How Much Money You Should SPEND (By EVERY AGE)

what's up guys here's Graham so about a month ago I made a video about exactly how

much

money

you

should

have saved for each age and each milestone you

should

reach each decade and in that video a lot of you are very happy to know that if you have less than 27,000 negatives saved by the age of 20, you are statistically ahead of the average US population for your age, wait a second, if you have more than 27,000 negatives, is that it? does it imply more debt or is it less than 27,000 negative debt because you have less good I have no idea that's why I make youtube videos anyway a lot of you guys enjoyed that video so I wanted to step it up a bit and in Instead of talking about how

much

money

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

spend

ing

every

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

spend

money and it's re Partnering with 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 you should really spend on each category, from housing, transportation, utilities, health insurance, coffee, you name it, and to do that.

I'm going to go over what the experts call the 50 30 20 rule of managing your money and then I'll give you my take on how much money you should spend on everyday items based on how much money you make and then of course, as usual, if you don't would i mind budgeting the like button until it turns blue for the youtube algorithm it really helps me and the more like buttons pushed on this channel the more iced coffee i can afford to drink which gives me energy to make even more videos of youtube hold on a second who am i kidding just rip and destroy it and delete the like button until there is no more left and then once you are done let's start the video right here thank you so much and w hen it comes to successfully managing your money and build your wealth so you don't live 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 this are extremely simple simple for anyone to understand in less than a minute which is probably why it's so popular nowadays and this is what your after tax income takes first which is obviously the income you have left over after pay your taxes and divide it as follows 50 of that income must be spent on your necessities or in other words things you absolutely must have to survive these are your mandatory expenses that you must pay each month so half of your income is already spent in these next 30 of your income must be spent on your wishes now these are things you don't need to have but are nice to have this could include going out to restaurants buying new clothes going to the movies theaters, if they ever come back and so on, these are the things that make life a little more fun but at the end of the day you don't have to have them and they are just optional and finally the remaining 20 should be spent on savings spent on savings you can earn star your savings if you're saving them anyway let's get to it the remaining 20 should be spent maxing out your retirement accounts paying off debt building a six month emergency fund or going all in on call options because you saw a post on wall street betting from reddit on how purple would be the next big investment but how accurate is this 50 30 20 rule really is and this is something you should 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 out of the hamster wheel of life and be able to retire early and here's why if you save and invest 20 of and our income each year and we assume your investments are generating a 7 percent return with inflation, it will take 37 1/2 years for your investments to grow to a value where you could retire from what is known as Like the four percent rule this is the formula that says you could spend four percent of your portfolio every year for 30 years while maintaining the exact same lifestyle even if let's be real I don't know about you but almost 40 years doing this every year just so you can retire doesn't seem like a good money management style to me and eventually these categories get wildly absurd the more money you end up making and all of a sudden the relative cost of buying something becomes a percentage more and more small of how much money you have.

For example, let's take a look at this perspective if you make fifty thousand dollars a year after taxes spending ten percent of your income on food that's five thousand dollars a year and that would be reasonable for most people, but if you make five hundred thousand dollars a year spending ten percent of your income on food is fifty thousand dollars a year and that is absolutely absurd as you can see although this might work for some income levels the more money you have the more this is it comes back very inaccurate so let's go over the actual amounts of what you should be spending in each category, I'll go over what the experts recommend and then I'll go over my own recommendations so that you can maximize value for every dollar and budget correctly so let's get started With that category of needs and for most of us, housing is the first thing that comes to mind and when it comes down to it, most expe Some recommend that housing should not exceed one-third of your income, so if your rent is $1,500 a month, you should earn $45,000 a month, or if you calculate this backwards, for every $3,000. a month i make i could spend a thousand of that on housing now this is something i am partially okay with and as a landlord i will only rent to people making three times the monthly rent because otherwise i am worried if an unexpected expense comes up that they're not going to have enough money to pay all of their bills, however as someone who is really interested in personal finances I'd rather suggest that for most people they try to aim for more than 25 percent of their income on housing max or , if possible, more like 20 of your income really, the gist of it is to spend as little as possible on housing and I know this can be very difficult to do depending on where you live and in places with In New York, San Francisco, and Los Angeles, it's pretty much impossible if you're making less than a hundred thousand dollars a year, but you can reduce your housing by potentially living with roommates by moving to a less expensive area or renting a room or two from where you live. , I would highly recommend getting it fixed not to mention you can always spend more money on housing later if you absolutely have to but saving so much money now up front will get you so much down the road if you could do it next we have to talk about another need for most us and that would be our car or transportation cost.

Now the conventional wisdom when it comes to this is that your total transportation cost shouldn't exceed 15 percent of your income and the total price you pay for a car shouldn't exceed 35 percent of your annual salary, so Using this metric, if you make $50,000 a year, the most you should spend on a car is $17,500 and the total cost shouldn't add up to more than $7,500 a year for your payments, insurance, gas repairs, etc. I would say for most people who go and buy new cars every few years equal to their yearly salary this is good advice, however I still warn people not to keep spending that kind of money on a car, especially if it's not absolutely necessary and instead i much prefer dave ramsey's approach 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 buy a new car unless have a net worth of over a million dollars and I would go so 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 make 50,000 a year , spend 12,500 on a new car max it won't drop much in value and again this is a max so if you own your car and it only costs you 200 a month for gas repairs and maintenance insurance, etc., and that's great, keep it that way. for as long as you can and just save the difference and remember the more money you make the more ridiculous it gets to spend 10 of your income on transportation but after that we have to talk about food and the general rule of thumb when it comes down to it is that you shouldn't be spe to find more than 10 to 15 percent of your income on food which I think is generally pretty reasonable depending on how much money you make that means the person making 40,000 a year after tax spends between 330 and 500 a month in groceries, restaurants, food, etc., which again is reasonable; however, i personally believe that your food budget shouldn't necessarily increase in relation to the amount of money you make, as if you were making a hundred thousand dollars a year spending twelve hundred and fifty dollars a month on food is absolutely ridiculous, why would you that?

I would say a better guideline here is to spend ten percent or six hundred dollars a month on food whichever is less oh sure if you're making 250K a month going out for sushi at happy hour once a week no It's going to break the bank if you barely get over the 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 necessities like health insurance, utility bills, etc. And when it comes down to it, most professional quotes recommend that you spend another 10-15 between the two, which sounds reasonable depending on how much money you make; however, just like your food budget, your utility and health insurance budget shouldn't be. increasing the more money you make like your health insurance isn't going to magically increase 10 times from when you make 50,000 a year to 500,000 a year so this is what I think is reasonable health insurance that could easily be 5 or more of your income, so between 200 and 500 a month for a single person, depending on your age, your coverage and where you live, it's very difficult to put a maximum amount to spend here because we're talking about your health , but I would say that generally, I'll round this up to about five percent a year, then as far as utilities go, generally, for most people, you'll spend between 50 and 250 a month depending on where you live and how hot or cold you want to keep your house or whether or not you do laundry during low electricity hours which you always should so I would try to budget around 3 of your income or 500-600 dollars a month maximum for most people nas in most circumstances again no more than that now leaves you with at least 52 of your income left over to do whatever you want and this is where things get good for a start i would allocate 10 of your income to literally do whatever you want I know this sounds like it was abducted by an alien and replaced with a deep fake here on youtube for even suggesting something like this, but seriously spend 10 of your income on whatever you want, whatever you see fit, whenever it's available. within reason it makes you happy and you're not a jerk about it if this is the money you want to put towards getting a house a little better then do it if you go and get a car a little faster then do it as long as it doesn't involve spend money on starb fuck i think its 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 the psychological aspect of this is going to make budgeting, planning and saving so much more enjoyable without feeling like you're depriving yourself just to save more money think of this a bit like your cheat meal so you don't just go and save money save money save money and then all of a sudden you go and spend it all at once and everything is 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 left 42 to do something really special with and you know me if you watch the channel you know what I'm going to say hit the like button for the youtube algorithm and then save and invest the difference that's right 42 of your income should go directly to investments in this order first, if you have high interest rate debt above 5 you should use some of this money to pay that down but assuming you now have no debt or any debt you If you have less than 5 interest, so this is what you would do with your money.

The first thing you would do is build a six-month emergency fund of cash in a high-interest savings account. This is self-explanatory, but it's always It's a good idea to have some cash on the side in case an emergency arises or something unexpected comes up, but once you've done that, the next step should be to max out your 401k up to your employer contribution if this is something they offer, sometimes employers will match yourdollar for dollar into a 401k up to a certain amount So if this is something that is offered to you always do this no matter what it is it's free money so always contribute up to the employer 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 make inside that account are completely tax free at the age of 59 and a half should always take advantage of this account when you can and investing six thousand dollars in this every 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 you it will just grow in value over time which could include using the link below in the description and getting two free shares when you deposit 100 to weble because one of those shares could be worth as much as 1,400, so if you have.

I haven't done that yet, you can also get your two free stocks in the description and tell me which two free stocks you get, but seriously investing money like this in real estate stocks or index funds will be a very good strategy for you. to use with whatever is left over and even better at a savings rate of 42 you could easily retire in about 20 years using rule 4 which means if you start doing this at 20 you could retire back to age 40 years if that's something you want to do, but just by following this, a 20-year time frame for retirement is absolutely possible with this budgeting technique and it will still give you a lot of flexibility with this just in case something goes wrong, I'm not done yet though though we've budgeted 100 percent now as you see here I'll put a cool little graphic here that I did myself in Photoshop this expense isn't treated equally. what people do is cover all their expenses first and then what is left over if they save something, 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 about it up front and really once you do this the hardest part is over and then the rest of the money could be properly budgeted for. budgets are cut exactly to the point each and every month most people are going to naturally fluctuate between five and ten percent month over month depending on what expenses come up so go ahead and take that two percent as a buffer if you need it but some people will need more than this other people less than this this is only meant 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 get out of hand so Once you start hitting some of these highs you need to get in the habit of consistently investing and saving the difference and I also understand that 40 is a big chunk 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 do recommend that you start tracking your spending, save your money, and cut back as needed as you continue. working at the same time to increase your income so you can save more. So over time, a savings rate of 40 will be much more achievable, and by following the 40 10 50 rule, it will be much easier to save money in the long run, you'll be able to achieve financial independence much faster, and I'll be able to mash the Me button. like for the youtube algorithm so with that said thanks so much for watching i really appreciate it as always be sure to subscribe and hit that notification bell also feel free to add me on instagram. a lot on a daily basis so if you want to be a part of it feel free to add me on there as on my second channel the graham stefan show i post there every day i'm not posting here so if you want to see a video new. for me every day make sure you add yourself to that and then as 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 a hundred bucks into the platform with one of those shares potenti ally is worth all the way up to fourteen hundred dollars so if you want these two free shares use the link below let me know which two free shares you get thanks so much for looking and see you next time.