![\"Globe](\"https:\/\/www.europesays.com\/ie\/wp-content\/uploads\/2025\/10\/BHM7RV3ODVH2DPRIAACLVQF7BM.jpg\")
Globe columnist Sean P. Murphy tracks his and his wife’s spending in an Excel spreadsheet.Sean P. Murphy<\/p>\n
First, determine your income. Calculating \u201cgross\u201d pay \u2014 what your employer pays you before taxes and other deductions \u2014 is fairly straightforward, unless your pay varies or you have more than one job. But most of us are salaried and or wage-earning employees and our \u201ctake home pay\u201d is total pay minus money withheld<\/a> to pay state and federal income taxes. <\/p>\n What else comes out of my paycheck?<\/p>\n Your paycheck also gets dinged for Social Security (6.2 percent) and Medicare (1.45 percent). Both are matched by your employer on your behalf. These are known as \u201cpayroll\u201d or FICA taxes<\/a>, but strictly speaking they\u2019re not taxes. They are more like contributions toward benefits paid to seniors. <\/p>\n Many of us pay for health care insurance (and sometimes dental or vision) with deductions. Some taxpayers (including me) save a few bucks by using Flexible Spending Accounts<\/a>, which are offered by employers. That lets you set aside money every pay period to cover out-of-pocket health care costs, like deductibles, copayments, and prescriptions with \u201cpre-tax dollars.\u201d<\/p>\n So what\u2019s left after taxes?<\/p>\n It\u2019s often referred to as disposable income \u2014 earnings you get to decide how to spend (sort of). One popular budgeting framework is called the \u201c50-30-20\u2033 rule<\/a>, which suggests you spend 50 percent of disposable income on \u201cneeds,\u201d 30 percent on \u201cwants,\u201d and 20 percent on savings and debt repayment (excluding mortgage and auto loans). There is nothing magic about \u201c50-30-20.\u201d The goal isn\u2019t to hit those exact percentages; it\u2019s to gain a working knowledge of your own personal finances.<\/p>\n Housing, transportation, food, and utilities. For those who own, housing costs include mortgage, real estate taxes, homeowners insurance, and homeowners association fees, if applicable. You should also budget for upkeep of your house. For the last 10 years, I have spent many thousands of dollars to replace the boiler and some drafty windows and doors (nondiscretionary) and remodel the kitchen and add a deck (discretionary).<\/p>\n How much should I spend on housing?<\/p>\n Some experts suggest spending no more than 28 percent of disposable income on your mortgage. Under the 50-30-20 rule, that would leave 22 percent of your disposable income for other housing expenses (real estate taxes and insurance, for example) transportation, food and utilities. Of course, everyone\u2019s circumstances are different and change over time. When I was younger, with children in school, for example, many worthy house projects went undone.<\/p>\n How much should I spend on rent?<\/p>\n A widely used guideline for those who rent suggests your rent should not exceed 30 percent of gross income. A significant portion of Boston area renters, however, are considered \u201ccost-burdened\u201d because they spend a higher percentage on housing, sometimes approaching 50 percent or even more.<\/p>\n Things you can live without if you had to, such as entertainment (dining out, streaming services), vacations, and non-essential shopping for things like clothing, gadgets, and electronics.<\/p>\n What are \u201csavings and debt repayment\u201d?<\/p>\n You should have enough money in an emergency fund to cover up to six months of essential expenses. But your savings should go beyond that. Some experts recommend that you \u201cpay yourself first\u201d by automatically saving a portion of your paycheck. Employer-based 401(k) plans are a prime example, with the additional benefit of saving on taxes. <\/p>\n OK, so what is \u201cdebt repayment\u201d?<\/p>\n Very few of us are debt-free. But there are different kinds of debt. Borrowing money to buy a house or condo or a motor vehicle may be considered \u201cgood\u201d debt. You use your house and car over multiple years and should pay for them over multiple years, with a mortgage or other loan.<\/p>\n What kind of debt isn\u2019t advisable?<\/p>\n Credit cards are almost indispensable these days for good reason: They are safe, pay rewards, and give you a tidy record of your spending. I put just about every purchase on a credit card. But I pay the balance monthly without fail. You should, too, if at all possible.<\/p>\n What\u2019s the downside of credit card debt?<\/p>\n Credit card debt is by far the most expensive form of consumer borrowing (it\u2019s \u201cbad\u201d debt). Paying 20 percent interest on thousands of dollars of debt month to month is like subsidizing the banks that provide credit cards. You can do much better with a home equity or personal loan, assuming you have a decent credit rating. (Maintaining a budget may help you pay your bills on time and thus improve your credit score.) Make a plan to pay off credit card debt, even if it will take years. Also, avoid \u201cbuy now, pay later\u201d offers to avoid possible steep fees.<\/p>\n What about using generative AI for advice on spending?<\/p>\n I would advise caution. A recent survey<\/a> found that more than half of those who acted on the financial advice offered by ChatGPT or other generative AI apps said they had made a poor financial decision or a mistake in trying to follow the guidance.<\/p>\n Got a problem? Send your consumer issue to sean.murphy@globe.com<\/a>. Follow him @spmurphyboston<\/a>.<\/p>\n![\"A](\"https:\/\/www.europesays.com\/ie\/wp-content\/uploads\/2025\/10\/QHJYK6XN556CGPFMHNIXJRSHKA.jpg\")
A “for rent” sign seen at a Brookline apartment building in September. David L Ryan\/ Globe Staff<\/p>\n