Your income vs. the cost of living

Make a budget to know how much money you need

Can I make ends meet on $12/hour?

Will a $30,000 annual salary allow my family to live comfortably?

To definitively answer questions like these, you need to consider where the dollars coming in need to go. What are your monthly expenses? Do you have debts to pay? Do you need to save for the future? If you don’t know, then how can you decide whether the amount of money a job provides is the right amount?

Creating a budget is a proactive way to better understand your spending. It might seem like a drag, but it’s a skill worth learning—one that will help you make monetary decisions and achieve your financial goals.

An alternative to wondering where your paychecks disappear to

There are lots of different budgeting methods out there. Some options lump spending into general buckets, such as “needs,” “wants” and “savings.” While others go granular and use more specific categories. An example of the latter is the budget percentage method designed by personal finance guru Dave Ramsey. If you’re new to household planning and don’t have any idea how much you should be spending on stuff, it’s a great starting point. Ramsey breaks spending down into a list of budget categories (housing, food, etc.) and then recommends a specific percentage (or a percentage range) of your after-tax income that should be allocated to each category. These percentages will total up to 100% of your income.

The beauty of this method is that it’s meant to be flexible. In personal finance, one size doesn’t fit all. People can adjust percentages to what makes more sense for their situation. The example you see below slightly modifies Ramsey’s guidelines to align more closely with the priorities of hourly workers.

Food 10% – 15%

Utilities 5% – 10%

Housing 30%

Transportation  10%

Healthcare  5% – 10%

Insurance 10% – 25%

Recreation  5% – 10%

Personal Spending  5% – 10%

Saving  10%

Miscellaneous  5% – 10%

Armed with this outline, the next step is to track all of your expenses for a month or two to get a consistent idea of your spending habits. Determine a dollar figure for each of the budget categories and then compare how much you spend to the guideline percentages. To illustrate, let’s say your weekly paycheck is $500 after taxes. You’ve chosen to budget 5% of that money to your “recreation” category. Calculating 5% of that $500 income gives you $25. Tracking your weekly spending though reveals that you’re coming in slightly over budget at $35. To stay on budget, you could simply reduce your expense. Or if recreation is really a priority, you can reduce percentages in other categories to accommodate your current spend.

One other thing to note is the inclusion of saving into your budget. While it may seem impractical or impossible in the short term, you should make a habit of setting aside some of your income for the future. Think of it as an expense that you pay to yourself. There are different ways to save. You could contribute to a 401(k) retirement plan offered by your employer or to an individual retirement account (IRA). You could open a high-yield savings account to serve as an emergency fund to cover large unexpected expenses, like replacing a broken refrigerator or a high-ticket dental procedure. You could also set up sinking funds to save for expected expenses that don’t come up every month in your monthly budget but you still need to plan for—things like birthday and holiday gifts, income tax payments or an annual vacation.

Budget knowledge is power

So what might a real-world example of a budget look like? Let’s imagine Taylor is a grocery stocker in Virginia, working 35 hours at $14 per hour. His annual after-tax income is $21,229, which equates to $1,769 every month. Using the budget categories with assigned percentages of income, Taylor’s monthly budget should look like this.

Food (10%) $176.90 

Utilities (5%)  $88.45

Housing (30%) $530.70 

Transportation (10%)  $176.90 

Health (5%)  $88.45 

Insurance (10%)  $176.90  

Recreation (5%)  $88.45 

Personal Spending (10%)  $176.90  

Saving (10%)  $176.90  

Miscellaneous (5%)  $88.45 

Total Budget (100%) $1,769

This data will give Taylor a comprehensive snapshot of where his loot should be going every month. If he’s overspending, this budget will show him where and by how much. And he can adapt. He may have wiggle room with his percentages. He may opt to tighten his belt and spend less. Or he may determine that the solution is to increase his earnings, which may require asking for more hours or a pay raise—or seeking out a second source of income.


The cost of living ain’t cheap, but having a budget definitely helps manage it. The more you know about your money situation, the more prepared you are to accomplish your personal finance goals—whether that’s paying bills, getting out of debt or saving for a rainy day. And that’s gold.

Katy Boyles |
Katy is our Social Media Manager at Snagajob, where she loves talking to hourly workers and employers all day long. Her first hourly job was as a hostess.