Do You Know Your Financial Numbers? Because Most People are Broke.

Only one out of three Americans actually know what their monthly budget is. If this is any indication, millennials will be in for a huge surprise as they age through society. Our 20s and early 30s were a wild ride of YOLO, Views from the Six, God’s Plan, Fake Love, Best I Ever Had, 0 to 100, In My Feelings, Nice for What, and Worst Behavior.

We basically lived a Drake discography.

Table of Contents

Why is Budgeting important?

Personally, I fell out of love with the paycheck to paycheck living. Getting your net worth north of $0.00 is a full-time orgasmic experience. Budgeting is “Peace of Mind in a Bottle” and I’m desperately trying to give it away for FREE through articles.

You are FREE to do anything, once you have the key components down pack.

To get an idea of what this looks like, experts created a visualized budget of the typical American making about $75k per year. They also drafted a mighty long research paper to conclude that you are broke. If you want to end the yoyo called “adolescence”; join the realm of the adults with the “How to Stop Living Paycheck to Paycheck in 4 Steps” by Brandon Turner of BiggerPockets.

Additionally, I pulled together data into friendly infographics (below). One of my life goals is to simplify all of these high concepts because finances for a long time was the realm of top earners.

*I started from the bottom; I’m sure the food portion was 13% of my overall income, but I’m here.

Important Note

These are the average percentage based on their respective average Pre-tax Income. You might be overspending in some categories (Food, Entertainment are the most common). These are averages; I understand if you make only $14 and give $10 to charity or you make $230k and can’t keep $2,000 for your mortgage. Again these are AVERAGES!

Rule of Thumb

A total housing expenses over 25% is terrible (For a deep dive). Counting pennies and cutting out Starbucks might save you $100/month but downsizing the rental could cut as much as $500/month. My Net/Max Financial Plan pushes you to invest and save more on the front end thus lowering your taxes throughout the year with the benefit of improving your life. *As always; if you have a better plan, it’s better than no plan at all.

Supporting documentation:

1. See how your spending compares with that of the average Americans by Esther Bloom

2. Income and spending patterns among Black households by Reginald A. Noel

3. Net/Max Personal Finance Plan by Lawrence Gonzalez

4. The Magic Number for Million Dollar Millennials by Lawrence Gonzalez

Being Average Earns You Average Results

Average American Budget based on using the 2016 Bureau of Labor Statistics numbers, illustrates the priorities of an average family, which makes just over $74,000 a year and shells out about $57,000.

That family spends 8 percent on health care, 12 percent on insurance and pensions, 14 percent on food, 15 percent on transportation, and 25 percent on housing.

Charitable giving doesn’t register, and neither do expenses related to education or personal growth; presumably, both are grouped in the 7 percent spent on “other.”

The numbers (based off of $74,000 – 2016 Bureau of Labor Statistics):

1. Housing – $1,542/month

2. Food – $863/month

3. General Expenses -$1,295/month

4. Savings – $740/month

The Gritty Details

Since this is the area that I’m most interested in, avg. African American household budget allocations are different.

(Based on my experience) To improve these numbers; I’d suggest the Housing category reduced to 25% or less. With better tax planning/savings education and strategy, this category can be reduced to 14%. Savings increased to 15-17%.

The general expenses seem about right. We can reduce it by streamlining unnecessary subscriptions (down 1%). Food and Entertainment should be at 14%. And Education repayment at 2-4%. Great supplemental information to know and consider:

1. The Color of Wealth in Miami Metro by the Kirwan Institute

2. The Median Wealth of Black Americans will fall to Zero by 2053

The numbers (based off of $45,287 – “Income and Spending Patterns among Black Households: comparison of low-income and high-income households”):

1. Housing – $1,132/month

2. Food – $603/month

3. General Expenses -$717/month

4. Savings – $415/month

For the Culture!

This segment represents the tradesmen, small business entrepreneurs, and college-educated. Often dual income earners. These are the talented Tenth.

They are lucky since they aren’t as burden as most AAs.

*This data is from 2012.

The racial wealth gap, as well as overall costs, have risen. This segment tends to factor the baby boomer generation. This means that once they retire in the next 20-30 years, the numbers will dramatically fall.

Life Tax – Physical (working poor), Mental (aspiringly educated – low middle), and Spiritual (two generations removed from struggling – mid to high)

Let’s break down their issues:

Their housing expenses are way too high, either a function of renting or densely populated locations such as Atlanta, New York, Miami, or the DMV.

Their savings is ok but likely should be in the #2 spot (to be optimal). They are at a high risk of being caught off guard. The retirement sandwich will hit them. General expenses are way too high. If they could pay off the student loan debt that extra 2 percent should be allocated to savings. I would like to see housing at 25-27%.

The numbers (based off of $112,307 – “Income and Spending Patterns among Black Households: comparison of low-income and high-income households”):

1. Housing – $2,714/month

2. Food – $1,310/month

3. General Expenses -$1,965/month

4. Savings – $1,591/month

The Hardest Position

The hardest segment of the pop. This requires lots of changes starting on the personal and/or psychological level. To sustain this level of scarcity of time, resources, emotion, and effort takes a toll on anyone.

The numbers (based off of $6,342 – “Income and Spending Patterns among Black Households: comparison of low-income and high-income households”):

1. Housing – $174/month* Subsidized, Temporary, or Shared housing

2. Food – $106/month* Subsidized Food, Family and/or Community Support

3. General Expenses -$69/month*

4. Savings – $16/month*

The Wrap-Up!

This idea came about from following @GetJoeMoneyRight on Instagram.

They always love to drop these nuggets so tracked down my own numbers. And with a bit of math, this is what I got.

I consider myself blessed in knowledge and implementation. I definitely didn’t start off like this but I’m on the trajectory.

The numbers (based off of $74,000 avg.):

1. Housing – $1,171/month

2. Food – $493/month* Includes Entertainment and Date Nights

3. General Expenses -$1,295/month

4. Savings – $2,158/month*, and

5. Dishonorable mention: $550/month in Student Loans. Check out how I balled out on $10k without knowing.

Bonus Content

Though African-Americans (by proxy all Blacks in America) are viewed as a minority group (less than 15%), AAs have the spending power of a small nation. A recent report by Nielsen, a consumer analytics company, and the National Newspaper Publishers Association (NNPA) predicts that in 2015, that buying power will amount to $1.1 trillion; at that point, we would be the equivalent of the 16th richest nation in the world.

33 percent of us own smartphones,

23.9 million of us use the Internet, and

The percentage of us attending college or earning a degree has increased to 44 percent for men and 53 percent for women—stats also found in the report.