If one is earning $100,000 per annum and as a single person, it’s like a dream come true. Apart from earning this much and feeling proud, it’s important to manage funds in certain ways. Well, it looks like a lot of money but if not managed well it can disappear so quickly.
Here I will break it down for you and discuss the best budget for a single person who is earning $100,000 per annum in the United States.
Understanding Your Monthly Income
Before you start budgeting, you need to know your take-home pay. A $100,000 annual salary does not mean you get all of it in your hands. Taxes, health insurance, and other deductions will reduce your actual income.
So, before I talk about budgeting, Let me clear one thing, and that is “your take-home pay”. It means the funds you will get in hands after paying all expenses, taxes, health insurance, EMIs and bills.
For example:
Federal tax: You must be paying around 12%-22% as a Federal tax, Which is a tax that everyone pays on all kinds of incomes.
State tax: You will be paying State tax which is a tax every state resident pays against their income. It Depends on the state, usually it is around 5.50% to 8.75%
Social Security and Medicare: Being a single person, you pay for Social Security and Medicare expenses of around 7.65%
So now if we break down the funds you are left in your hand on a monthly basis, It is between $6,000 and $6,800. So, Finally we have the right digits of funds to craft the best Budget for a Single Person Earning $100K in the US.
The 50/30/20 Rule
Some of you might already know this rule. The 50/30/20 Rule is an effective formula to develop an effective budget. It breaks down your income into 3 major categories:
- 50% for needs
- 30% for wants
- 20% for savings and debt repayment
So, Now it’s time to understand all these categories in depth keeping in mind that you have $6,500 per month as a “take-home pay”.
50% for Needs: $3,250 per Month
Even if you are living single and alone, you pay for your needs every month. The needs like housing, utilities, groceries, and transportation etc. Let’s talk about these needs more deeply:
- Housing: $1,500 – $2,000 per Month
One of the biggest parts that goes into expense is Housing Expense. It depends on where you live. If you live in tier-1 cities like New York or San Francisco, the Housing amount goes higher and in tier-2 or tier-3 cities it goes average. Below given table will give you an idea about cost of living in top tier cities in the USA.
| Top Tier Cities in USA | Monthly Amount (1 Bedroom Flat ) |
| New York City, USA | $3,336 |
| San Francisco, USA | $3,043 |
| Chicago, USA | $4,453.33 |
| Boston, USA | $3,867 |
- Utilities: $100 – $200 per Month
To live a comfortable life in a good city in the United States, You pay for basic utilities like electricity, water, Security, Gas and heating. So, if we calculate the basic set of utilities a person needs, it can probably be around $100 to $200 per month. Here is the approximately amount you pay for utilities.
| Basic Utilities | Monthly Expense |
| Water bills | $37 to $115 |
| Electricity Bill | $100 to $149 |
| Gas | $47 to $60 |
- Groceries: $300 – $400 per Month
Whether you prefer to cook at home or order food from outside, the bills of Groceries can be between $300 to $400 per month. If you decide to cook dishes yourself, the cost will come down to $200 to $300 monthly and save you some funds.
- Transportation: $200 – $400 per Month
Transportation is something that depends on your daily commute. If you prefer public transport to travel, It will cost you around $100 to $200 per month. Whereas, if you drive a car, it will cost your between $300 to $400 monthly because of the extra cost of Fuel, Insurance and servicing and maintenance.
30% for Wants: $1,950 per Month
Wants are something that we don’t really need but desire to have, own or experience. Things like travelling, Dining out, Watching movies and joining a gym etc. These things look like they are not essential but to feel life as a human, It’s important to enjoy life too.
- Dining Out: $200 – $400 per Month
Going out for a lunch or dinner in a good ambience restaurant can relax you up but it’s important to limit it. If you go for dining out once or twice a week, will cost you between $200 to $400 per month.
- Entertainment: $100 – $300 per Month
We are human, not robots! So we occasionally perform activities that entertain us. It includes going out for movies, concerts, or enjoying Netflix or Hulu. $100 to $300 per month can be a good amount to spend on Entertainment.
- Travel: $200 – $400 per Month
If you are a travel freak and love to go for vacations monthly, Its important to keep some bucks aside. Saving for vacations can be anything that you prefer, but to be safe with the annual budget you should save between $200 to $400 per month.
- Hobbies and Other Wants: $200 – $400 per Month
Be it joining the gym or taking classes to learn some new skills, You can keep a small budget of around $200 to $400 per month.
20% for Savings and Debt Repayment: $1,300 per Month
Just like Author Steve Burkholder says “If you’re saving, you’re succeeding”, Saving can be a great tool for you. As per the best budgeting plan you should save, invest or pay off debts 20% of your income.
- Emergency Fund: $300 per Month
It is something you always need to have for an economically secure life. You must save at least three to six months of living expenses. Set it around $300 per month to the maximum. Keeping emergency funds is always a wise decision. These bucks help you in hard times.
- Retirement Savings: $500 per Month
It’s always better to plan your retirement, and for that you must Contribute to a 401(k) or IRA. Always try to save at least 10 to 15% for your retirement, which is around $500 per month.
- Debt Repayment: $500 per Month
Setting some funds to pay off the debt like loans, credit card bills is always a smart idea. You should put $500 aside to get buried from the debts.
Other Budgeting Tips
Now you must have learned important things to consider making the Best Budget for a Single Person Earning $100K in the US. Now, let’s discuss about other essential tips to make your budget effective:
- Track Your Spending
Always maintain a sheet or a journal to track all your daily expenses. Practicing this will make you aware about the areas where you can cut off unwanted expenses.
- Adjust for Your Lifestyle
Budgeting is not always the same for everyone living in the US. Based on different cities expenses are never the same. If you live in top cities it will go up and in smaller cities it will be less than average. So adjusting your budget in lifestyle and priorities will help you a lot.
- Avoid Lifestyle Inflation
Sometimes people keep their expenses high as soon as their salary increases. This practice is called Lifestyle Inflation. Whenever you get an increment in salary you must save, invest or put that in emergency funds instead of spending it for fun.
- Cut Unnecessary Expenses
You can cut unnecessary or unwanted expenses wherever you find you can. For example, instead of going out for dinner or lunch, you should cook more at home. Try travelling through local transport instead of using a car. Get rid of subscriptions you use rarely or regularly.
- Plan for Big Expenses
To get yourself ready for a big purchase like buying a car or going out internationally on vacations, you should start saving early. This way you don’t need to touch your monthly savings or the budget that you have set into debts.
The Importance of Financial Goals
Setting your financial goals is a must if you want to live your life on your own terms. If you plan to buy a luxury house or car or want to travel the world, Making financial goals is important. With $100,000 per annum you can do N number of things and explore life to the fullest in the US.
The Bottom Line
Planning Best Budget for a Single Person Earning $100K in the US indicates areas where you must look into. Like calculating taxes, following the 50/30/20 rule and other tips we talked about. Only needs must be covered and stopping to lose bucks on unnecessary things will help you meet your financial goals easily living in the US.
With this budget plan, you can enjoy financial stability and peace of mind while still enjoying the rewards of your hard work.
