Every person’s finances are unique. Just like DNA or a CD collection, the combination of income, savings, debts, splurges and strict budgets is individual. Yet, within that stipulation, some broader comments can be made. How much debt should we carry?
How much should we be spending on our house and home? And what expenses are most likely to be draining our hard-earned income? Here is a look at your prominent expenses, and how much experts suggest you should be spending on them.
Of course, these are just general guides to give you an idea of some averages.
The Number One Expense Is… 30%
For most Australians, our number one expense is housing. Whether you’re renting or paying off a mortgage, chances are the biggest chunk of your budget is heading towards four walls and a roof. Personal finance experts would say that’s fine, except the trend in recent years has been to exceed the recommended 30% threshold. For your finances to stay healthy, it’s recommended that your repayments comprise no more than 30% of your overall income. The rising number of mortgage defaults is a result of people taking on mortgages they couldn’t afford, so when interest rates move upwards, their only option was to default. It’s also recommended- as the past couple of years have shown us- that you save up more than 5-10% as a deposit if possible.
Superannuation And Savings: 14- 22%
Generally we don’t think of superannuation and savings as expenses, but they’re certainly outgoings, so let’s count them here. Super will be from 9- 12% of your pay, and experts recommend putting aside 5-10% of your income into a savings account. So, all in all, you’re looking at 14- 22% of your income heading into saving areas, almost as much as your house expenses.
Utilities And Food: 14- 20%
I read an article suggesting that low to middle income earners should budget 11- 14% of their income, after tax, towards food. That means, if you’re on $50,000 a year, you would have a budget of $135 per week to spend on food. It’s not a lot of money, but with menu planning, bulk buying and a little discipline, it’s definitely possible.
Utilities vary hugely from household to household. From what I could gather from a variety of articles, an average weekly spend (including Internet) is generally about $150- 200, although this average may rise significantly over the next couple of years.
Medical And Insurance: upwards of 6%
Medical is an increasingly prevalent cost, and one we cannot prepare for. Research suggests households are spending an average of 6% of their income on medical costs, so it’s worthwhile setting aside an equivalent amount as an emergency fund. Medical insurance is included in that figure but other types of insurance can comprise extra amounts to budget for.
Cost of living surveys show changing trends in how Australians spend their money. Eating out has risen, although food expenditure overall has dropped. Internet costs have risen, along with mobile phones and TV costs. School fees and child care also rose. Petrol continues to be the major expense (outside of complete necessities) for most households, so if you’re looking for a sure-fire way to save money, driving the beloved four-wheel monster less frequently might be the ticket.