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How Much Should
You Spend?
People have different ways of handling and spending their
money, while certain people think eating out is utterly
necessary, some other people prefer to put a little money
aside for vacations to faraway places. In the end, the way you
spend what you make, is ultimately your decision and your
decision alone. However, when you apply for a mortgage or a
large loan, financial institutions will look at certain
spending ratios to determine whether you qualify. With all
these facts it is important to remain within limits when
spending on certain items and you should ensure that you check
with your particular lender to know what these limits are
precisely.
According to the U.S. Bureau of Labor Statistics Consumer
Spending Survey, most American consumers spend the following
amounts on the following items:
Food: 14.1%
-At home: 7.7%
-Away from home: 5.4%
-Alcoholic beverages: 1.0%
Housing: 32.9%
-This includes mortgage/rent; utilities; insurances and
upkeep/maintenance.
Transportation: 19.1%
-Vehicles: 9.1%
-Gasoline: 3.3% (In 2003)
-Insurance: 6.7%
Apparel and Services: 4.0%
-The cost of new clothes, dry cleaning expenses, etc.
Healthcare: 5.9%
-Doctors, dentists, eyewear expenses;
over-the-counter-medications, medical co-pays and deductibles.
This does not include healthcare premiums.
Entertainment: 5.0%
-Movies, outings, vacations.
Personal Care products and Services1: 1.3%
-Haircuts, salon fees, etc.
Reading: 0.3%
-Magazine subscriptions, books, etc.
Education: 1.9%
Tobacco Products: 0.7%
Miscellaneous: 1.5%
Cash Contributions: 3.4%
-Religious tithes, charitable contributions, etc.
Personal Insurances and Pensions: 9.9%
-Health insurance premiums, 401K contributions, life
insurance, disability insurance, etc.
The expenses made by each family will differ but if you find
that your own spending exceeds these spending statistics then
you may need to find out why you are spending excessively in
one area or the other.
Some areas that may be cut, according to most financial
experts include:
Transportation: if your transportation (car) costs are much
higher than the 19.1% national average, you may probably own a
car which is too much for your own budget. You should try and
downsize to a vehicle that is a whole lot less expensive. Not
only do you save money on monthly loan payments but you also
save on insurance premiums, upkeep as well as gas.
Miscellaneous accounts tend to be budget killers for a lot of
people. This is usually where people tend to spend the most on
unnecessary items. This is also where you should tray and
improve on by keeping things at least under 1.5%.
Entertainment can also be a budget buster for some people. At
most times the national average is usually 5% of your annual
salary, this amount usually tends to be quite excessive
especially when your salary is large. While it is often fun to
go out every weekend and pay the bill, you should try staying
at home once in a while and have an often quieter and less
expensive get together with your friends instead.
Food. A lot of Americans spend more than 14% of what they earn
monthly on food despite the size of their families or rather
regardless of it. More than half this amount is spent on
eating out at fast food joints and restaurants. It may be a
good idea to visit your grocer and eat at home in order to
save yourself a lot of money. |
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