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The Budget Breakdown: A 26-year-old sales professional in New York on $6,600 a monthFeatured

Posted in:Advice Compensation Lifestyle Money

The Budget Breakdown aims to broaden the conversation on money and offer insights into various approaches to spending, saving, and investing.

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💰 Income

Monthly Gross Income: $6,600-8,300 dependent on commission

Monthly Net Income: $5,200-6,600 dependent on commission

🏡 Monthly Fixed Expenses

Rent: $1,453 (2 bedroom rent-stabilized apartment, living with 1 roommate)

Utilities (Electricity, Water, Gas): $100-140 (including internet and renters insurance)

Transportation: $140 (public transportation, Citibiking, Ubers)

Health Insurance: $424

Subscriptions: $128 (Spotify, NY Times, Audiobook)

🛒 Monthly Variable Expenses

Groceries: $298

Eating Out (Restaurants, Bars): $423

Entertainment (Movies, Events, Hobbies): $344

Clothing: $348

Personal Care: $180

Travel: $670 (personal travel, weekend trips, ski trips)

Home: $115 (furniture, frames, lightbulbs, etc)

💸 Monthly Savings and Investments

Emergency Fund Contributions: $585

Retirement Savings (401(k)/Pension, IRA/Roth IRA): $287

Investments (Stocks, Bonds, Mutual Funds, Real Estate): $287

🎁 Monthly miscellaneous

Gifts and Donations: $100

Health and Wellness (Gym Membership, Therapy, Medical Expenses): $100

⚖️ Final balance

Total income: $5,200-6,600 dependent on commission

Total expenses: $6,000

Final balance: -$800 to +$600

💭 Money Reflections

1. How much does tracking your personal finances influence your spending, saving, and investing habits?

It makes a huge difference in my confidence in what I’m spending money on and ensuring that it aligns with my values, and is in line with the amount of money I’m making that month. Especially since my income is variable, keeping track of every little expense takes the uncertainty and anxiety out of spending. When I make a little less money, I have a plan. When I make a little more money, I have a plan.

Generally, I stick to the 50% fixed / 30% wants / 20% savings rule. I enter my monthly income and my budget sheet calculates those ratios to determine how much I have to spend across each category. I’ve found this type of budgeting works so much better for me than going category by category (Rent, Home Needs, Groceries, Eating Out, etc). If I have a lump sum that I can spend on Wants (shopping, eating out, activities), then I don’t feel bad spending a little more on activities - I just don’t do as much shopping that month. The amount that I save is also proportional to my monthly income.

2. Is there anything you wish you would spend less money on?

I wish I didn’t have to spend as much money on health insurance. I would also love to spend less money eating out - I generally appreciate cooking more. If it is a lower-income month, the categories to spend less in are eating out, shopping, home needs (unless necessary purchases), and travel (unless necessary or pre-planned).

3. What do you consider important to spend money on?

I love to spend money on activities that I enjoy! Going to the movies with friends, art / writing classes, comedy shows, dance or theater performances, sports games, buying art or craft supplies, concert tickets, and museum tickets.

I also love to spend money on travel. I’ve recently opened a Sinking Funds checking account to help me spread out the cost of travel. I estimate the cost of upcoming trips and break up the total across how many months there are to the trip. Then each month, I put this amount away so paying for the trip is taken out of that account rather than a lump sum in that one month's budget.

4. Do you have any short-term or long-term financial goals?

Short-term:

Build my emergency savings to hold 4 months of fixed expenses.
Contribute monthly to a Sinking Funds checking account for travel, gifts, and home needs expenses. These are my most variable expenses, so putting away a monthly average will lessen the bill when they come up. It also allows me to save towards specific goals, reinforcing intentional spending

Long-term:

Once my emergency savings account has 4 months of fixed expenses, I plan to heavily invest to max out my Roth IRA next year! From there, I will continue to invest in retirement and in a Brokerage account for more medium-to-long-term goals such as buying a house, potentially going to graduate school, etc.

5. What is your approach to saving/investing? Are there any specific strategies you follow?

I am trying to fill one bucket at a time as I save in order to prioritize need and urgency.

First: 2 months of fixed expenses saved in my main checking account. This money is used as an emergency cushion in case anything unexpected comes up that I need immediate cash for.
Second: 4-month fixed expenses emergency fund saved in a High Yield Savings Account. I only opened this account this year, so I’m saving here most aggressively. This account will be used if (God forbid) I lose my job or have a large medical bill come up.
Third: Roth IRA saving. I was unemployed within the last year and was not able to contribute anything to my Roth IRA. This will be my third goal of saving.
Fourth: Brokerage account for other life goals that are not soon and not urgent.

I do not have specific investing strategies. I do have a relationship with the bank I invest with which has grown my confidence in having someone I can talk to about what’s possible. Right now my Roth IRA is passively managed, and my Brokerage account is actively managed. I figured active management fees were worth it for a year to balance out the portfolio, and I can cancel it once I don’t want to pay the fees anymore.

6. What was your relationship with money like growing up? Did you talk about it with your parents/caregivers?

Growing up, my parents and I discussed money very theoretically. They started a checking and savings account for me when I started to make money babysitting and working. We talked about the importance of saving money when I was young and would go together to deposit cash & checks and to watch the money grow in the savings account. We also discussed the basics of how banks work, interest, loans, and debt. They did teach me the fundamentals of spending and saving money.

I started to learn about investing when I was in college. My parents are good with money and have been very supportive in discussing my money with me (ie the decisions to start a RothIRA account as well as an employer retirement matching account, suggesting that I meet with the bank and have a point of contact there, etc), however, we do not discuss their finances. I have learned a lot from friends, and significant others, and doing a lot of independent research online. I also didn’t get a credit card until after college.

7. Did you receive any formal or informal financial education growing up? If yes, where did you learn to manage your personal finances?

I did not receive formal education. Budgeting is still something I’m learning, and have adopted the 50/30/20 to give myself more flexibility in my monthly budget. I’m really proud of how I’ve been able to learn about personal finance and create a system of accounts to help me towards different goals.

8. Do you feel well-versed in personal finance? What resources have you used to educate yourself?

I would say that I feel more confident in my finance systems and techniques. I have put a lot of time into my budget spreadsheet, and I am usually excited to put my purchases in it to see how things change. There’s still anxiety especially when it’s a lower-income month, or about future decisions like moving and paying higher rent, but I do feel more capable of planning for these events.

I really, really like the Reddit personal finance page. The flowchart they’ve developed is really useful to understand how to fill certain buckets depending on need & urgency. I also am lucky in that I do not have any debt to pay off.

💡 Ask the community

I want to understand how others distribute their paychecks. This will allow me to take a look at my percentages and see if there is anything I am disproportionally paying for or not putting enough towards.

I would also love to hear from someone who has started with a very low-paying job and has worked their way up to a high-paying role. My first job out of college was $50,000 / year, and while I’ve made progress in making more, I want to know how others have been responsible about their money and also been able to increase their income.

Iynna·Jun 18

You’re doing great OP! 🤗On your last ask/point, check thesehttps://elpha.com/posts/l09ua90z/from-40k-to-120k-my-journey-through-the-salary-mazehttps://elpha.com/posts/vqnz96fm/how-i-tripled-my-pay-from-50k-to-150k-in-two-yearshttps://elpha.com/posts/ljjy2v92/a-180-salary-increase-journey-in-tech-and-operationshttps://elpha.com/posts/fuenuiot/how-my-transition-into-engineering-management-increased-my-salary-by-87https://elpha.com/posts/xi10u6sx/my-career-in-developing-policies-and-compliance-products-across-three-industrieshttps://elpha.com/posts/2w7mrivx/let-s-talk-moneyhttps://elpha.com/posts/uzqsabwb/let-s-talk-moneyOkay hope this all helps haha

allisonk·Jun 19

This is fascinating, thank you for sharing! It's clear that living in NY multiplies all the numbers. Don't know if this helps justify it, but health is #1 so I think it's worth every $ for health insurance. Where I live, health insurance is provided by the govt but income taxes are high. So no matter that, my money is going to health insurance - that's now I see it now XD haha

Filomena21·Jun 19

Are you doing software sales, or some other type of sales? What does the promotion track look like in your current role? Do you enjoy your job?I saw great advice somewhere that simply said, "Everything is expensive. The key is to find out how to make more money." The good news is that sales is a field where my perception is that you can dramatically increase your earnings a lot if you are good at it. Maybe you need to switch to a sub-industry where the account values / commissions are higher. Definitely would suggest networking with higher paid sales people and figuring out how you can re-position yourself. Or if you dislike sales, figure out a different path that excites you where you can make more money (I know, easier said than done).At one point, I was living on a $70,000 salary in NYC with rent that was $1,100 (also shared with a roommate, but it was a while ago). I think your ratio of rent to income is good. You are well within the 40x rule.This is only my personal experience, but when I was in this situation I would not have felt comfortable with so many luxuries. I'm very surprised by the $670 monthly travel spend and $348 monthly on clothing. Those are amounts I would only spend if I had tons of disposable income. It's really really hard to avoid eating out in NYC, so I think your restaurant and grocery costs seem about as reasonable as they can be. I'm not sure where the majority of your entertainment spend is going, but that's another area I could imagine cutting back on, although I'm sure that part of the reason you are willing to live in a high cost-of-living city like NYC with a roommate is because you want to be able to take advantage of all of the entertainment that is available to you.On the subscriptions, I'm wondering if you've negotiated properly. Spotify is only $12 per month (and I do agree that's worth it), but where's the other $100+ going? For The New York Times, they are constantly running deals, and often if you go through the steps of cancelling they will offer it to you for $1 a month or something really low. Alternatively, do you really need to be paying for news? You can get so much news for free. What are the economics on these audiobooks? The library in NYC is really great and again I'm questioning why you need to be spending so much in this category.I agree the health insurance does suck, but I'd view that more as a problem with your job. If a job is paying you under $100,000 a year, they really shouldn't be having you pay more than $100 a month on health insurance. That said, it's great that with your health insurance you are keeping your therapy bills so low.So overall if you can cut the travel, shopping, and fix your subscription spending, you should be able to add an extra $1,000+ to your emergency fund each month. If you want to spend on these things, I would say that you need either a higher-paying job, or you'd want to move to a lower cost-of-living area.One other suggestion is that you should only keep 1 month of fixed expenses in your checking account and have the rest in the high-yield savings. Interest rates are high right now and you don't want to miss out on free money. You should only be keeping the bare minimum in your checking account where it doesn't earn anything. Of course set up automatic transfers though so you don't accidentally incur any fees.

katiebabs·Jun 19

Almost $500 eating out a month? What??

elisegatsby·Jun 19

That stood out to me as well! My family tries to stick to half that ($250/mo) and we're a family of four! But we're in WA so that probably plays a large part.

Iynna·Jun 19

you answered your own inquiries/surprises in the last part of your note. this is NYC, OP is doing well

Filomena21·Jun 19

I don't think it's crazy at all. She said $423 (not $500), which equates to $106 per week. That could be one meal in an NYC restaurant with cocktails and/or an appetizer, or it could be 3 brunches, or it could be 2-5 takeout orders. Restaurant food is the same price in NYC as in any other major city in the country, but it's better quality.NYC apartments are tiny and it can be unpleasant to stay in all the time. If she's living in NYC, part of the point is to enjoy the food. This seems like one of the most reasonable parts of her budget IMO.

elisegatsby·Jun 19

I don't know if my journey counts as "started with a very low-paying job and has worked their way up to a high-paying role" but my first FT job was $9.90/hr and I now make $160k/yr. I would say, at any income, I try to look at percentages first and total dollars second. This way my spending can increase with my income but not wildly so and my savings keeps us as well. For example, housing has always been 30%, retirement at least 10% with non-retirement savings on top of that. Like a lot of folks, we've struggled with inflation, especially with groceries, but we've made it work with moderate COL raises and spending less in other areas.

Iynna·Jun 22

Well assuming you worked about 40 hours a week you were making about 20,800 a year ($10x40x52) so yea i'd say this is pretty good, objectively, Now of course we need to know things like when you entered the workforce because a dollar today is not what it was say 20 years ago, where you are located ($160K would take you very far in certain places compared to NYC for instance). I love your approach of looking at %, I tend to do the same!

karijatunadjiru·Jun 22

I would like to know what tool is used to track spending and come up with monthly budgets? I have tried an Google sheet tool but updating it at the end of every month has become a difficult task. I wish there was a tool I could simply link to my debit card.

sabrinabrogren·Jun 25

I'm a huge fan of YNAB. It's a budgeting app that has changed how I think about money - instead of setting budget goals and then trying to stay within them throughout the month, you budget money that you already have and put it in budget categories, then spend from those categories. It's like the money envelope system but digital, and you can connect all your banking and credit card accounts if you're in the US. If you're not in the US and your accounts don't link it's a little annoying, but still worth it in my opinion. It's a paid app (around $100 yearly) but it's paid for itself many, many times over in my household.

karijatunadjiru·Jun 25

Thank you for sharing this insight Sabrina.

Ruthie89·Jun 24

It seems like your health insurance expense is high relative to your age and income. Could you find something cheaper on the ACA exchanges? Also, it’s great that you love entertainment. Take advantage of every free event that NYC has to offer. There is a ton of things to do and you will save as well.