Budgeting 101
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You work hard for your money, make it work hard for you! One way to stretch your dollars and plan for the future is to create a budget. Keep in mind, budgeting doesn’t mean you can’t treat yourself.
Healthy spending habits allow for self-care and a budget will be your guide to managing your needs and your wants. We are huge fans of the 50/30/20 plan, that is:
50% of your income goes towards life’s necessities such as housing, utilities, laundry and other clothing needs, transportation, groceries and housing supplies (i.e. cleaning supplies)
30% of your income goes towards wants such as dining out or entertainment
20% of your income goes toward emergency fund savings, retirement savings, and/or paying off debts such as credit card bills or personal loans. Keep in mind personal loans are different from pay day loans which are almost impossible to pay off. To learn more about why pay day loans are harmful, watch the video below.
How much should I spend on housing?
As a general rule of thumb, you should pay no more than 30% of your gross income (the income you make before federal and state taxes are taken from your earnings) on housing. For example, Illinois is currently on track to raise minimum wage to $15 and hour by 2025. In January 2021, the state minimum wage increased from $10.00 to $11 an hour for non-tipped employees. If you earn minimum wage at this rate and work full time (40hrs per week) your monthly gross income might be around $1760. That means you should try and keep your rent around:
.30 x $1760 = $528 per month
We want to make it clear that rent varies from community to community throughout the state of Illinois. In some locations you might just find a small apartment or split rent with a roommate allowing you to meet your monthly obligation on minimum wage. In larger locations such as Chicago, the minimum wage is slightly higher ($13.50 and hour)—and so is rent. If you find that you are having trouble paying rent please check out our section on housing for more information on housing assistance that may be available to you in the state of Illinois. Click here for our Housing page.
Minimum wage in Illinois will go up by $1 ever year until it reaches $15/hr in 2025. To check out the minimum wage increase schedule for the state of Illinois checkout this chart from the Illinois Department of Labor. Minimum wage in Chicago is set to go up to $15 July 1st, 2021.
My cash doesn’t really stretch that far. Is it really possible for me to save?
When it comes to savings, we understand that life happens and saving can be hard. Savings however are just what you need when the unexpected occurs. 20% of your income may sound like a lot, but unforeseen expenses could cost you more. If 20% is just not possible, consider saving at least 10% of your gross income and bit by bit increase how much you save. If that seems like a push, working your way up to 10%, then from 10% to 20%. No matter what, try to save something!
We recommend setting up a savings account online and having some of your income automatically deposited from your check through direct deposit each pay day. Just remember, you can’t miss what you don’t see, and before you know it, you’ll be laying the foundation for your emergency fund.
How do I budget for groceries?
Not sure on how to budget for your groceries? Check out this grocery budget calculator developed by Iowa State University to create an ideal grocery budget for your income! Grocery Calculator
For more information check out our section on Food.