I've showed you our family budget and now I would like to show some budget scenarios for a family of 4 to give you an idea of how all this works. To make it easier, I'm using these annual incomes and considering that they are AFTER-tax incomes. Generally for a family of 4, you would subtract $5,000 in taxes - factoring in state tax and the child tax credits. That will give you a nice buffer. So if you make $35,000, budget for $30,000 and so forth but as the income goes up, so do the taxes but I'm keeping these incomes low so that shouldn't be an issue. Also, don't forget that your retirement contributions are pre-tax, which lowers your taxable income. That is how I make these average monthly incomes work. If you have an HSA account with your insurance plan, you will lower your taxable income even more! But that is another topic in itself.
*I'm going to estimate that these families have a fully-funded emergency fund of $5-10K, so that they can purchase a higher-deductible medical plan. They are also paying for disability, life and car insurance and have no car payments. These would be ideal scenarios. Imagine how much they would save if they had paid-for mortgages! But in the meantime, let's assume they have a mortgage on a small, 2 or 3 bedroom home. If you are wondering what each expense category covers, refer to my budgeting post here.
Family of 4 Living on $30,000 a Year - Average Monthly Income of $2,500
$30,000 after taxes
Expenses
Charity = $350
Savings = $320
Housing = $700
Utilities = $180
Food = $280
Personal = $130
Transportation = $230
Medical = $230
Clothing = $40
Recreation = $40
Debt - 0
This family has a high-deductible Medi-share plan to save on premium costs and they have their emergency fund fully funded to pay for any medical crisis that may happen this year. Or, this family can get medicaid coverage because they are in poverty. If they do that, they can then budget the medical money into other areas. Their savings amount goes to fund their retirement and savings account. They have to live in a very small home because they are living within their means. They keep their costs down and consumption to the basics until they can pay off their mortgage. Once they pay off their mortgage, they can either increase the other areas or add more bulk to their savings. They find free things to do as a family and only reserve $40 for eating out or having friends over for dessert. They shop consignment stores for clothing or the mom sews. Many families live on this income and they make it work but it isn't ideal for sure but it can be done. There is just NO room for debt!
Family of 4 Living on $40,000 a Year - Average Monthly Income of $3,333
$40,000 after taxes
Expenses
Charity = $420
Savings = $600
Housing = $850
Utilities = $213
Food = $300
Personal = $150
Transportation = $250
Medical = $400
Clothing = $50
Recreation = $75
Debt - 0
This family does as the family above by saving 15% of their income for retirement but they will obviously give a larger portion and have a larger retirement. They are also saving extra for misc. purchases that they choose to save for. They can afford a higher housing cost than the $30K family but with that comes higher utility costs. They spend more on food and personal items because they can and they also pay for a lower-deductible Christian sharing medical plan than the prior family but it costs more a month. They are able to spend more on clothing and recreation but not so much as they can splurge yet until they pay off their mortgage.
Family of 4 Living on $50,000 a Year - Average Monthly Income of $4,167
$50,000 after taxes
Expenses
Charity = $510
Savings = $712
Housing = $1050
Utilities = $300
Food = $450
Personal = $200
Transportation = $320
Medical = $400
Clothing = $75
Recreation = $150
Debt - 0
This family is doing everything the prior families are doing with funding their retirement with 15% of their income and saving extra for whatever purchase they have on their list at the time. They decided to get a larger home and with that comes an increased housing cost and utility cost. They spend more on food and personal items but they decide to keep the same plan as the family before with a Christian sharing medical plan. They still are frugal in their clothing expenses but decide to spend more in recreation because they like to go on field trips to the zoo or museum and this also increases their transportation costs as they use more gasoline for these outings.
Family of 4 Living on $60,000 a Year - Average Monthly Income of $5,000
$60,000 after taxes
Expenses
Charity = $600
Savings = $1425
Housing = $1050
Utilities = $300
Food = $500
Personal = $200
Transportation = $300
Medical = $400
Clothing = $75
Recreation = $150
Debt - 0
This family can live comfortably at this income as they are funding their retirements as all the previous families but they are also saving a lot more for other purchases. They could also pay off their mortgage incredibly early by living on the lower income levels. They can spend more in housing but they choose not to, so their housing and utility costs remain the same as the previous family. They like to spend more on food and clothing but they keep their recreation and transportation costs about the same as the previous family so that they can fund their annual vacations and other big purchases. They also keep the same Christian sharing medical plan to keep their costs low.
If you make more than $60,000 a year, it might be a good idea to live off a lower income and build wealth. Set up your 6-month of expenses emergency fund, fully fund your retirement, pay off your mortgage, etc. If you could live off the above scenarios and save and/or invest the rest - you could retire very early or even save to travel the world. The possibilities are endless and it is in your favor.
Many families live in the $30-40K range and they have more than 2 children! So tell me how a couple living on $50K can't seem to make ends meet? I know families with upwards to 9 children that make it on very small incomes WITHOUT GOVERNMENT ASSISTANCE and they live well and are happy. God can make any budget work - God and the biblical principles of the bible! Do what the Word says and be content with what you have and enjoy the showers of blessings that God pours on you year after year! I call it basking in His bounty!
Notes
If you aren't debt-free and don't have a fully-funded emergency fund, then you would have to tweak other areas of these budgets to accommodate for higher medical and debt payments. You can easily move money around the different categories as it suits your family. If you want a larger housing cost, you will have to lower other categories.
I've seen budgets that did NOT work on paper but somehow every month God provided - don't lose hope, aim to do right and God will help you!
