Permanent Link: http://ufdc.ufl.edu/IR00002194/00001
 Material Information
Title: How Much Should We Spend?
Physical Description: Fact Sheet
Creator: Turner, Josephine
Publisher: University of Florida Cooperative Extension Service, Institute of Food and Agriculture Sciences, EDIS
Place of Publication: Gainesville, Fla.
Publication Date: 2006
Acquisition: Collected for University of Florida's Institutional Repository by the UFIR Self-Submittal tool. Submitted by Melanie Mercer.
Publication Status: Published
General Note: "Original publication date March 5, 2002. Revised April 27, 2006."
General Note: "FCS5229"
 Record Information
Source Institution: University of Florida Institutional Repository
Holding Location: University of Florida
Rights Management: All rights reserved by the submitter.
System ID: IR00002194:00001

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FCS5229 How Much Should We Spend?1 Josephine Turner2 1. This document is FCS5229, one of a series of the Family Youth and Community Sciences Department, Florida Cooperative Extension Service, Institute of Food and Agricultural Sciences, University of Florida. Original publication date March 5, 2002. Revised April 27, 2006. Visit the EDIS Web Site at http://edis.ifas.ufl.edu. 2. Josephine Turner, Ph.D., CFP, professor, Family and Consumer Economics; reviewed by Mary N. Harrison, professor of Consumer Education, Department of Family, Youth and Community Sciences, Cooperative Extension Service, Institute of Food and Agricultural Sciences, University of Florida, Gainesville, 32611. The Institute of Food and Agricultural Sciences (IFAS) is an Equal Opportunity Institution authorized to provide research, educational information and other services only to individuals and institutions that function with non-discrimination with respect to race, creed, color, religion, age, disability, sex, sexual orientation, marital status, national origin, political opinions or affiliations. U.S. Department of Agriculture, Cooperative Extension Service, University of Florida, IFAS, Florida A. & M. University Cooperative Extension Program, and Boards of County Commissioners Cooperating. Larry Arrington, Dean Most people wonder if their spending compares favorable with others spending. To help compare, nlets look at some reasonable limits for the living nexpenses of families: Family Living Expenses "Reasonable Limits" Take-home Pay $ ________ Item Per Cent of Take-Home Pay Our Family Food 13-15 $ % Housing 32-42 $ Child Care 15-25 $ Clothing 3.8 4.2 $ Personal 2-5 $ Transportation 17-18 $ Medical 6-7 $ Education and Recreation 0-10 $ Gifts and Contributions 0-10 $ Misc. and Emergency 2-10 $ Savings 0-10 $ Insurance 0-11 $ Total $ % These figures are based on take-home pay. That's pay you actually bring home, not what you make or even what you make after taxes. Most wage earners have deductions besides taxes taken out of their paychecks. These include insurance payments, credit union payments or contributions, and retirement fund payments. It's nalways safest when looking at a budget to nconsider just the money you have direct control nover-that's the money you actually see on npayday. Many mistakes and headaches about a nbudget start when its figured on gross or even nnet pay. This is just a little added insurance to nhelp a budget work when you begin with the n"take-home pay". For families not on a regular paycheckthe farm family or any family, in which the major sources of income is from a self owned business use the total amount of what you spend for family living expenses for your take-home pay figure. What Are You Now Spending? Write down your total take-home pay on the preceding chart. If both husband and wife are working include take-home pay from both.


How Much Should We Spend? 2 Using records (or reasonable guesses, if you ndon't have records) jot down what you spend for nfood, housing and the other categories noted nabove. Finally, figure out the percentage of take nhome pay you spend for each category. Divide namount spent in a category by the total amount of ntake-home pay. For instance, consider a family nwith $3,000 each month. This family spends $500 nfor food, so the percentage spent for food is 16.6 npercent. ($500 divided by $3,000 = 16.6). That is on the high end of spending range for nreasonable limits for food expenses. Why Do We Spend Different Amounts? Why do we have a range for the reasonable limits nin a family budget? All families are different, so nall have different spending patterns. Where you nfall in a particular range will depend on several nthings. Let's consider some of them. The stage in the family life cycle is an important nfactor to remember. Newly married couples may nhave a household to set up, buying among other nthings furniture, appliances, pots and pans, ntableware, and various staples. Families in other nstages of the family cycle also have unique nneeds. The amount and source of your income is nimportant in determining how much of your npaycheck goes for certain things. As income goes nup, you probably will spend less ( percentage nwise) on some things, such as food and medical ncare, but may spend a larger share of your npaycheck on other things such as housing, nclothing, or personal items. Depending on what nyour job is and where it is, you may spend more nfor clothing, food and transportation than nsomeone who has a different kind of job. Where you live also determines how much of nyour paycheck goes for certain items. If you live non a farm, for instance, you may spend a larger npercentage of the family budget for transportation than someone who lives in a small town or larger ncity. The number of people in the family and the number of breadwinners also help determine how the family paycheck pie is sliced. Families have different spending priorities nbecause they think different things are important. The family who feels its important to give to the church or to give gifts to others will spend more for gifts and contributions than the family who places a low priority on these items. All families are different. They have different values. They all spend money differently because of their values. Any Unusual Circumstances? Your family may have unusual circumstances nwhich can put it at the higher end of the nreasonable limits (or maybe even out of the limits naltogether). Things like high medical expenses nfor a family member in poor health, children in ncollege, or a temporary job layoff are just a few nexamples. You probably see that if you fit near the upper limit of several of the categories on the chart, you'll only get about half-way down the list before you go over 100 percent. That means there's nothing left for the rest of the categories. This is a warning signal for you to take a serious look at your money situation. More important nthan knowing how your spending compares to other families is the fact that you know where nyour money is going and why. If you don't know, keep track for a month or so. Then, as a family, sit down and look at your records, the more naccurate picture of your family's spending the nmore effective your money control. What to Do If You Have Problems Be sure each family member knows the situation, nagrees something has to be done, and is willing to ncooperate to work out the financial problems. Look at the records you have of your spending nand decide what can be cut, at least temporarily, nuntil the present financial crisis is over.


How Much Should We Spend? 3 Cut down on spending. Stop buying on credit nuntil you get all debts paid. Consider consolidating debts into a single, longer-term nloan, but be sure the loan is one you can live nwith. This usually costs more in finance charges nthan if the debts are paid off as originally agreed nupon. Shopping around can save you money, neven on credit cost. Discuss your situation with your financial advisers-your family banker, attorney, or representative of a social service agency trained to help families with financial problems (your minister or social worker, for example). References US Department of Labor, Bureau of Labor Statistics.n2004. Consumer Expenditure Survey http://www.bls.gov/news.release/cesan.nr0.htm Table 1. Consumer Price Index for all Urban Consumers (CPI-U):US. City average by expenditure category and commodity and service group Turner, Josephine. 1989. How Much Should We nSpend? Extension handout. Alabama Extension nSystem, Auburn University, AL Basic Budget Calculator. www.epinet.org/datazone/fambud/budget.html