Rent (if heat is included) - *25 per cent of income
Rent (if heat must be supplied) - *20 per cent of income
(If you are buying your home, or already own it, the "rent" is the total of interest on mortgage, taxes, interest, upkeep and repairs which should not ordinarily exceed 1/8 to 1/10 of income. If payments on principal are included it may reach 1/4 to 1/5 of income.)
*Provided that in your community it is possible to provide safe shelter for your family for this amount.
One of the things I really like about The Manual's budget advice when it comes to rent/mortgage is how inclusive it is. Their attitude seems almost modern - it's so green. And yet in that day it was just considered good old fashioned logic. Gathered in with all the other things you might normally consider housing-related costs is "Transportation to Business." Take a look:
Shelter
1. Rent or Mortgage Interest
2. Taxes
3. Insurance
4. Improvements
5. Repairs
6. Transportation to Business
7. Other
When deciding whether what we're spending on our rent or mortgage is in a financially healthy proportion to our income, we must take into account how much where we live impacts what it costs us to get to our place of business. After all, if you think you're saving money on housing in a metropolitan area by living far out in the suburbs and commuting one hour each way every working day, isn't it fair to include the costs related to that two-hour commute with the money you spend on housing? Only then can you get a true picture of what you're spending on shelter. If you had opted for more expensive housing in the city but your "transportation to business" expenses were the cost of a subway token, you might find things come out quite even in the end. Financially, that is. (Your carbon footprint is another picture entirely.)
I rent what my landlord calls a junior one-bedroom apartment for $425 per month. My rent does not include heat, but it does include water and garbage collection --- though not recycling collection. (There are some advantages to living in a dump of a city. Cheap apartments is one of 'em!) I don't now - but ought to - have renter's insurance. If I did, the premium would fall into this category.
For "transportation to business" expenses, I'm going to include gas and parking. As crazy as it sounds to have to pay for parking at your place of business, the university I work for requires that employees pay for annual parking passes in their garage or lot of preference. (I bristle at this sometimes, but I know it makes good environmental sense. They're trying to encourage as wide a use as possible of public transit and other means of transportation to campus.) I pay $29.42 per month for parking. I drive a 12.76-mile round trip to work each weekday. That's 255.2 miles per month x my 2001 Toyota Corolla is supposed to get about 26 miles per gallon with city driving x $2.53 per gallon for gas (running price around town this morning) = $24.83 per month for gas to commute to work. These are very rough figures, of course, but they should give me some idea to start with what I'm spending on shelter. I'd probably own a car whether or not I used it to commute to work or not, so I'm not going to include any other car expenses in this category.
My total spending per month for shelter then is approximately $479.25. That's 13% of my gross monthly income of $3666.67. I fall quite safely within The Manual's recommendation that no more than 20% of your income should be spent on rent "if heat must be supplied." So far, so good!
In addition to kind of guessing where I stand now in relation to the The Manual's "pattern" household budget, I'd like to track all my expenses - at least for the next month - to see if there are any leaks in my spending that I'm completely unaware of. I've uploaded images of the Suggested Budget Form included in The Manual that I'll be using to record my expenses every day. Maybe it'll come in handy for some of you as well! If you click on each page, you should be able to open an extra large printable version. Tomorrow: Clothes.
