Overview: One of the things that we will be examining in the not too distant future is the power that Congress has in helping to set the nation's budget. I thought it would be helpful to bring this concept down to a much more personal level. Thus, I am going to have you create a hypothetical personal budget. Follow the directions below and be sure to fill in the info on the appropriate places on the provided worksheets.

SPENDABLE INCOME


INCOME: In the imaginary world of your personal future, let’s assume that you can find a job in the profession you’re most interested in. To figure out how much you will be paid, on average, in that job, go to this site from the Bureau of Labor Statistics. http://www.bls.gov/news.release/ocwage.htm Scroll down about a third of the way to where it lists the average wages for various jobs. Find the job you’re interested in. You can also use the Control + F keys to search for what you’re interested in. The third column from the left lists the average annual income for this profession. Fill that amount in on your Budget Worksheet where it says “Wages and Bonuses.”

For simplicity’s sake, we won’t consider investment and interest income right now. But, in the ideal world, you may have income from your investments to add to your wages. So put your Wages total in the Income Subtotal.

TAXES: You can’t earn money without paying taxes. Go to this site to figure out how much of your paycheck is going to taxes. http://www.paycheckcity.com/calculator/netpay/us/arizona/calculator.html At the top, choose the state the you hope to be living in. If you're not sure, just switch it to Pennsylvania. Fill in the Wages that you got in Step One as your Gross Pay. Leave Gross Income YTD (Year to Date) empty. For Pay Frequency, click “annually.” That just simplifies things though, of course, you probably will be paid more times than once a year. For Federal Filing Status, fill in Single. Where it says # of Federal Allowances, fill in 1 – that is what you get for what is called your “personal exemption.”(If you want to picture yourself married and with children, that’s fine. Add in one allowance each for your spouse and each child)
Leave the Withholding space blank. Click No for Round Federal Withholding. Leave the other questions on exemptions blank. Click Calculate. That will give you the information to fill in on your Budget Worksheet for Federal Tax, State Income Tax, Social Security, and Medicare. It kindly computes the Net Pay for you. Fill that amount in where it says “Spendable Income.”

IF PLANNING TO BE MARRIED: You will also have to compute the imaginary income from the imaginary job of your imaginary spouse by going back to Step One.

EXPENSES
Now we’re going to figure out your housing costs. To get an idea of average prices , go to this site that has a Cost of Living Calculator. http://www.bankrate.com/calculators/savings/moving-cost-of-living-calculator.aspx Where it says “City you are moving to,” plug in an appropriate city. Put in your income from Step One and press “calculate.” When you’re all done with this activity, you may want to return to this site and have some fun comparing how the cost of living changes depending on where you live.
If you are planning to buy a house, choose the amount on the second line that says “Payment + Interest,” then multiply that amount by 12 and place the total in the line on your worksheet for housing. If you are planning to live in an apartment, take the amount on the third line for “Apt. Rent” and multiply that by 12.

You will need insurance for your home or apartment. You can go to this site to find out how much the average insurance is for homeowners or rental insurance by state. http://www.insure.com/articles/homeinsurance/average-home-premiums.html Scroll down for the chart. Multiply that number by 12 and fill it in on your sheet.

If you have a house, you will need to pay property taxes. To calculate your taxes for a house, take the amount that your house is valued at from the top line of the Cost of Living Calculator. Divide that amount by 100 and then multiply that amount by .9075. Put the result on the line for property taxes on the budget worksheet.

If you bought a house, the chances are that you will have home repairs and maintenance to take care of. Experts estimate that homeowners pay about 3.6% annually of a new home’s cost and 4.5% for an older home on home repairs. Figure out if you are more likely to have bought a newly constructed house or if you like older homes. For the new homes, compute 3.6% of your home’s total cost from the “Home Price” line from the Cost of Living Comparison chart. Put that number on the line for Repairs/Maintenance line on your Budget Worksheet. For an older home, compute 4.5% instead.

Take the amount on the fourth line from the Cost of Living Comparison Chart in Step Three for “Total Energy” and put that in the line on the worksheet for Energy costs.

For the cost of water and sewer, fill in $1200. That’s close to the average cost.

The average cost for telephones is about $50.00 a month or $90.00 a month for an iphone $180 if you're spouse will have a phone. Multiply that by 12 and add it to your Budget Worksheet.

GROCERIES, compute 7.7% of your family spendable income and fill that in on the Budget Worksheet.

For food eaten out, compute 5.4% of your wages and fill that in. That is what experts recommend for a budget. Remember that, if you’re going to pretend you’re married, compute 5.4% of your joint salaries. Add in another 5.4% for each child you’re envisioning
FAMILY OBLIGATIONS: We’ll leave this blank, since we’re assuming you have no children. However, if you would like to imagine a different future, add in 5% of your wages for child care expenses. Then fill that in for your total for FAMILY OBLIGATIONS.

HEALTH AND MEDICAL: Health insurance costs certainly vary very much depending on where you live and where you work. However, a recent study found that the average annual cost of for a single person is $4,824 and for a family is $6,328. So, let’s use those figures;; choose single or family if you’ve decided that you’re going to be married. Your employer may or may not pay some of that amount. The same study found that people pay, on average 26% of their insurance premium, so figure out what 26% is of the cost for health insurance and put that total where it says “Health Insurance.”

Now add in $1,000 for your average out-of-pocket health care expenses. If you’re planning on a family, add in that amount for each person in your family

TRANSPORTATION: Figure out 9.1% of your spendable income for your average car payments. If you want to be more adventurous, you can go to http://www.autotrader.com and pick out the car you would like to buy. Then go to this site, http://www.bankrate.com/calculators/auto/auto-loan-calculator.aspx to figure out your car payments, figuring 10% for your interest rate and then you can figure out your monthly payments. Multiply that amount by 12 and put that in the space for “Car Payments.” Don't forget to do the same for your spouse if planning to be married.

Figure 3.3% of your spendable income for your Gasoline and Oil costs. Don't forget to do the same for your spouse if married.

To estimate the amount you’ll need for maintenance and repairs, it will depend on the age of your car. If you think you will have a new car, fill in $360, $1200 for a car less than five years old, and $1500 for an older car on the line for “Auto Repairs/Maintenance. Don't forget to do the same for your spouse if married.

For your car insurance costs, go to this site http://www.carinsurance.com/Average-Premiums.aspx to find your average annual payment. Fill that in for “Auto Insurance.” These figures, of course, vary widely depending on which car you’re driving and what your driving background is. Don't forget to do the same for your spouse if planning to be married.

DEBT: You may be lucky enough not to have debts, but you probably will end up having to pay back some loans for something. Studies show that the average person carries $3,752 in debt, mostly for credit cards. So fill that in for that line. If you are planning to be married, the amount is $7394 per household.

ENTERTAINMENT: Compute 5 - 7% of your family's spendable income for your average annual costs. This, of course, will vary according to your lifestyle but this will include the expenses for cable TV, videos, movies, computer expenses, hobbies, and vacations so you can decide if you’ll be at the high or low end of the spectrum.

CLOTHING: Again, this will vary. Chose 3 to 6% of your family's spendable income to cover clothing expenses.
PETS: If you are planning on having a pet, compute 1.4% of your spendable income for pet expenses. Otherwise, leave that line blank.

Compute 1.3% of your family's spendable income for “Household Products
Compute 1.3% of your family's spendable income for your miscellaneous personal care products
Compute 1.7% of your family's spendable income for Miscellaneous Expenses.

INVESTMENTS AND SAVINGS: Experts recommend that you save and invest 10% of your spendable income every year. So compute that amount and fill it in for that line.

Add up all the totals in the EXPENSES category for your TOTAL EXPENSES. Subtract that total from your SPENDABLE INCOME amount. Fill that in where it says SURPLUS/SHORTAGE.