I’ve seen the formulas that you’re talking about, SmoothOperator. I don’t have anything right here at my fingertips for you, but just go down to any bookstore and buy a book on budgeting or on managing household finances, and they will have some formulas for you in the form of rough guidelines. Also, I have heard of non-profit centers and/or businesses that will actually sit down with you and help you work out a budget (Consumer Credit Bureaus or something like that?). Or you can check out women’s resource centers if you live near a city.
Most budget guidelines are going to be very general, and there will be a couple different types of guidelines to reflect different living situations and personal priorities. Also, you can make trade-offs. For example, if good, first-rate housing is a big priority for you, then you can allow it eat up a big portion of your budget and scrimp elsewhere by living close to work and using public transportation instead of maintaining a car.
The main idea of a budget isn’t so much to specify exactly what amounts you should spend. The main idea is really to be aware of how much you spend and what you spend it on. Once you figure that out, you can then decide where you want to make trade-offs so that you can live within your salary. Thus, the first step in learning how to budget properly is to keep a log and record every penny you spend during the day. After you’ve done that properly, you can then start looking where to make cuts in order to stay within your paycheck.
In other words, don’t think of it as setting spending limits. Instead, think of it as making trade-offs. If you want to save up for a nice vacation, then cut back on long-distance phone calls for a couple months. Or cancel your cable service and learn to live with broadcast television for a year.
Even though you’re still pre-break-up, you can probably anticipate most of your future daily expenses if you really think about it–food expenses for you and your daughter, clothing, approximate transportation costs (gasoline for the car), etc. Ask around among friends for information on the cost of utilities (water, phone, electric bills) for an apartment. Same with things like insurance bills, loan repayment bills, and other extras. Factor in some extra money for occasional car upkeep and repairs, emergencies, vacations, and entertainment. Add a little more for savings, both toward retirement and as a buffer for other expenses you’ve forgotten about. And then whatever is left over is the amount that you can put into housing.
It may sound a little overwhelming at first. But the main thing is to get a handle on how much money you spend from day to day, week to week, and month to month. Once you figure that out, it’s pretty easy to figure out where to allocate it and where you need to start scrimping. By the way, the two biggest places to scrimp are 1) eating out and 2) gifts. If you need to save money, then start doing your own cooking and eating in, and bake up pans of brownies and give them as gifts at Christmas.
You haven’t indicated whether you need help on other aspects of financial management, such as loans/credit, or savings/investments/IRAs. You can get books on these subjects at the bookstore, and I won’t bother addressing them other than to provide the following caution: When people handle their own finances for the first time, credit cards are usually where they’ll first get into trouble. The simple way of avoiding trouble: Don’t use a credit card unless you’re sure you can completely pay off the balance at the end of the month. If you start carrying a balance from month to month, you’re already halfway to damnation. If cash is running short and you need a short-term loan, don’t use the credit card. Instead, go to a bank and borrow against some other equity or collateral (a house, an IRA) or even take a signature loan. The interest rates on those loans are much lower than credit card interest rates.
By the way, kudos to you for having the foresight to ask for help on finances if you’re headed into a break-up. A lot of wives (and even some husbands) don’t have the first clue about putting together a budget or even balancing a checkbook, and it becomes a big stumbling block when the break-up hits. By all means, get a basic book on the subject at the local bookstore and start reading up, or head over to a woman’s resource center in your area. This stuff is not at all hard to learn. You will find out that most of it is intuitive and quite natural once you are exposed to it. The main thing is to go out and get yourself exposed to it in some fashion, so that you can start planning ahead.
Just remember: Money is not a goal. Instead, it is a tool for achieving other goals. You simply have to learn how to handle that tool correctly. There’s no big mystery to it.
Sorry to hear of your impending break-up, SmoothOperator. I’m hoping for enough of a miracle so that you can keep your marriage together. If that doesn’t come to pass, then I hope the break-up represents the start of a new and much better life.
I’d always heard that your housing costs should be no more than 1/4 your take home pay, but if you live someplace very expensive 1/3 is more realistic.