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Last time in this series we took a look at how to be broke on $50,000 a year. Today we continue on in the series to discuss how you can still have no money at the end of the month on $75,000 a year. My post on the average finances in America inspired me to write this series on how different income levels can end up in the same place. 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 $75,000 a year.
Take Home Pay with $75,000 a year
Before we determine what our take home we need to make some assumptions. We are going to assume the same situation as last time, that 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. Obviously if you live in higher cost areas, a significant number of these costs will be increased.
If we break down a $75,000 salary than it will give us a biweekly paycheck of $2,885. The first thing taken out would be our federal income taxes which would be $372 a paycheck. Then we also have social security and medicare resulting in another $221 taken out of our paycheck.
We also have our benefits that need to be taken our pretax. Let’s assume we spend $150 for our medical, $20 for dental, $20 for vision plus put $145 into our 401(k) every paycheck. This will give us a take home pay of $1,957 or a total of $3,914. It is important to note that we would still have 4 months that we get a third paycheck in. We will get to this later.
The largest expense for most people is their mortgage. This time around I was looking for a place closer to downtown where we can assume we work. I found this 2 bedroom, 2 Bath apartment, right across from the records building. The house only cost $259,000 so if we put down 20% that would leave us a mortgage of $207,200. This results in a principal and interest payment of $930 a month. We also have to pay property taxes of $525 a month and homeowners insurance of $100 a month. This property also has an HOA fee of $687 a month. Given the location, your access to the amenities here as well as the proximity to the rest of the city, this might be a bargain for some.
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 and we are in an older brick building, so we have to run our A/C costing us $105 a month. Luckily the other utilities are included in our home owner’s association fees. The only other thing is our internet and cable which we decided to go with a high speed internet plan for $50 a month and AT&T TV which costs us $55 a month.
The next largest expense we have is our car payment. Since we live so close to everything, we really only have a car for when we need to move things or go on longer trips. We bought our car for $8,000 and put $4,000 down giving us a monthly payment of $175 for 24 months. We also have to have car insurance which costs us $95 a month. Like we said we don’t drive that much so gas only costs us $20 a month. However, we do buy monthly DART passes to use public transportation which costs us an additional $192 a month.
Our other major expenses are our other debt payments. Our monthly credit card payments are about $100 but we usually pay it off in full. The only other major debt payment we have is our student loan payments coming in at $325 a month.
The other major expense we have is food. We spend $200 a month on groceries and an additional $160 on eating out. You might think these are high for living by yourself but it works out to be $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 Audible subscription costing us $15 a month.
We also have a phone, luckily for us our plan isn’t too expensive and we only pay $50 a month to our provider.
We do have one other cost that we did not have in the previous post, and that is life insurance. Since we are going to assume we are young and relatively health, we are going with a whole life policy. We are going to be paying $100 a month for a million dollar policy.
For those of you keeping track at home, how much do you think we have left over?
All said and done, we have exactly $7 left over each month. Now if you are doing a cash envelope budgeting system, this may work for you. However, it is a little too close for comfort for me. After all, we didn’t include things like clothes, vacations, gifts and donations in our budget. Now using the above calculations is only taking into account 24 of the 26 pay periods. We have 2 extra pay periods that give us an additional $3,914. We can use for things like paying off our car or our student loans to try and free up monthly cash flow.
The other option you can try is investing that money to create more monthly income. If you are interested in creating monthly income I suggest you check out the Wheel Strategy and see how it can help you.
Summary of Living on $75,000 a year
|Home Owner’s Association||$687|
Like we mentioned in our previous post, you may see some of these numbers as high and others as low. That is the nature of looking at someone else’s budget. It is important that budgets line up with your priorities so you spend money where you find yourself most passionate. Everything else just turns into noise.
Does your budget look similar? Have you ever tried to balance a budget on $75,000 a year? Let me know in the comments below what you think!