Once you figure out how much money you need to buy a house, it's time to get saving. This article shows how an average Hoosier can save $50,000 in two years by modifying the 50/30/20 budget. For those who are not familiar with this budget, 50% of your after-tax income goes to needs, 30% goes to wants and 20% goes to paying off debts and increasing your savings. We'll be assuming a $56,000 salary, which is the average for a person in Indiana, and a 15% tax bracket.
Base 50/30/20 Budget
| Percent of Budget | Annual Budget |
Salary | | $56,000 |
Take Home Pay | 100% | $47,600 |
Needs - Housing | 30% | $14,280 |
Needs - Cost Of Living | 20% | $9,520 |
Wants/Luxuries | 30% | $14,280 |
Debts | 10% | $4,760 |
Savings | 10% | $4,760 |
Fast-Track 40/20/40 Budget
| Percent of Budget | New Annual Budget |
Salary | | $56,000 |
Take Home Pay | 100% | $47,600 |
Needs - Housing | 25% | $11,900 |
Needs - Cost Of Living | 15% | $7,140 |
Wants/Luxuries | 20% | $9,520 |
Debts | 10% | $4,760 |
Savings | 30% | $14,280 |
Add Additional Income
| Additional Savings |
3% Raise/Bonus | $1,680 |
Extra Income | $10,400 |
Total Additional Income | $12,080 |
Additional Take Home Pay | $10,268 |
New Savings Total | $14,280 + $10,268 = $24,548 |
As one can see, the fast-track budget requires some lifestyle adjustments and picking up additional income. Let's break it down into monthly figures to see how achievable this can be. It's easier to take smaller bites.
Monthly Budget Breakdown
| Annual Budget | Monthly Budget |
Salary | $68,080 | $5,673.33 |
Take Home Pay | $57,868 | $4,822.33 |
Needs - Housing | $11,900 | $991.67 |
Needs - Cost Of Living | $7,140 | $595 |
Wants/Luxuries | $9,520 | $793.33 |
Debts | $4,760 | $396.67 |
Savings | $24,548 | $2,045.67 |
Now that we have a clearer picture of the fast-track 40/20/40 budget broken down per month, the goal of saving $50,000 in two years or over $2,000 a month for 24 months looks more attainable. For ideas to cut costs and save more, read our money hacks article next.