The Rules of Budgeting — Tailored to a New York LifeStyler
September 15, 2009 by Lauren Fairbanks
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We’ve all heard the typical budget allocations for the rest of the country — 30% to rent, 20% to transportation, 15% for food. But how does this tie in with New Yorkers who tend to average about 50% of their salary or more on rent? Late last year, CNN posted a budget pie chart to show Americans where they should be allocating their monthly income. But we’re going to take a closer look at how New Yorkers are — or should be — budgeting their money.
Rent – 40%
Paying only 30% of your monthly income to living expenses? That’s a nice little pipe dream in Manhattan. It is possible to obtain this living in a borough with a couple of roommates, but let’s be real. On the lowest end, you’ll be throwing around 40% of your hard-earned paycheck each month to your landlord, and in some cases you’re looking at spending up to 50%.
Utilities - 5%
Most budget tend to include utilities such as electricity, heat and hot water into that category. In New York, better to play it safe and add an additional allocation line to the budget with around 5% going to utilities, since the 40% budget allocation usually only takes care of rent.
Food – 15%
In a city where it’s not unheard of for a jar of peanut butter to cost $4, you’ll be hard pressed to keep your grocery budget under $500 each month — especially if you eat out at lunch every day. But there are ways to cut back, namely cooking your own food and bringing it to work. A system that has worked really well for me is purchasing fresh vegetables, fruits, and herbs at outdoor markets each week, and stocking up on cheap pasta (usually .50 or $1 a bag), fish, and bread at the grocery store. Employing this method has allowed me to shave down my food budget to just 5% of my total monthly income — no lie.
As for lunch time in midtown, preparing your own food is really the way to go. But if you’re dead set on eating out each day, a salad payable by the pound over an $8 Cafe Metro sandwich might be able to cut down your eating expenditures. Or buying sides instead of a full meal (a plate of rice and beans at my local Cuban restaurant is only $4, while a full meal is close to $11).
Entertainment – 10%
I try to keep my entertainment budget at around 10% — this includes the occasional restaurant visit (which I keep separate from my basic food budget, because I view it as an evening out) and personal spending like clothes, jewelry and other items on my “want” list. Keep in mind, however, than I am single and child-free, so this would most likely need to skewed a bit if you have children and are living on a middle class salary.
Transportation -5%
This is the mecca of all commuting cities. Where other driver-friendly areas force you to put aside 15% – 20% of your income towards transportation, New York excels in this arena. If you’re utilizing buses and subways with a monthly unlimited pass, rarely should you have to spend over 5% of your income on transportation.
Savings – 5%
It may not be feasible, if you’re making under $40K, to save 10% of your income for retirement or an emergency fund. Unfortunately most people (a whopping 61%) don’t and are living paycheck to paycheck. So, if you’re stashing away even 5% of your monthly pay, you’re way ahead of the game.
Extras – 20%
This leaves an additional 20% (or more if you’re able to slash your food spending by half) for other line items, such as childcare, debt payments or insurance.
Obviously a budget is a very personal thing, and needs to be specifically tailored to fit your lifestyle. However, this is a starting point — especially for young single New Yorkers who just need to get into the good habit of rationing out their monthly expenses.
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Great post, Lauren. It IS amazing the money you can save if you just shift your choices a little bit. Eating out is a HUGE one for me…I’ve started going to Trader Joe’s instead of the overpriced D’Agostino, and even that has helped me trim my food costs. And I’ve always saved 10% to 401(k) and anywhere from $50-$100 a paycheck to “fun money” (weekend getaways, expensive concerts, plane tickets) to avoid credit card debt. It has worked!!
@ Sarah – Thanks! Eating out was the hard one for me to curb too — mainly eating lunch out in midtown. That’s a income sucker right there.
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