Living on $46,000 a Year - Where it Goes

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Living on $46,000 a Year - Where it Goes

By JLP | April 19, 2007

Money has published an interesting slide show profiling five families and how they live on $46,000 per year. Each family’s profile is followed by a pie chart that breaks down their expenses. The last lady profiled spends 47% of her income on housing. OUCH! Another couple spends 41% ($1,700 per month) of their income on healthcare. DOUBLE OUCH! Of the five families profiled, only two of them tithe and one other family gives 1% to their church.

Topics: Budgeting |

Comments to “Living on $46,000 a Year - Where it Goes”

Kim Says:
April 19th, 2007 at 7:28 pm

I don’t understand. If she really makes $46,000 a year, than how does $675/mo. rent (includes most of the utilities) add up to 47% of her monthly income?

dimes Says:
April 19th, 2007 at 7:28 pm

We made ~$46K last year (including BAH and tax free combat pay). I guess I should break it down and see how we compare.

Dus10 Says:
April 19th, 2007 at 7:30 pm

That is just crazy. I was making $48K until two years ago, and I had to support a family of five. We had two modest vehicle payments, a house payment, 401k, and food. We did it without any credit cards.

We spent:

$9960 on mortgage (P&I, Escrow)
$7800 on cars (loan, insurance, gas)
$5200 on food
$2000 on clothes
$4000 on utilities
$3800 on 401k

The rest was some taxes (FICA), healthcare, and ancillary expenses.

Curious Says:
April 19th, 2007 at 7:34 pm

I asked the author of the piece about the tithing, and whether the people were chosen according to some profile. He said that the subjects were chosen at random, which for some reason I find interesting. I wonder what proportion of middle-income folk tithe, also vs. upper-income.

JLP Says:
April 19th, 2007 at 7:42 pm

Kim,

You’re right. It doesn’t make sense. In order for her housing expenses to take up 47% of her income, she would have to be spending over $1,800 per month.

Andy Says:
April 19th, 2007 at 9:05 pm

Ouch. 21% for credit cards.

Eric Says:
April 20th, 2007 at 6:05 am

Kim,

I think they are only counting her spending, which is very low. I didn’t see savings as a category fr anyone.

KMC Says:
April 20th, 2007 at 9:56 am

Kim & JLP, could it be the result of taxes? I’m thinking her 47% is 47% of her (after-tax) paycheck. I didn’t do the math, though.

Moneymonk Says:
April 20th, 2007 at 10:45 am

They say the biggest killer of the middle class is their home. I guess most americans love to overextend themselves. I make more than $46K and my house payment is no where near what they pay.

Russell Bailyn Says:
April 20th, 2007 at 10:54 am

My impression is that housing, transportation, and food generally consume about 75% of the average person’s income. That housing number at 47% is definitely on the high side. But, better housing be the high number (potential savings vehicle) than transportation or food, which have no appreciation potential at all. I wonder what’s in those credit card bills?? I would be quite impressed if the average person was tucking 10% or more of pre-tax income into a retirement plan. I’d say that number is closer to 5%, or maybe 2%.

Chris Says:
April 20th, 2007 at 11:42 am

My wife and I are right in this 46k/yr income. We have the “big mortgage” relative to our income (its a 120k home) and our monthly expenses look something like this:

Savings: 15%
Investments: 5%
Living Expenses: 80%

Out of the living expenses, it ends up like this:

Mortgage (including insurance/taxes): 43%
Groceries: 14%
Dining Out: 8%
Entertainment: 3%
Utilities: 5%
Auto Loan: 3%
Phone/Internet (cell+land): 2%
Auto Insurance: 2%
Auto Fuel: 10%
Maintenance: 2%
Misc: 8%

Cheng-Jih Chen Says:
April 20th, 2007 at 12:31 pm

What does it mean that 21% is for “credit cards”? Interest service, or “I buy stuff on my credit card worth 21% of my income, and pay it off every month”?

There’s also no indication of taxes, so I have to assume this is all after-tax income. Which makes the 15% to the 401(k) not add up correctly in this example because of categorization issues.

I also take issue with the health care costs. It’s clearly out of pocket costs, but that’s not really how much it costs her to get health care.

Yeah, the reporter writing this piece, or the guy doing the charts in Excel: innumerate.

JLP Says:
April 20th, 2007 at 12:37 pm

Cheng-Jih Chen,

Yeah, you’re right. The author could have done a better job explaining how they arrived at their numbers.

eR0CK Says:
April 20th, 2007 at 12:47 pm

Wow, cost of living must be cheap for some of the posters. I live outside of Philly and there is no way I can afford even a condo at my current salary (close to $46K, but not for long).

Here are my costs of living, after taxes and 6% of salary removed.

Cable 2.48%
Rent 29.78%
Heating Oil 1.60%
Other 2.98%
Car loan 10.99%
Student Loan 13.12%
46″ TV 1.42%
Electric 1.42%
Gas 2.13%
Food 4.61%
Cash 3.55%
Gym 1.06%
Insurance 5.32%
Apart. Ins 0.71%
Credit Card 3.55%

I never looked at my finances in terms of percentage, but as you can see it would be difficult for my to cover a mortgage considering TCO. The ~20% left over is usually spent on dinner, extra gas, and other item(s) I’m not aware of (oops!)

I think I need to get some spending under control, ouch!

Foobarista Says:
April 20th, 2007 at 2:23 pm

Yeah - for us, our “expenses” could actually look somewhat similar, if you only consider expenses and ignore savings and taxes. If you go by total gross, our savings is about 50% and taxes of all kinds are another 30%. We live on the remaining 20% of our gross.

thefeeonlyplanner Says:
April 20th, 2007 at 6:20 pm

JLP,

Money also had an article on a family with two daughters who are way into music (and raising horses too) and who are slowly but surely are on their way into becoming financial basket cases!

I would love to read comments from other readers on that family and how far should parents go for their kids…I love my kids but if they ever came to me with a request to buy a violin costing six digits I would tell them to take a hike:-)

Cents You Asked Says:
April 21st, 2007 at 8:06 am

looks like they updated the last pie chart to correct the 675/month = 47% issue.

Quickies: The Power Of Choice, Umbrella Bank 5.50%, Spending Breakdowns » My Money Blog Says:
April 23rd, 2007 at 7:09 pm

[...] » JLP points to an article that profiles families earning $46k a year and where it all goes. The pie chart was what caught my eye. What would my spending chart look like? Or yours? [...]

Jenna Says:
August 28th, 2008 at 6:15 pm

I make 46K right now and am single and live in a 1bedroom apt and most of my money goes towards figure skating training and my apt. i save no money and am losing money monthly.

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Living on $46,000 a Year - Where it Goes