Earning over $100,000 per year is a goal that many people strive for. But without the right budget, it can feel like your money disappears as fast as it comes in — even on a six-figure salary.Budgets often get a bad rap for being restrictive, but a good budget is just the opposite; it can help you prioritize how you spend your money and ensure you’re on track to hit your financial goals.So, what should the typical budget for a $100,000 salary look like? Here’s what you need to know.If you get paid $100,000 per year, that doesn’t actually translate to a six-figure income.A gross salary of $100,000 ends up being closer to between $70,000 and $80,000 in net income (your take-home pay) after certain deductions are made from your paycheck. These may include: Federal and state taxes (exact amounts vary by state, filing status, and your tax bracket) Contributions to retirement and other tax-advantaged accounts, such as a health savings account (HSA) Out-of-pocket premiums for health, life, and other employer-sponsored insurance plans This isn’t to say that you should skip these deductions and contributions for the sake of having a slightly bigger paycheck. In fact, reducing these contributions could mean leaving money on the table.“For retirement contributions, I usually ask clients if they receive matching on their retirement plans through their employer,” said Jamie Hobkirk, CFP, CFA, and portfolio manager at Reynders, McVeigh Capital Management in Boston, Mass. “If they do, it is usually a good idea to at least contribute this amount, if possible.” Hobkirk added that she encourages clients to automate retirement savings to avoid spending that money on other expenses.The same idea applies to your insurance premiums — investing in these plans on a monthly basis can reduce any surprise medical bills down the road.Start by reviewing your last few pay stubs to better understand your typical monthly net pay. Once you have that figure in mind, you can divvy up that money across all your major spending categories.In our example scenario, we’ll assume you take home $75,000 after taxes and other deductions, or $6,250 per month.Keep in mind there isn’t a one-size-fits-all approach to budgeting; your budget should reflect your unique financial situation and goals. That said, experts often recommend certain guidelines to help keep your budget and spending on track.For example, your housing costs — likely the most expensive category in your budget — should be no more than 28% to 30% of your income. Hobkirk noted these expenses can include rent or mortgage payments, taxes, insurance, and homeowners association fees. And the right amount can vary depending on where you live.The same goes for other essentials, such as utilities, healthcare, food, and transportation. How much you can afford to allocate toward each category will depend on the cost of living in your area, whether you support dependents, and more. However, it’s important
Ven. Feb 7th, 2025
