If you make $20 per hour and work full-time, your monthly salary would be approximately $3,467 before taxes. Dividing your paycheck wisely is essential to ensure that you have enough money to cover your expenses while also saving for your future. Here is a step-by-step guide on how to divide up your paycheck:
Step 1: Determine your fixed expenses
The first step is to determine your fixed expenses, which are the expenses that are the same every month. This includes your rent or mortgage, utilities, car payments, and other bills. Add up all of these expenses and subtract them from your monthly salary.
For example, let’s say your fixed expenses are $1,200 per month. Subtracting this amount from your monthly salary of $3,467 would leave you with $2,267.
Step 2: Set aside money for savings
It’s always a good idea to save a portion of your income each month for emergencies and your long-term financial goals. Experts recommend saving at least 20% of your income. For example, if you make $3,467 per month, you should aim to save at least $693.
Step 3: Allocate money for variable expenses
Variable expenses are expenses that can fluctuate each month, such as groceries, entertainment, and dining out. Experts recommend allocating no more than 30% of your income to variable expenses. In our example, 30% of $3,467 would be $1,040.
Step 4: Determine your discretionary income
Discretionary income is the money left over after you have paid all of your fixed and variable expenses and set aside money for savings. This money can be used for anything you want, such as travel, hobbies, or additional savings. In our example, your discretionary income would be $527 ($2,267 fixed expenses + $693 savings + $1,040 variable expenses = $4,000 – $3,467 = $533).
Step 5: Review your budget regularly
It’s important to review your budget regularly to ensure that you are sticking to it and making any necessary adjustments. If you find that you are consistently overspending in one area, you may need to cut back in another area to balance your budget.
For those that are more visual or work better by percentages. Here is the same formula formatted for you.
If you make $20 an hour and work full-time, you can allocate your money by percentages to make sure that you are spending your money wisely and saving for your future. Here is a breakdown of how to allocate your money by percentages:
- Fixed Expenses: 50%
Fixed expenses are the essential expenses that you have to pay every month, such as rent or mortgage payments, utilities, insurance, car payments, and other bills. These expenses are typically the same amount every month and make up a significant portion of your budget. To allocate your money by percentages, aim to spend no more than 50% of your income on fixed expenses.
- Savings: 20%
Savings should be a top priority for anyone who wants to achieve their financial goals. Aim to save at least 20% of your income each month. This money can be put towards an emergency fund, retirement savings, or any other financial goals that you have.
- Variable Expenses: 30%
Variable expenses are the expenses that can fluctuate from month to month, such as groceries, entertainment, dining out, clothing, and travel. To allocate your money by percentages, aim to spend no more than 30% of your income on variable expenses. This will give you some flexibility in your budget and allow you to enjoy the things you love without overspending.
If you make $20 per hour and work full-time, it’s important to divide your paycheck wisely. Determine your fixed expenses, set aside money for savings, allocate money for variable expenses, determine your discretionary income, and review your budget regularly to ensure that you are on track to meet your financial goals.
