People always think the grass is always greener when it comes to money. I am going to write a few posts about how you can be broke at any income level. My post on the average finances in America inspired me to take a look at this. It is up to us to determine how we are going to create the life we want to live. Today we are going to cover how you can be broke on $50,000 a year.
Take Home Pay with $50,000 a year
Before we determine what our take home we need to make some assumptions. We are going to assume we are single and also living in Dallas, TX. Texas has no state income and a lower cost of living than most of the coastal states so this will give us a great starting point for our calculations.
If we break down a $50,000 salary than it will give us a biweekly paycheck of $1,923. The first thing taken out would be our federal income taxes which would be $158 a paycheck. Then we also have social security and medicare resulting in another $137 taken out of our paycheck.
We also have our benefits that need to be taken our pretax. Let’s assume we spend $100 for our medical, $20 for dental, $20 for vision plus put $96 into our 401(k) every paycheck. This will give us a take home pay of $1,393 or a total of $2,786. It is important to note that we would still have 2 months that we get a third paycheck in. We will get to this later.
The largest expense for most people is their mortgage. I was able to find a decent 3 bedroom, 2 bath in Dallas. The house only cost $160,000 so if we put down 20% that would leave us a mortgage of $128,000. This results in a principal and interest payment of $611 a month. We also have to pay property taxes of $103.50 a month and homeowners insurance of $79.17 a month.
The next largest expense we have is our car payment. We bought our car for $12,000 and put $2,000 down giving us a monthly payment of $225 a month. We also have to have car insurance which costs us $135 a month. Luckily for us we don’t have to drive too much and our car only costs us $60 a month in gas.
We also have to pay the utilities for our house as well. The most expensive utility that we have is our electric bill. It gets hot in Texas so we have to run our A/C costing us $110 a month. We also have to pay $38 a month for our water and sewer, $31 a month for our garbage and $20 a month for gas. I am also a big sports fan so we have a more expensive internet and cable package coming in at $110 a month.
Our other major expenses are our other debt payments. We have a monthly credit card payment of $335 from some emergencies that we had to fund with our credit cards. We also still have our student loan payments of $450. Unfortunately we have several years left of this one.
The other major expense we have is food. We spend $240 a month on groceries and an additional $100 on eating out. You might think these are high for living by yourself but it works out to be less than $4 a meal if you eat 3 meals a day.
We also have a couple reoccurring subscriptions. The first is Netflix costing us $13 a month. The second is Spotify which cost us $10 a month. The last is our gym membership which costs us $40 a month.
If you haven’t been keeping track how much do you think we have left over?
It would leave us with a grand total of $30.33 for those that aren’t keeping track. That brings us to those 2 extra paychecks we have every year. This is how we can break the cycle and free up some of our income. Those 2 extra paychecks will give us an additional $2,786. Now we didn’t account for things like home maintenance, clothes, gifts, savings, charitable giving, vacations hobbies or childcare. All of which could really break this budget. But, if we use these additional paychecks to pay down some of our debt, we can free up even more money in the future.
Summary of Living on $50,000 a year
|Water and Sewer||$38|
|Internet and Cable||$110|
Just like every budget review, you might think certain line items are high or low. This is normal, we are all comparing budgets to our own. However, the point of this post is to show how easy it is to live paycheck to paycheck at every income level. For as many things in this budget that may be high, there are things that are omitted that may be in other budgets. For as many things that are low, there are things that are included that might not be in other budgets.
We all have a life to live and a budget to make. It is important to take control and use your budget to create the life that you want to live.
Have you lived on $50,000 a year before? Did your budget look similar? Let me know in the comments below!