Question

Let’s see how much income you might need when you begin working. Start by deciding whether you are going to rent or buy a house or an apartment. Look at online ads for places in your area and choose one to represent your new home. Make a list of all the expenses—down payment, if any; monthly rent or mortgage payments; condo or homeowners association fees; etc.—associated with that home. Now determine what you will need to furnish your home. Does it come with an oven, stove, and refrigerator, or do you need to buy them? How about a washer and dryer? (If not, is there a laundromat in the area?) For now, list the bare minimum of furniture you think you can get by with. Then explore the various ways to purchase these items, noting the prices you find for those that you think would suit your needs. If you do not currently have a car, do you think you can rely on mass transportation? If not, figure out how much you will need to spend each month to buy or lease a car. When the list of all your expenses is as complete as possible, calculate the total cost on a weekly basis. Then estimate how much you might have to earn in order to be able to afford spending that amount per week.

Answer 1

Let's break down this budgeting exercise step by step.

1. Choosing a Home

I'm going to assume I found a rental apartment:

• Location: Downtown area
• Type: 1-bedroom apartment
• Monthly Rent: $1,500

2. Expenses Associated with the Apartment

• Monthly Rent: $1,500
• Security Deposit: $1,500 (typically one month's rent)
• Utilities (Electricity, Water, Internet): Approximately $150/month
• Renter's Insurance: Approximately $15/month
• Total Monthly Housing Costs: $1,500 + $150 + $15 = $1,665
• First Month's Rent + Security Deposit (upfront): $3,000

3. Furnishing the Apartment

Minimum Furniture Needed:

• Bed (Frame and Mattress): $500
• Sofa: $300
• Dining Table and Chairs: $200
• Basic Kitchenware (Cookware, Utensils): $100
• Dresser or Wardrobe: $200

Total for Furniture: $1,300

4. Appliances

• Refrigerator: $600 (assumes it does not come with the apartment)
• Stove/Oven: Included in the apartment.
• Washer/Dryer: $600 (assuming it doesn't come with the unit; otherwise, access to a laundromat).
• Total for Appliances: $1,200

5. Transportation

• Relying on Mass Transportation:
  • Monthly Public Transit Pass: $100
• Total Yearly Transit Cost: $1,200

6. Summary of Expenses

Upfront Costs:

• First Month's Rent + Security Deposit: $3,000
• Furnishing the Apartment: $1,300
• Appliances: $1,200

Total Upfront Costs: $3,000 + $1,300 + $1,200 = $5,500

Monthly Ongoing Costs:

• Rent: $1,500
• Utilities: $150
• Renter's Insurance: $15
• Public Transit: $100

Total Monthly Costs: $1,500 + $150 + $15 + $100 = $1,765

7. Weekly Cost Calculation

• Monthly Costs: $1,765
• Weekly Costs (approximate):
  • $1,765 ÷ 4 = $441.25

8. Estimated Income Requirement

To afford spending approximately $441.25 per week on expenses, we should consider a reasonable income:

• Using the rule that no more than 30% of income should go to housing:
  • Required Monthly Income for Housing: $1,500 ÷ 30% = $5,000
  • Yearly Income: $5,000 × 12 = $60,000

Calculating Total Estimate Needed for Weekly Expenses:

• To support $1,765 in monthly expenses (under 50% of income for total living), you would need at least:
  • $1,765 ÷ 50% = $3,530
  • Yearly Income for Total Expenses: $3,530 × 12 = $42,360

Final Income Estimation

To comfortably cover your expenses and have a little extra left over for savings or other needs:

• Aiming for a Target Income: At least $50,000 per year, which translates to around $4,167 per month or about $1,000 weekly.

Conclusion

In summary:

• Upfront Costs: $5,500
• Monthly Costs: $1,765
• Required Annual Income: Aim for at least $50,000 to maintain a comfortable lifestyle.