If you know what you spend on something like food in terms of dollars, how can you figure out what percentage of your income you're spending on it? How do you do the math?
This is an important thing to be able to do. Learn this skill and you can make a lot of sense out of how you're spending your money.
Grab a calculator. Let's say that you earn $45,000 per year after taxes and spend $3,000 per year on food. Take $3,000, and divide it by $45,000. You'll get 0.07. Take that, multiply it by 100, and tack a "%" sign on the end. Voila -- the answer is 7%. Here's the formula:
annual expense / annual post-tax income = portion spent
portion spent x 100 + "%" = percentage spent
As another example, imagine that you're spending $1,100 per month on rent and you and your spouse earn a total of $60,000 per year, after taxes. Take $1,100, and multiply it by 12 to get an annual number -- $13,200. Divide $13,200 by $60,000, and you'll get 0.22, or 22%. With the formula above, you can substitute monthly or weekly numbers for the annual ones -- just be consistent, and don't mix annual numbers with weekly or monthly ones.
To learn more about ways to save money and spend less, check out our Personal Finance area, which is chock full of guidance on insurance, buying a car or home, paying for college, banking, setting up short-term savings, getting out of debt, lowering your tax bill, and more.
And here are some articles on budgeting:
You can also get some tips from folks on our Budgeting discussion board.
