How Much Money You Should SPEND (By EVERY AGE)

What's up, guys? I'm Graham, so about a month ago I made a video that breaks down exactly how

much

money

you

should

have saved at each age and each milestone you

should

reach in each decade, and in that video, quite a few of you. We were very happy to learn that if you have less than 27,000 negatives saved by the age of 20, you are statistically ahead of the average American population for your age, wait a second if you have more than 27,000 negatives. Does it imply more debt or is it that you have less than negative 27,000 debt because you have less.

Well, I have no idea, that's why I make YouTube videos anyway. Many of you enjoyed that video, so I wanted to step it up. one level and instead of talking about how

much

money

you should have saved at each age, let's talk about something a little more provocative and that would be how much money you should

spend

each day because, let's face it, we live in a world where we have to

spend

money and it really depends on It's up to us to decide whether or not we can afford something, so let's go over

every

thing you need to know about how much money should really be spent on each category, from housing, transportation, utilities, health insurance, coffee, you name it. and to do that, we'll go over what experts call the 50 30 20 rule for managing your money and then I'll give you my opinion on how much money you should spend on

every

day items based on how much money you make and then, of course, as always, if you don't like mind budgeting the like button until it turns blue for the YouTube algorithm, it really helps me and the more the like buttons are pressed on this channel, the more iced coffee I get.

I can afford to drink, which gives me energy to make even more YouTube videos. Wait a second. To whom I lie? Just smash it, destroy it and delete the like button until there's no more left and then once that's done, let's start the video right here. Thank you so much. a lot and when it comes to successfully managing your money and building your wealth so that you're not living paycheck to paycheck, this is probably one of the most used rules of thumb and it's called the 50 30 20 rule, the basics of it. They are extremely simple for anyone to understand in less than a minute, which is probably why they are so popular today and this is what it is: First you take your after-tax income, which is obviously the income you you have left after paying your taxes and you divide them. as follows, 50 of that income should be spent on your necessities or in other words things that you absolutely must have to survive, these should be your mandatory expenses that you must pay every month, so that's half right there of your income. already spent on the next 30 of your income you should spend it on your wants now these are things you don't need to have but it's nice to have this could include going to restaurants to buy new clothes going to the movies if you ever come back and so on these are the things which make life a little more fun but at the end of the day you don't need to have them and they are simply optional and finally the remaining 20 should be spent on savings spent on savings can you spend your savings if you are saving them anyway, let's move on?

The remaining 20 should be spent maxing out your retirement accounts, paying off debt, building a six-month emergency fund, or going all-in. options because you saw a post on Reddit's Wall Street betting about how purple the next big investment would be, but how accurate is this 50 30 20 rule really and this is something you need to follow if you want to be filthy rich one day or be able to. retire early based on saving 20 of your income because I will be the first to tell you that if you follow this advice, it will be almost impossible to get off the hamster wheel of life and be able to retire early, and this is why if you save and invest 20 of your income each year and we assume that your investments generate a seven percent return with inflation.

It will take 37 and a half years for your investments to grow to a value where you can withdraw from what is known as the four percent rule this is the formula that says you could spend four percent of your portfolio each year for 30 years of maintaining the exact same lifestyle although let's face it, I don't know about you, but almost 40 years of doing this every year just so I can retire doesn't seem like a good money management style to me and eventually these categories become wildly absurd. the more money you end up making and suddenly the relative cost of buying something becomes a smaller and smaller percentage.

How much money you make, for example, let's look at this perspective, if you make fifty thousand dollars a year after taxes, spending ten percent of your income on food is equivalent to five thousand dollars a year and that would be reasonable for most of people, but if Earning five hundred thousand dollars a year spending ten percent of your income on food is equivalent to fifty thousand dollars a year and that is absolutely absurd, as you can see, although this could work for some income levels, how much The more money you make, the more inaccurate it becomes.

So let's go over the actual amounts of what you should spend in each category. I'll go over what the experts recommend and then go over my own recommendations so that you can maximize the value of every dollar and budget correctly. Let's start with that category of needs and for most of us housing is the first thing that comes to mind and when it comes to this, most experts recommend that housing should not exceed a third of your income, so If your rent is fifteen hundred dollars a month. You should be making four thousand five hundred dollars a month or if you calculate this backwards for every three thousand dollars a month you make, you could spend a thousand of that on housing.

This is something I partially agree with and as an owner I will only do so. rent to people who make three times the monthly rent because otherwise I'm worried that if an unexpected expense comes up they won't have enough money to pay all their bills; However, as someone who is really interested in personal finances, I would prefer to suggest that for most people try to aim to spend more than 25 percent of their income on housing at most or, if possible, more than 20 percent of your income, really the essence of this is to spend as little as possible on housing and I know that this can be very difficult to do depending on where you live and in places like New York, San Francisco and Los Angeles, it is practically impossible if you earn less than a hundred thousand dollars a year, but if you can get your housing to potentially live with roommates move to a less expensive area or rent a room or two where you live.

I highly recommend it, not to mention you can always spend more money on housing later if you absolutely have to, but save just as much money now. The front will take you much further if you could do it next. We have to talk about another need for most of us and that would be the cost of our car or transportation. Now, the conventional wisdom when it comes to this is that its total cost. transportation should not exceed 15 percent of your income and the total price you pay for a car should not exceed 35 percent of your annual salary, so using this metric, if you earn 50,000 a year, the most you should spend on a car it's 17,500 and the total cost shouldn't add up to more than 7,500 a year for your payments, insurance, gas repairs, etc., and I would say for most people who go out and buy new cars every few years, equivalent to your annual salary, this is pretty good advice, however, I would still caution people against spending that amount of money on a car, especially if it's not absolutely necessary and instead I prefer Dave's approach Ramsey when it comes to how much money you should spend on transportation.

He recommends that your transportation costs not exceed 10 of your annual income, you should never go shopping for a new car unless you have a net worth of over a million dollars and I would go as far as to suggest that if you go and buy a car, the cost of the car should not exceed 25 of your annual income, so if you earn 50,000 a year, spend 12,500 on a new car at most, that will not reduce its value much and again this is a maximum, so if you own your car outright and it's only costing you 200 a month for gas repairs and maintenance insurance etc.

That's great, keep it up for as long as you can and save the difference and remember the more money you make the more ridiculous it gets Spend 10 of your income on transportation but then we talk about food and the general rule of thumb when it comes to this is that you shouldn't spend more than 10 to 15 percent of your income on food, which I think in general. it's pretty reasonable depending on how much money you make, that means the person who makes 40k a year after taxes spends between 330 and 500 a month on groceries, restaurants, food, etc. which again is reasonable, however, personally I think your food budget shouldn't necessarily increase relative to the amount of money you make, if you make a hundred thousand dollars a year, spending twelve hundred fifty dollars a month on food is absolutely ridiculous, why would you do that?

I would say there is a better guide here. spending ten percent or six hundred dollars a month on food, whichever is less, surely if you make 250,000 a month, going out for sushi at happy hour once a week won't break the bank if you barely break that 600 mark. but use common sense and don't get carried away with food just because you make more money. Next we'll talk about other needs like health insurance, utilities, etc., and when it comes down to it, most professional budgeters recommend that you spend another $10 to $15 between the two, which sounds reasonable depending on how much money earn;

However, just like budgeting for food, your utility and health insurance budget shouldn't increase the more money you make, your health insurance won't magically increase 10 times. from making 50k a year to 500k a year so this is what I think is reasonable health insurance that could easily be 5 or more of your income so 200-500 a month for a single person, depending on your age, your coverage and where you live it's very difficult to set a maximum amount to spend here because we're talking about your health, but I would say that generally we'll round this up to around five percent a year, as far as to public services in general for the majority. people, you will spend between 50 and 250 a month, depending on where you live and how hot or cold you like to be in your house or whether or not you do laundry during off-peak hours, which you should always do, so Your goal would be to budget about 3 of your income or five to six hundred dollars a month at most for most people in most circumstances, again no more than that, which now leaves you with at least 52 of your income left over to do with whatever. you want and this is where things get good to begin with.

I would allocate 10 of your income to literally do whatever you want. I know this sounds like I was abducted by an alien and replaced with a deepfake here on youtube for even suggesting. something like this, but seriously spend 10 of your income on whatever you want, whatever you see fit, as long as it's within reason, makes you happy, and don't be an idiot about it, if it's money you want to spend on getting a life a little better. home, then do it, if buying a car a little faster is your thing, then do it, as long as it doesn't involve spending money at Starbucks.

I think it's important that you can spend some money on things you enjoy and 10 of your income is enough to get it out of your system without going completely broke. I have a feeling that the psychological aspect of this will make budgeting, planning and saving much more enjoyable without feeling like you're depriving yourself just for the sake of saving more money, think of this a little bit like it's your cheat meal so you don't just go and save money, save money, save money and then all of a sudden spend it all at once and this is it.

That's fine, as long as that doesn't include any spending at Starbucks because it's a waste of money and now that means you have 42 left over to do something really special and you know me, if you already watch the channel, you already know what I am. I'm going to say: mash the like button for the YouTube algorithm and then save and reverse the correct difference. 42 of your income should go directly to investments in this order first. If you have any debt with a high interest rate above 5, you should use some of this money. to pay that off, but assuming you now have no debt or any debt you have has less than 5 interest, here's what you would do with your money, the first thing you would do is create a six-month cash emergency fund. held within a high interest savings account, this one is pretty self explanatory, but it's always a good idea to have some cash aside in case an emergency or something unexpected comes up, but once you've done that, the Next step should be to max out your 401k up to your contribution.employer if this is something they offer, sometimes employers will match you dollar for dollar within a 401k up to a certain amount, so if this is something they offer you, always do this no matter what it is. free money, so always contribute up to the employer's maximum in each situation, after that the next six thousand dollars you invest should go towards maximizing a roth ira.

This is a retirement account that allows you to contribute money after taxes and then any earnings you earn. Within that account is completely tax free at the age of 59 and a half, you should always take advantage of this account when you can and investing six thousand dollars in it each year will be a very good use of your money. From there, any remaining money you have left should go into any type of taxable account or any investment that will simply grow in value over time, which could include using the link below in the description and getting two shares free when you deposit 100 on weeble because one of those shares could be worth up to 1 400 so if you haven't yet you can also get your two free shares in the description and let me know which two free shares you get but invest Money like this in stocks, real estate or index funds will be a very good strategy for you. to use with everything left over and even better with a savings rate of 42, you could easily retire in about 20 years using rule 4, meaning if you start doing this at age 20, you could retire at the age of 40 if that's something you want to do, but just following this, a 20 year time frame for retirement is absolutely possible with this budgeting technique and will still give you a lot of flexibility with this in case something goes wrong, however I'm not done yet, although we're now 100 percent budgeted, as seen here.

I'll put an interesting little graphic here that I made myself in Photoshop. This expense is not treated equally. See what most people do. cover all your expenses first and then whatever is left if you save anything, although for this budget to work we have to reorganize it immediately, forty percent of your after-tax income will be saved without even thinking it through. from the beginning and really, once you do this, the hardest part is over and then the rest of the money can be budgeted appropriately. You may also be wondering about that missing two percent. Well, realistically, no one budgets exactly to the point each and every one. month, most people will naturally fluctuate between five and ten percent month to month depending on expenses that arise, so go ahead and take that two percent as a reserve if you need it, but some people will need more than this, others less than This is only intended to be a rough guide.

It is also very important to recognize and mention that the more money you make, the more these percentages will deviate, so once you start reaching some of these highs, you should get used to investing and saving the difference constantly and I also understand that 40 is a great part of your income to save. I don't expect this to be an overnight transition for anyone, especially if you're already spending a lot of money, however, I highly recommend you get started. track your expenses, save your money, cut back as needed while still working to increase your income so you can save more money and over time a savings rate of 40 will be much more achievable and By following the 40 10 50 rule, you will be much easier to save money in the long run, you will be able to achieve financial independence much faster, and you will be able to hit the like button on the YouTube algorithm, so with that being said, guys.

Thank you so much for watching, I really appreciate it as always, make sure you subscribe and hit that notification bell. Also feel free to add me on Instagram. I post almost daily, so if you want to be a part of this, feel free to add me. there, like on my second channel, the Graham Stefan show, I post there every day. I don't post here so if you want to see a new to me video every day be sure to add yourself to it and then like I mentioned if you want two free shares use the link below in the description and Weeble will give you two free shares when you deposit one hundred dollars on the platform and one of those shares has a potential value of up to fourteen hundred dollars.

If you want these two free actions, use the link below, let me know which two free actions you will get. Thank you very much for watching and until next time.