Creating a Budget for 100k Income
Disclaimer: This article is for informational purposes only. It should not be considered legal or financial advice. You should consult with an attorney or other professional to determine what may be best for your individual needs.
When I first started working, reaching a six figure income before 30 was my goal! I am happy to say that with hard work and focus, I was able to achieve that goal. Making an income of $100k more can mean different things depending on what phase of life you are currently in and the lifestyle that you choose. For this post I will consider factors such as living in expensive cities and carrying significant student loan debt. This is a post directed toward single people and couples. If you are interested in budgeting $100k for a family, I previously wrote a post The Truth about Living on 100k as a Family of Four.
How to Create a Budget for 100k Income?
A budget is simply a plan for how to spend your income. One modern budgeting concept is the 50/30/20 rule. The 50/30/20 rule recommends spending 50% of your salary on Needs, 30% on Wants, and 20% of your income to paying off debt. That is $2,997 a month for wants, $1,798 a month for needs and $1,188 for savings and paying of debt.
Creating a budget for 100k income: Estimating Take Home Pay
There was a recent article that computed an estimated US take home pay based on the state that you live in. That article can be found here. On Average in the United States if you make $100k, you will take home on average $71,943 a year or $5,995 a month. This is based on estimated state and local income taxes but does not include items such as contributions to retirement accounts or contribution to health in dental plans.
On Average in the United States if you make $100k, you will take home on average $71,943 a year or $5,995 a month.
Creating A Baseline Budge for 100k Income
Using the 50/30/20 rule as a baseline:
| Needs | 50% | $2,997 |
| Wants | 30% | $1,798 |
| Savings/Debt | 20% | $1,199 |
Budgeting for Needs on 100k Income
Items in the “need” category include housing payment, utilities, groceries, car payments, insurance & minimum payment on debts. If you have children and require Child Care to work, Child Care would also fall in to the needs category. I recently wrote a post about surviving on a $100k salary as a family, that post can be found on our website here. For this post, I will focus on budgeting $100k salary, as a single person or as a couple.
The average cost of rent in the United States is $1,405 according to CBS News . As a single person living on $100k you would likely be able to comfortably provide for your needs based on spending 50% of your take home income on needs.
As a single person living on $100k you would likely be able to comfortably provide for your needs based on spending 50% of your take home income on needs.
| Car Payment | $381 |
| Car Insurance | $150 |
| Utilities | $200 |
| Groceries | $367 |
| Housing Payment | $1,405.0 |
| Total | $2,503 |
After your needs are provided for there would be more than $1700 for things that you want to do such as investing in hobbies, shopping dining out, outings or vacation. Additionally, you would have more than $1,000 to use toward paying off debt or savings.
This is just a baseline budget for a single person. There are a number of factors that can impact your budget. You may need to or decide to spend more or less in the savings/debt category.
Budget for 100k in a High Cost of Living Area
According to ivestopedia, the 10 most expensive places to live in the United Sates are :
| 1 | New York, NY |
| 2 | San Francisco, CA |
| 3 | Honolulu, HI |
| 4 | Boston, MA |
| 5 | Washington, DC |
| 6 | Oakland, CA |
| 7 | San Jose, CA |
| 8 | San Diego, CA |
| 9 | Los Angeles, CA |
| 10 | Miami, FL |
According to Business Insider , the average rent for an apartment in Manhattan is $3,667. As a single or a couple, you will be able to live comfortably in a one-bedroom apartment. The average rent for a one bedroom in one of the least expensive neighborhoods in Manhattan (Washington Heights) is $1,980. The table below shows an example “need “budget for a single person living in the Washington Heights neighborhood.
| Car Payment | $381 |
| Car Insurance | $150 |
| Utilities | $200 |
| Groceries | $367 |
| Housing Payment | $1,980.00 |
| Total | $3,078 |
Sample budget for Living in the Washington Heights section of Manhattan
According to Business Insider the rent for a 1-bedroom apartment in Manhattan’s most expensive neighborhood, (Little Italy) is about $4300. The “need” budget for this neighborhood would be:
| Car Payment | $381 |
| Car Insurance | $150 |
| Utilities | $200 |
| Groceries | $367 |
| Housing Payment | $4,300.00 |
| Total | $5,398 |
Sample Budget for living in the Little Italy section of Manhattan
The 50/30/20 budget isn’t a rule set in cement. Living in Washington Heights would put your “need” budget at about 51% of your take home income. You could easily make this work by simply adjusting your “want” budget or your “savings and debt” budget slightly. You could modify either one slightly and live comfortably.
However, living in an expensive area like Little Italy would take up more than 90% of your take home pay. Severely limiting your available income to do the things you “want” and disposable income to save and pay off debt. If you really wanted to live in the Little Italy Section of Manhattan on 100k, you have two options to make this work:
- Look for a roommate to significantly reduce the cost of living in this area.
- Generate more income to afford the cost of living in this area.
Budget for 100K Income: Student Loan Debt
According to CNBC (https://www.cnbc.com/2018/02/15/heres-how-much-the-average-student-loan-borrower-owes-when-they-graduate.html) In the United States, about 70% of students graduate with an average student loan debt of $37,172. The average student loan payment is $393 per month according to the Federal Reserve. Assume $393 is the minimum payment on student loan debt, here is an example for the “needs” budget for the 50/30/20 budget rule with the Average Student Loan Debt Payment factored in:
| Car Payment | $381 |
| Car Insurance | $150 |
| Utilities | $200 |
| Student Loan Debt | $393 |
| Groceries | $367 |
| Housing Payment | $1,405.00 |
| Total | $2,896 |
With the average student loan payment in a state with at or below an average rent of $1,405 student you can still keep your “needs” within 50% of your take home pay. In fact you could use a portion of the more than $1100 in the “debt/savings” portion of your budget to accelerate paying off your student loan debt. Visit a post that I recently wrote about creating a debt payment plan to come up with a plan to tackle your student loan debt, How Do I set Up a Debt Payoff Plan.
Budget for 100k Income: Tailoring Your Budget to Meet Your Goals
My favorite personal finance book is I Will Teach You to Be Rich by Ramit Sethi. Unlike most Personal Finance gurus, Ramit doesn’t condemn you for purchasing a $4 cup of coffee, because at the end of the day kicking a Latte will do very little to help you reach your financial goals. If that $4 cup of coffee adds value to your life, you should enjoy it. In his book I Will Teach You to Be Rich, Ramit instead focuses on eliminating costs that add no value to your life such as unused subscriptions and bank fees. Additionally, Ramit, provides scripts on how to negotiate credit card interest rates.
Once you have eliminated all of the no value added activities, if you find you still do not meet your financial goals, Ramit focuses on identifying ways to generate additional income. He gives advice about how to discuss a promotion at your current job and ideas for generating additional income as a side hustle.
If you are fortunate enough to make 100k in income with little debt and have a significant amount to save or pay off debt, he provides advice about how to allocate that money for growth. He also discusses saving for big purchases like a house, or a wedding. Ramit Sethi’s book is really a great entry in to budgeting, saving, & investing for your future. I got I Will Teach You to Be Rich for free with an audible trial. After listening to it, I gladly would have purchased this book. This book is available as an audible book, an e-book & a paper back book. It was revised in 2019, with updated advice and recommendations. I Will Teach You to be Rich is Available on Amazon, check the current price of I will Teach You to be Rich.
Ramit discusses how to stop asking $3 questions and start asking $30,000 to start living a Rich Life in the Video Below:
