Living on $30,000 a year may seem tight, but by making the right choices and seeking proper resources, you can seamlessly navigate this journey. Since there are several factors to consider while budgeting, follow along as we provide tips and tricks for staying on track.
Understand the Numbers: Net versus Gross Pay
When you start to organize your monthly budget, you must ask yourself, $30,000 a year is how much after taxes? Depending on your tax bracket and deductions, this could equate to approximately $24,000 to $26,000 a year. Therefore, to net $30,000 you might have to have gross pay of $34,000 to $36,000 per year. Be to be sure to factor in your taxes when you’re calculating a budget based on $30,000 a year.
But even if you don’t have much income tax withheld you will still pay a FICA (Federal Insurance Contributions Act) tax, which is currently 6.2%, and Medicare tax of 1.45%. So in order to live on $30,000 a year, your gross pay should be at least $32,500.
Another way to look at the figures is to ask, “$30,000 is how much an hour?” Approximately $15.00 an hour for a 2,000 hour work year (40 hour work week and 50 weeks per year). Add another $1 an hour for each $2,000 in taxes if you want to net $30,000 a year. Understanding how your income works and the exact rate you accrue will be helpful in accurately tracking and allotting your expenses.
Generally, you should never spend more than 30% of your income on mortgage or rent. This should include utilities and homeowners/renters insurance. If you go over 30% or $750 monthly, you are considered “cost-burdened” and may have a hard time affording other necessities such as food and transportation.
If your city offers reliable public transportation (train, bus, subway. etc.), be sure to take advantage of it. According to the American Public Transport Association, taking public transportation instead of owning/driving a car can help save you close to $10,000 per year. If your city does not offer such amenities, consider carpooling to work with a coworker or walking if you live close to your office.
You should allocate 15% to 18% of your income on transportation. If you drive a car, this would include gas and car payments. This percentage range would equate to $375 to $450 monthly.
Food is pivotal to our health and survival, so you should allocate expenses for this category. Allot between 10% and 15% of your budget on food. This will be around $250 to $375 a month. Though this may be tight, grocery shopping and meal planning will help cut down on your food costs. Also, visit coupon and discount sites such as Groupon to take advantage of discounted food services.
It’s the status quo these days that you have a cellphone to stay in touch with loved ones. Though they can get pricey (especially smartphones), you can find services and deals that will only take approximately 5% of your budget or around $125 a month.
It’s important to save as much as you can no matter what budget and income you are looking at. Aim to allot 10% of your income each month to get roughly $3,000 in your savings account each year. Identify other areas in your expenses where you may be able to cut down and set that amount aside for your savings.
Other Options on Cutting Expenses
People’s financial circumstances are not the same. We each carry different personal responsibilities that affect our day-to-day and monthly expenses differently. So some people may need to find further ways to cut down on costs.
Needs versus Wants
Do you have a gym or a video-on-demand membership you rarely use? Think about all your extra monthly expenses and decide if you truly need them. There comes a time when you have to think about your needs versus wants and handle them accordingly.
Though these expenses might look small (say you have a $10 monthly gym membership), they eventually add up. This $10 will turn into $120 in a year that you would have been able to use towards other crucial expenses such as food, transportation, and/or your savings account.
Mobile Apps That Help You Save
Several mobile apps offer insight into the best prices on products and can help you budget These can help you take advantage of discounted prices on much-needed items.
- RetailMeNot – This app keeps you informed with deals on clothes, shoes, and food at the stores and restaurants you like to frequent.
- ShopSavvy Barcode Scanner– This app allows you to scan products and find online or local stores that also carry these products, and provides a price comparison.
Incorporating these resources and tips will help you budget and live on $30,000 a year. Whatever your financial goals are, it’s vital to have an organized process to set yourself up for success.
CreditAnswers understands that each person’s financial and personal circumstances are different. An income of $30,000 will translate differently across many people. That’s why we offer personal service through a diverse array of tools, tips, and techniques to help if credit card debt got you off track. Learn more by requesting a free debt assessment today.