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Percentage of net or gross? Mine is roughly 25% of net. I say roughly because I'm paid hourly so my monthly net varies, plus it's weekly so a few times a year I make more.
23.6% of gross and I rent. Sorry, I don't calculate it as % of my take home. Too complicated backing out 401k contributions, taxes, health insurance, etc.
Too complicated backing out 401k contributions, taxes, health insurance, etc.
You don't back them out... they're more important than owning.
The question is in how deeply you fund them all. Or not.
Then calculate how well your budget categories NET percentages can work out to.
Next biggest category for most is housing (w/utilities etc).
Keep it as low as you can stand.
If you back out 401k with a 70% multiplyer (to account for taxes) and add in the deduction for ESOP purchases it's around 8%. Probably the most true way to compute since those are optional deductions.
Keep in mind those with a mortgage a good percentage of it is getting paid back to you in mortgage pay down. Example, out of our mortgage 60% of that money is paid out but goes back to us and 40% goes out in the form of ITI, or interest taxes and insurance. That makes that figure even lower which is why owning is such a better long term solution.
I would *perosnally* consider anything over 25% to be really high.
Using a budgeting program it's neat to see what % spending is spent where. Obviously for most of the population housing will be one of if not THE highest. Transportation would be second. Food probably third.
Using that % you can recognize where cuts would be more effective. Example, it makes little sense to focus spending reductions on say a "pets" category if you spend a relatively small amount of total spending on it. You'd be better off focusing your attention to the heavy hitters first as it will have a much greater impact.
"Net" is too variable and misleading depending on whether you are a big saver or not. Using gross as the denominator is more meaningful especially because it give a clearer idea of just how much you CAN save based on current circumstances. Also, if you own a home that figure should include everything like interest, taxes, and insurance.
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