After subtracting expenses from her income, Graham ends up with $300 a month—not enough to meet her wedding savings goals (which would require $416 per month). “To be able to save enough money for periodic emergency expenses, she needs to revise her wedding budget,” says Broadnax-Lawrence.
Graham’s budget should limit household expenses to roughly 35% of her total income, and debt payments to about 20%. Other expenses (including transportation) shouldn’t exceed about 20% of total income, and savings should be 10%, according to Broadnax-Lawrence.
Because freelance income fluctuates, Broadnax-Lawrence says Graham should treat that money like petty cash and focus solely on her base salary when budgeting. “To get to solid budgeting numbers, she should use her salary only, and focus on saving the rest,” she advises, “or use it to continue paying down her debt.”
Najla Slowe understands the value of budgeting, and she knows firsthand what can happen when people let their finances unravel. As an administrative assistant and marketing consultant for a bankruptcy attorney, she works about 35 hours a week and brings home $1,800 a month. She’s tried to map out a budget for herself in Microsoft Excel, but admits that she “rarely looks at” the spreadsheet.
With two small children, Slowe is having a hard time making ends meet. “I’m in debt,” says Slowe, whose student loans are now in deferment. “My biggest financial challenge is finding a way to live within my means, while searching for a job that will increase my salary.” Slowe says she hasn’t put much time into the latter.