How Much Should I Spend?

how much should i spend on a house, on a car, on food
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I remember talking to another colleague of mine at my first “real” job. I was making decent money as a recent college grad, but nothing crazy. He couldn’t have been earning much more than me. It was funny because every time our team tried to go out for lunch, he would volunteer to drive. When we finally agreed to letting him drive, we realized why. He had just gotten a brand new car – a fully loaded Nissan Maxima. Nothing crazy, of course – but still shiny and new. Another colleague asked how much he paid for it.

“$43,000.” Wow. (For a Maxima?) But he followed up explaining that he was paying $750 a month on a 7-year loan. Now that’s crazy. To him, it seemed completely worth it. To me, it seemed like prison. I realized that it’s really just a guessing game figuring out how much you should try to spend on certain things each month when you just start making an income. It’s easy to think that $750/month for a car isn’t too bad when you’re bringing home $2000/month. But is that really what you should be aiming for?

Understandably, there are other factors in play here. If you’re living at home and saving completely on rent, then you’ll have money you can use elsewhere. Likewise, if you have no student loans, maybe you have a little more to spend on food costs. Regardless, I think everyone asks themselves how much they should spend on certain things quite often. I want to provide some of the commonly agreed upon spending guidelines out there. These are guidelines, not laws, but they can definitely come in handy.


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Home is Where the Heart Is

For most people, this is your greatest monthly expense. If you’re new to the job market, you are most likely still renting. For the average Joe, you should aim to spend less than 30% of your monthly income on rent. In fact, according to the government, you are “rent-burdened” if you spend more than 30% of your income on housing. You are “heavily rent-burdened” if you spend more than 50%. It’s so easy to coming into your first job and wanting to impress your friends by living in a loft downtown. If we break this down into numbers – $50,000/year might get you around $3000/month after minimal deductions. So at a salary of $50,000/year, you wouldn’t want to spend more than $900/month on rent if possible.

Now let’s say you’ve started saving and saving… and saving… for a house. (And if you live in California, good luck). How much do you need to purchase a home? If you have a significant down-payment on a home to bring down the monthly mortgage, it should follow the rent guidelines right? Well, with housing, it’s a bit more difficult because houses require a bit more responsibility – as many of you may know. Things tend to break when least expected. It’s important to have an emergency fund ready in addition to having a down-payment and monthly rent forecast before considering buying a home.

The common rule-of-thumb for buying a home is spending no more than 3x your total annual income. I love this rule because I dislike math and this makes it pretty easy to get a ballpark estimate. To many, this may seem like a conservative amount. If you’re making $100k/yr, you should really only be looking at $300k homes. In essence, this is to protect you from any crazy costs that might hurt you down the road in addition to the purchase price of the home.


Can I afford this house
I can definitely afford this home!


Cars Show How Rich You Are

Or, that’s what a lot of people think. One of the most prominent displays of wealth is the car that you drive. It’s crazy to think that’s the case. But it makes sense – aside from the clothes or jewelry that you wear, cars are the next most visible symbol of your finances. The key word here, of course, being visible. It’s hard to fight against the feeling of pride being able to display your shiny new BMW to your small group of friends. And no, I’m not saying that buying a new or luxury car is bad in any way – but it will kill your personal finances if you’re not ready to do so.

I’ve known too many people (including the person I’ve mentioned at the beginning of the article) that have splurged on their car without being able to truly afford it. Most of them will eventually regret their choice. A car can only be shiny for so long. And the ones that don’t regret it – well, they could care less about personal finance.

I know what you’re thinking. How much should I spend on a car? Well, the guidelines basically boil down to this:


how much car can i afford? how much should i spend on a car


It’s pretty crazy how low the suggested spending is when you’re trying to be frugal. I mean, really – when you’re making low six-figures, purchasing a $10k car sounds ridiculous. But that just goes to show how our environment has shaped us to purchase things that we can’t truly “afford”. Of course, this offers flexibility for people as well. If your car really is the purpose of your life, your spending limits can adjust to that. Even so, no one should be going out and buying a $50k car on a $50k salary, no matter how much you love that car.


Food? Now We’re Talking

This one really hits home for me. Because I love food. And I’m sure a lot of you guys out there can relate. I didn’t even know how big of an expense food was while growing up (a big shout-out to my mom who cooked for me for 18 years). But after having to fend for myself in college and these early working years, I’ve realized how quickly food costs can add up.

But how much should you really be spending on food? Believe it or not, the United States Department of Agriculture (USDA) actually produces a monthly report for suggested food costs for families. It’s broken down by the size of your family, age, gender, cost per week, cost per month, and 4 levels (thrifty, low-cost, moderate, and liberal).

So for me, as a single male falling into the 19-50 age category, my budget guidelines would be as follows:


How much should I spend on food each week? How much should I spend on food each month?
I could eat my weekly budget in a day!


In a time where Americans are spending over $900,000/month on avocado toast, it’s easy to see how difficult these guidelines are. Heck, if you eat out for lunch each day of the week at an average of $10/meal, you’re hitting $300/month on lunch alone. That’s the entire monthly cost of the suggested moderate-cost plan! There’s a reason why I choose to pack my lunch every day.

Cooking at home is an easy way to not only hit these guidelines, but help your budget overall. As an added bonus, it’s most likely healthier cooking at home as well. You can also be like me and eat ramen sometimes while watching videos of Gordon Ramsay on YouTube and pretending that I’m eating what he’s making.


Giving Gifts

Americans spend an average of $850/year on Christmas gifts alone. It’s always fun for me to give gifts and as I approach a time in life when everyone is getting married, I’m beginning to see that there will always be opportunities to give gifts. Having said that, it’s still something that you should plan for and budget accordingly. The general rule of thumb regarding how much you should spend on gifts is 1.5% of your total income (pretax). Let’s put in some numbers to get a better picture of what this looks like.

We’ll use the average starting salary for a college grad, which is just below $50,000/yr. The annual gift budget for that salary would be around $750. Maybe that number doesn’t seem too limiting to some of you, but when I’m trying to be generous with my gift giving, the expenses add up real quick. For Christmas shopping, I usually try to start looking for gifts way before Black Friday now, as deals pop up. This not only relieves the stress of having to find everyone’s gift right before Christmas, but you can save money overall by avoiding being forced to pay the full cost of the item right before Christmas.

But remember, with the $750 budget (assuming $50k/yr salary), that includes gifts for other occasions too. We’re talking birthdays, parties, weddings, and all that other fun stuff. This is where the gift budget starts to feel a little bit tight. And that’s the importance of budgeting all of this out prior to unloading your wallet.

Now, I do want to remind everyone here (so that I don’t suddenly lose all my friends to being stingy), that this is just a rule-of-thumb. There are obvious occasions where you will need to spend more in this category (I.E. best man, maid of honor). However, this guideline is good to just make sure you’re not getting carried away even when you’re giving. You don’t want to dig yourself into debt through gifts and have to beg your friends down the road to help pull you out.


Final Thoughts

This is just a small list of spending guidelines. I hope to dive deeper into other categories in the future. If there’s something that you think of that would be cool to look into, please let me know! It’s been really interesting researching and understanding just how on or off I am in some of these areas. And in case you’ve already forgotten (I know…I’ve thrown in a bunch of numbers in this post), here’s a small recap of the major guidelines that I went through in this post:


how much should I spend


Even in the process of writing this post, I was already interested in knowing what others thought of some of the guidelines mentioned. As expected, there was a mixed reaction towards some of the numbers listed. And to be fair, no set of rules or numbers will capture every person’s unique situation. I don’t think that would be possible. But I do think that we get a better understanding of how to allocate our resources to some of these expenses, at least in a high level.

I’m more curious to know what you think. Do you agree with the rule-of-thumb for each category? When do you think we should be more lenient or strict on these guidelines? Do you have your own set of guidelines (maybe with completely different numbers!) that you follow? Or maybe you think all of this is just silly. Regardless, I’m interested to hear your thoughts!

6 Replies to “How Much Should I Spend?

  1. Hey Kong! Great points here!

    I have to admit my bf and I regret financing a bmw 6 years ago. We didn’t buy brand new (4 years old at that time) nor was it anything fancy, but when we look back at how much we spent, we’re like…. d@mnnn! The car itself, gas, some maintenance, etc. Until this day we still drive it and we decided that it’s better off keeping it until it’s on his last legs.

    Great job on this overall post. The avocado toast point was interesting lol! I love avocados (my fave) and I always buy my own from the grocery stores, and mash and spread them on my toast myself for breakfast. But I didn’t realize this was a hot trend at restaurants hah!

    1. Yeah…maintenance can be killer sometimes. BMW’s are nice cars for sure, though 🙂

      I’m all for avocados haha! I love them myself. The DIY toast is so much more economical – you can get like 10 avocados for the price you have to pay at some of these places!

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