home pay

  20. Housing is ~15% of take home
    childcare (for two kids) ~20%

    We purposefully bought a smaller home than we could “afford” knowing that daycare would kill us, but even with raises, it’s tough.

    There just aren’t many financial situations that can absorb $30K cash outlay every year, for 4 years straight. (Kid 1 was $15K/year, now at $30K/yr for two kids, then estimating will be back down to $15K/yr when Kid 1 is in public school – inflation has kept our area daycare rates fairly consistent per child at around $300 per week per kid.)

  21. Reading this article from Feed the Pig:

    http://www.feedthepig.org/get-started/spending/managing-habits#.V7YGwKKrNu0

    Since I bought a house last year, which significantly increased my housing costs, I’ve been in habit reform mode and it’s been a struggle. I have successfully chopped my clothing and shoe habits down to very minimal levels (I culled my closet down to what I really wear and love, and vowed to only purchase to replace, and have largely stuck to that vow), but you know what? You can pry my fancy lattes out of my cold, dead hands.

  22. Boy is this a timely one! We are trying to figure out how much is a sane amount for monthly mortgage. The snag is that SO works in finance and receives a lump sum bonus which can be anywhere from 50% of his salary for the year to much, much more. No loans or debt. We are also big savers and don’t want to get ourselves into a golden handcuffs situation where if he wants to change jobs or the market has a bad year, we are in big trouble with an expensive house because of how much his salary can vary. I went from biglaw to inhouse and took a paycut. Very interested to read these, so thanks for the input everyone!

    • sbux bean counter :

      Word to the wise – if you don’t have great documentation about the expected bonuses, your lender will probably not allow you to include it as a part of your income when calculating debt to income for mortgage loans. We found out the hard way… It worked out in the end but another hassle and really messed with our calculations!

    • Smart to avoid the golden handcuffs situation.

    • I’m the poster up there who’s stretching, but … could you get a house that would be affordable on your salary + his salary *excluding* his bonus from the calculations? That would give you a huge opportunity to save / pay down your mortgage quicker, and might help with those Golden Handcuff worries.

  23. I just did the math and I’m spending 33% of my take-home pay on a 3BR place in Boston. But it’s only 16% of my pre-tax pay. I’m sort of unsure whether I should panic or not. I’m maxing out my 401K, employee stock purchase program and save $1,500 to 2,000/month outside of those. Annual base salary is $241K.

    Should I panic? Please advise.

    • Totally don’t panic. If you’re maxing out your 401K, then you’re putting a huge percentage into savings. For this advice to apply to you, you’d probably want to compare to your take home pay PLUS voluntary deductions

      • So that’s what I was thinking, but this article (https://www.learnvest.com/knowledge-center/your-ultimate-budget-guideline-the-502030-rule/) seems to calculate the 50/20/30 situation by looking at your income net of both taxes _and_ 401K.

        Hive, is that how y’all calculate it? I have been thinking of my 401k contributions as part of the “20” category.

        • I really think that advice is written for people who are putting a few percent of their salary into a 401k–when you saying maxing, I’m assuming that you’re talking the maximum $s allowed under law, not the max up to which your employer will match? If so, and with the amount you’re putting into other savings (good to have some unrestricted), it doesn’t sound to me like you have anything to worry about

    • Anon Cambridge :

      Your numbers and my numbers are nearly identical – 31% for a 3BR in Cambridge, also maxing out 401K and IRA and saving similar amounts. I feel good. I will probably feel a little less good when childcare costs kick in, but will cross that bridge when we get to it!

      • Thanks, all. Very reassuring. When I do it off of my net pay but before 401K and ESPP deduction, it comes out 25%.

        And yes, “maxing out” = up to the federal limit. Employer matches $6K on that.

        I also forgot that I also put my annual bonus straight into savings every year, so that’s anywhere from $25K to $40K, post-tax.

        So I guess I’m probably okay. Thanks for talking me off the financial ledge!

    • We’re in the (inside 95) Boston burbs. Family gross income is 350-375k; our mortgage is $5500/mo. We have $300k+ in the bank for retirement at ages 31/32 and $200k in other savings. Two kids, childcare costs $1000/mo (I’m now part time; previously gross income was $425 but childcare was $4500/mo). No more student loans or car payments or CC debt. We each max our 401ks and IRAs. $500/mo into college savings. About $1000/mo left to add to savings. Not ideal but I’m now a part timer, which will change in a few years.

  24. 20 minutes from SF and mortgage is 15% of take home pay. But we way overpay each month — will be paid off in 2 months at which time we redirect all money to college savings.

    • wow. I am impressed.

      • We are a two salary family (now, didn’t used to be) but we live on one salary. Instead of buying bigger and nicer house we stayed in our fairly modest 3bdr/2ba to get it paid off…

  25. Twin cities.

    30% Mortgage and utilities, life insurance, car insurance, gym membership
    16% childcare for one toddler
    15% savings, 5% to student loans

  26. Anonymous :

    Bay Area. Mortgage + taxes + childcare for two (1 in public, but bundling afterschool and camps) + insurance puts us just over 50%, but I’m fine with that given declining trajectory of our childcare costs and job security/trajectory of raises. Max out both of our 401ks. Otherwise live pretty frugally, and so we’re just now starting to save for things like house projects. Our huge break is that a grandparent is funding 529s. If not for that, I’d be far more stressed.

  27. I’m a teacher at a nonprofit. Rent $830, phone $30, electricity $20, and internet $35, half of my take home pay. There is also the $300 to student loans; I’m always sad they calculate the repayment based on gross income.

  28. Single with child with special needs.

    Mortgage is about 18% of take home pay
    Student loans is about 12% of take home
    Child care is about 30% (ouch)
    Child’s Doctor, therapies, extra school help etc runs between 10-20% depending on the month
    Pay 6% to 401k and contribute to college savings and a very minimal amount to actual savings (125/month)

    So hard but proud I’m able to save and very blessed to have a job that allows me to pay for doctors and therapies for my child that so many can’t afford. It breaks my heart to think about kids that need help and can’t get it or don’t get enough.

  29. Anonymous :

    (City of) Chicago. Calculated on gross pay because I always have trouble calculating the retirement savings otherwise.

    Mortgage, including taxes and insurance: 11%
    Retirement savings: 15%
    Giving: 5%
    Utilities: 4%, but spouse’s employer pays probably 1/8 of this–a portion of the cell phone bill
    Transportation: 4%
    Taxes: 30% (don’t mind paying them, but since this is gross income, it helps for context on the other numbers)

    We have no debt other than the mortgage, we have a large emergency fund, we have no kids, and we’re homeowners, so retirement is our only long-term savings goal. We saved a lot in our twenties and are on track for that. Weirdly, I worry about money more than I ever did before, and I think it’s partially because the focus on retirement makes me think about needing enough money socked away to last the rest of my life.

    It surprises me that giving is not often included in budgeting advice, except in religious contexts. I suppose that many people start to budget when they realize they’re not making ends meet, so there’s not room for giving at that point. When I was a kid, 20% of our allowance was assigned (by our parents) to saving and 20% to giving. When I talk to my friends and in-laws, I’m often surprised how many don’t regularly set aside money to give, though they are people who value giving as a general idea. Maybe this speaks more to the value of having been taught to budget before I had actual income or expenses.

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