What percentage of our salary should we spend on our first home? -- NatalieAnn
With so many future goals, it's hard to figure out how to divvy up each paycheck. But here are some guidelines of the maximum percentages you should put your paycheck toward.
- 15% transportation: Including all car payments, gas, repair, insurance, taxis, and public methods.
- 35% housing: This means your mortgage, taxes, home insurance, maintenance, and any other living costs (utilities, renovations, and the like). It may be hard to stick to this 35 percent because of real estate costs, but get as close as you can. Before you sign on the dotted line for a mortgage, create a new budget that includes what the monthly payments would be. If you're cutting it too close, can't save, or have to drastically cut corners, it might not be worth it.
- 10% savings: Put aside money for your 401(k), IRA, and any other retirement or safety-net funds. Saving the full 10 percent may prove difficult when you first start out, but try to save at least 5 percent and increase your savings by at least 1 percent each year.
- 10% debt repayment: This means credit cards and student loans. If you don't have debt, put this money toward your savings or housing percentages -- whichever needs it most. Just remember: Pay more toward your credit card debt and the minimum on your student loans. In most cases, student loans are cheaper debts (because of the low interest rates) that are okay to stretch out.
- 25% everything else: Before you get too excited about this chunk of cash, remember that it has to cover your medical expenses (doctor visits and prescriptions), food, clothes, entertainment, and travel. Besides medical treatments and the necessary food items, this is where you can be the strictest with your budget. Track this spending closely (on a computer or even in your day planner) -- it'll help you narrow down what you really need. After all, if you can save here, you might be able to put more money toward your home, your retirement, or paying off your debt.
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More Money Q&A with Jean Chatzky
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Jean Chatzky is a money coach and the financial editor for the Today show. She is the the author of of five books including the upcoming Make Money Not Excuses: Wake Up, Take Charge and Overcome Your Financial Fears Forever.
>> Buy it now
>> Check out her website, jeanchatzky.com
by The Nest Editors
7/1/08
See more:
Buying a Home,
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