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Thread: Living w/in means

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    Veteran Member Scout's Avatar
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    Default Living w/in means

    If I am single w/no children, own my car, and have no debt, what is the amount of monthly rent that I can afford to pay w/out being too frugal or too extravagent if I earn:

    $15,000/year?
    $20,000/year?
    $30,000/year?
    $40,000/year?
    $50,000-$75,000/year?
    $75,000-$100,000/year?

    Is there a formula that could figure this out? The reason I am asking is that I'd like to live closer to the city. I am about 45 minutes outside of Atlanta. Rent for the types of places I am used to is about $800 if I have roommates and $1200-$1500 for a one bedroom. It just seems too expensive. I think I can afford it, but I'd like your opinion first.

    (I put the wide range of incomes up because I reaaaaallllly don't want to post what I make. I think most dancers fall in the range of $15,000-$100,000/year.)
    Last edited by Scout; 06-26-2006 at 07:26 PM.

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    Default Re: Living w/in means

    depends on what you DO spend and what your requirements are. I'm not the one to answer this question, but just to provide context for those who can answer this question:
    1) are you looking to rent or buy?
    2) how much space do you really need? Do you have animals that might need a separate room (or that you'd need a one bedroom for so you can lock them out of your room?) Do you entertain a lot to the point where you wouldn't feel comfortable in a studio?
    3) where do you live? Is this where you want to settle if you DO want to buy right now?
    4) what CAN you make? What are you currently making now, what could you be making if you pushed yourself a little more/worked one or two extra shifts, and what, in the best possible scenario, do you think you could bring in?

    Then there's also what type of mortgage do you want? I for one would never go for a twenty or thirty year loan if I was still dancing while paying. A five or MAYBE a ten year one would be more logical to me just because of interest rates. What are you comfortable with?

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    Default Re: Living w/in means

    In addition to what fancygirl mentioned, I would add the following questions...

    1 What are you monthly expenses? Bills, spending habits (gas, groceries, gym, shopping etc)
    2 What are you personal goals? Personal savings, retirement, travel, or even saving for a deposit on a house.

    After you determine these questions, then you can see how much you have left over on a monthly or annual basis. I like to target 35% of monthly income to cover all my monthly bills (rent, car, electric, anything that will send me a bill). Also, does your money vary thoughtout the year. If so, then you should consider that as well.

    One more thing... There's also your personal choice. Doing a 45 minute commute may be something some people can deal with and others can't.

    I think that you are on the right track thinking about the answer to the question before going out and getting something. This shows maturity. Consider how much you are going to make and then make your decision.

    good luck

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    Default Re: Living w/in means

    Quote Originally Posted by oceanside
    In addition to what fancygirl mentioned, I would add the following questions...

    1 What are you monthly expenses? Bills, spending habits (gas, groceries, gym, shopping etc)
    2 What are you personal goals? Personal savings, retirement, travel, or even saving for a deposit on a house.

    After you determine these questions, then you can see how much you have left over on a monthly or annual basis. I like to target 35% of monthly income to cover all my monthly bills (rent, car, electric, anything that will send me a bill). Also, does your money vary thoughtout the year. If so, then you should consider that as well.

    One more thing... There's also your personal choice. Doing a 45 minute commute may be something some people can deal with and others can't.

    I think that you are on the right track thinking about the answer to the question before going out and getting something. This shows maturity. Consider how much you are going to make and then make your decision.

    good luck
    35%? The median income in the US is about $40,000. 35% of $40,000 is $14,000. Even if I replaced my meals with Raman noodles and walked to work, I do not think I could get by on $14,000. If I were earning $75,000+, yes, I could live on 35%. Let's just assume that I earn between $25,000 and $35,000. Last year, minus an emergency medical expense, my total costs were $20,000.

    I would like to move because I live in crappy area far from everything. I would like to enjoy my earnings a little instead of penny pinching until the day I die and have my grandkids blow the inheritance after probate takes a chunk.

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    Default Re: Living w/in means

    I was trying to provide more of a methodology, rather than a hard fast number.

    I'm just saying that you need to find a % that you are comfortable with. This works for me. If 70% work for you, then use that number. Since you did not provide your detailed information, then I figured that it would help the most by providing a thought process.

    On a side note. From you analysis, you are correct. I do earn closer to $75K than $40K. Also, it has taken me years to reduce this % down to 35%. I'm in major savings mode for a house.

    And yes. Sometimes, if you tend to be frugal, it's time to make that extra step and work to live vs live to work.

    Good luck on your decision.

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    Default Re: Living w/in means

    Quote Originally Posted by oceanside
    I was trying to provide more of a methodology, rather than a hard fast number.

    I'm just saying that you need to find a % that you are comfortable with. This works for me. If 70% work for you, then use that number. Since you did not provide your detailed information, then I figured that it would help the most by providing a thought process.

    On a side note. From you analysis, you are correct. I do earn closer to $75K than $40K. Also, it has taken me years to reduce this % down to 35%. I'm in major savings mode for a house.

    And yes. Sometimes, if you tend to be frugal, it's time to make that extra step and work to live vs live to work.

    Good luck on your decision.
    I think 50% would be okay. If I use 60%, I would not have any savings because I pay over 35%* for income tax.

    *This is a rotten, stinking number. 20% income tax + 15% self-employment tax.

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    Default Re: Living w/in means

    I've read on msn a few times about the 60% solution. Basically, it says that (after taxes) 60% should cover your expenses for the month. 10% for short term savings (for random purchases like birthday gifts, etc.) 10% for long term savings (house, car, etc), 10% for retirement, and 10% towards debt reduction.

    I am by no means an expert on this, but it seems like a do-able plan, IF you can stick with it. Another number that was suggested by someone on the board (I can't remember who) was that its best if you can pay your rent out of what you make in 1 week. So, if you make 3k a month, you're making about 750 a week, you should keep your rent at that number or below.

    Also, check out the utility prices in the area you wish to move to, some subarbs have higher utility rates than others, this should be factored in as well
    I believe you Dottie and you have my support

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    Default Re: Living w/in means

    there's an unofficial 'line in the sand' which states that anybody who is spending 50% or more of their after-tax income towards housing is taking a pretty big risk. Given your 35% tax bracket, 50% of the remaining 65% would be equal to 32% of your pre-tax income. Of course, tax brackets change as income rises, i.e. if you earn $40k your tax bracket may 'only' be 25% , but if you earn $75k your tax bracket may be 40%, so you'll need to recalculate accordingly.

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    Default Re: Living w/in means

    Quote Originally Posted by Melonie
    there's an unofficial 'line in the sand' which states that anybody who is spending 50% or more of their after-tax income towards housing is taking a pretty big risk. Given your 35% tax bracket, 50% of the remaining 65% would be equal to 32% of your pre-tax income. Of course, tax brackets change as income rises, i.e. if you earn $40k your tax bracket may 'only' be 25% , but if you earn $75k your tax bracket may be 40%, so you'll need to recalculate accordingly.
    Wow, so the dancers who earn $35,000 pre-tax are screwed with respect to savings, investments, etc.

    If I declare my "business" an LLC, would I avoid the self-employment tax? I found this thread (http://www.stripperweb.com/forum/showthread.php?t=52660) which is really helpful, but I'm still not sure how the tax thing would work if I were to incoporate.

    I just want to avoid the 15.3% self employment tax. It blows. If I can free up some money, I could have (finally) a decent standard of living. After reading all the helpful responses on this thread, my goal is to make 50% of my after tax income produce a comfortable life.
    Last edited by Scout; 06-27-2006 at 04:27 AM.

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    Default Re: Living w/in means

    I don't think you can get out of the employment tax. If anything, then your business would be earning a profit and they would tax that.

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    Default Re: Living w/in means

    This is tricky. Again, it depends on so many factors. You asked us to run down a list of several different ranges of income. What are your spending habits outside of the rent? How much money, if any do you invest/sock away for retirement?

    It all depends on what's worth it to you. If you truly think that living in the city would make you happier, and the amount of the rent you're paying is easy for you to do (I like the one week's income guideline) AND you can still have enough left over to pay bills and hopefully save, then go for it. As you said, you do want to enjoy some of your money, and finding a place to live where you will be happier could do a lot for you.

    Most people spend more the more they make and our consumer culture makes temptation very prevalent.

    Here in NYC for example, it's not at all uncommon for people put half their income towards rent. Sure, it's extraordinairly expensive here and it's not the norm, but it happens in some places.
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    Default Re: Living w/in means

    If I declare my "business" an LLC, would I avoid the self-employment tax? I found this thread () which is really helpful, but I'm still not sure how the tax thing would work if I were to incoporate.
    In the final analysis, doing this wouldn't change much - although some clever accountants can manage to 'split' payouts from an LLC into 'salary' (which counts as ordinary income thus is subject to income and SE tax) plus 'capital gains' (which don't count). However this trick means that you don't actually get paid the 'capital gains' portion until next year even though you earned the money this year !

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    Default Re: Living w/in means

    Ironically, my Econ class covered this very topic tonight .....according to the budgets suggested by the government / Consumer Price Index, the average person should be spending about 32.9% on shelter.

    Here's the basic breakdown (and no, I don't think it's realistic, but my book is from a few years ago)

    Housing - 42.1%
    -Shelter 32.9%
    - Fuel & utilities 4.7%
    - Furnishings and Operations 4.5%

    Food & Beverages - 15.4%

    Transportation - 16.9%
    -Incl public and private transportation: car, fuel, maintenance, occassional bus

    Medical Care - 6.1%

    Apparel - 4.0%

    Recreation - 5.8%

    Education & Communication - 5.9%

    Other Goods & Services - 3.8%






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    Default Re: Living w/in means

    ^^^ I agree that this is no longer realistic, primarily because the cost of home fuel and utilities, the cost of transportation fuel, and the cost of medical care have all risen astronomically over the past 5 years ... not to mention the rising cost of property, gasoline, sales taxes etc. which isn't specifically broken out in your list.

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