Here is a breakdown of the average spending for a parent in her/her late 20s with one child under the age of 5, making $60k in annual income.
Is this a good budget? Let’s take a look…
At $60,000/year, this person makes about $4,337/month.
Here are the usual expenses each month:
- Home/Mortgage: $1,300
- Transportation: $700
- Childcare: $650
- Food: $600
- Entertainment: $375
- Debt Repayment: $305
- Utilities (and phone): $300
- Healthcare: $200
- Clothing: $175
Total: $4,605
This leaves our average American at -$268 in debt each month.
This family is spending more than they take in on a monthly basis. We see why the average family in the United States does not feel financially secure. Many families and individuals, just like this one, are struggling to make ends meet and are living from paycheck to paycheck. Credit card debt has quadrupled since the 1980s and bankruptcies have doubled in the last 5 years alone (Source: usnews.com).
Times are tough, but there are lots of ways to save. Examining each of these spending buckets, here are some ideas for how this family might cut costs and move into the “green” next month.
Home/Mortgage:
- Rent vs. Buy: Sometimes renting is cheaper than buying, and sometimes buying is cheaper than renting. Take a good look at what you’re paying every month and make sure this is where you want to spend your money. Renting can provide you with the flexibility to get up and move when your next big opportunity comes along. Plus you won’t have to worry about fixing the water heater (or the many other things that can go wrong in a residence) when it breaks. If you know that you are going to be in one place for a long time, you like spending time at home, and you are fairly handy, buying may be better. Make sure to understand the real costs and benefits of home ownership and renting before you commit to a long-term purchase like a home.
Transportation
- Take the bus or ride a bike! With gas prices sky-rocketing, the Average American family spends $368.09 per month on gas (according to money.cnn.com). In Minneapolis, a 31-day unlimited ride bus pass costs between $59-$113.50 per month per person. By buying one, you could really cut costs in your transportation budget. Bus rides are a great time to catch up on reading or that phone call home to mom and dad that is long overdue. Bike rides are free and can save you the cost of a gym membership if you are riding every day.
Childcare
- Set up a rotation with 4 friends. One day per week per month, you and your spouse are in charge of watching everyone’s kids. That’s one day a week you have to either work from home or take it off. However, you’ll get 4 days off of your day-care bill per month. If you’re paying $650/month, that’s about $32.50/day. You could put $130 back into your budget each month with this rotation. It’s a great way to get to spend some time with your kids, too!
Food
- Make a shopping list. A lot of extra costs come from “shopping while hungry.” You can eliminate the urge to pick up everything that looks good at the grocery store by creating a list before you get to the store and sticking to it when you’re there. If something that isn’t on your list looks good, take a picture of it instead of buying it, and when you are making your next list you can think about whether or not it makes sense in your weekly meal plan.
Entertainment
- Create an in-home movie theatre. Going to movies these days can cost a family of four well over $50. Instead of spending that money, create a movie theatre in your family room with popcorn, soda, and other home-made treats. Rent a movie at your local Redbox for $1/day.
Debt Repayment
- Stop using credit cards. Learn about credit basics and try to eliminate or reduce your use of credit by saving for what you want or finding cheaper ways to get it (like Craigslist).
Utilities
- Cut the cable. I pay $75/month for cable and internet- that’s not a small amount. If I cut back on this by cutting out the cable and sticking with the internet, I could save about $50/month. Choosing a different option like a Netflix membership that would require internet but no cable is a great replacement. Plus, it only costs $9.99/month for a subscription!
Healthcare
- Shop for your prescription. According to Consumer Reports, Americans pay 477% more a year for generic prescription drugs at the priciest pharmacies than at the least expensive pharmacies. Try shopping for your prescription at a Costco or Sam’s Club. Download the app "GoodRX" to scan prescription prices at all of the pharmacies near you to locate the best prices. Assuming you spend about $450/year on prescriptions, shopping around could save you up to $37.50/month.
Clothing
- Go “Thrift” Shopping. Do buy things like wool sweaters at secondhand stores—why pay $75 for a warm sweater when you can get one for nearly $4? Don’t buy things like baking pans. Unless you want to be cooking in someone else’s rust, find a cheap new one instead.
Written by Kayla Johnson
This blog post is from the Author's perspective and doesn't speak for brightpeak financial. Contact brightpeak if you want to know more about brightpeak products, and keep in mind that they are not available in all states and there are some limitations (some exclusions and restrictions may apply).
