Manage Money

How Much Can You Spend Every Month?

Having a good amount in the bank does not always mean that you should go on a spending spree. There are still things like debts and bills to take care of each month. Besides, you need to save for the future as well, don’t you? What all this means is that you need to spend less than you are earning.  

What you want is less money going out than coming in. In other words, your expenses need to be less than you’re your net income. Thus, before you think of buying something substantial, create a budget which takes care of your wants and needs.

How much should you spend?

When it comes down to your spending, it will be a good idea to use the 50/30/20 budget. When you use this formula, you can devote 50% of your net income to meeting needs like insurance and rent, 30% towards vacations and gym memberships, and 20% to things like savings and debt repayment. As you can see, your needs come before your wants, and what you spend always depends on how much you earn.

Start with your net income

At the end of each month, or at the beginning of the next month, you get your salary. It may look like a huge sum at first, but there is a limit to how much you can buy with it or do with it. That is why you need a budget. Now, start with your net income, which is your income after payroll deductions and post-tax deductions. The sum you arrive at now tells you how much you can afford to spend on things, from groceries to rent to gym membership.

But what if the money is not enough? Well, it won’t hurt to ask for a raise at work, get a promotion, change your job to one with a higher salary, or even take up part-time work in addition to your day job. If you want to cut back on current expenses, there are a few things you can do. For instance, you can do carpooling instead of using your own car each day. You can use coupons to bring down prices as well.

Pay the necessities first

If you spend on everything you like, you won’t have enough for the things you must have. For instance, you spend on an expensive gym membership and find you don’t have enough for rent. So here’s what you need to do. Start with giving 20% of your income towards meeting needs. Pay yourself first, and then set money for retirement and emergency funds. Once this is done, go to meet your debts. Have outstanding credit card debt? Tackle these next!

The next thing to do is to subtract all your regular bills. For instance, if your monthly net income is Rs. 50000, spend no more than 15000 on utilities, rent, food and the like.

Leave room for wants

A budget that caters to just needs may not be sustainable for the long run. You need to see your wants as well. That is why you may want to dedicate 30% of your income towards it.

Be flexible

Be flexible and open to options. Whether you are moving to a new city or whether the cost of living in your hometown has increased, it all depends on your income and expenses. If your expenses are high, do check your budget and spending habits.

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