# What Percent of Your Take-Home Pay Should Be Discretionary Income?

Before you embark on the lofty goal of determining spending percentages at your household, you and your hubby or significant other need to be on the same page. Get it through to your sweetie that football tickets are not necessities; they fall under discretionary income. But before you get too hard-nosed -- although most gals would argue this point -- getting your hair and nails done are also not necessities and fall under discretionary income, too.

## Do the Math

It might sound like a bit of a cop-out and, in a way, it is. But assigning percentages might not be the best way to determine how much of your take-home pay you can spend on discretionary items. One way to go about deciding how much to spend on wants is to add all the fixed costs you have: mortgage or rent, car loan, insurance payments, groceries and utilities. Subtract that from your take-home pay. The rest can be used for discretionary items, the stuff you want.

## Not Enough Money

If you don’t have any funds left after subtracting your fixed costs from your take-home pay, or if you don’t have enough income to cover the basics, you’re living beyond your means and should seek credit counseling. Prioritize your wants. Don’t expect to get everything you want whenever you want it -- you’re not a toddler or a college kid anymore. Put off what you can’t afford.

## So You Need a Percentage: 30 Percent

It can be difficult to determine how much to spend on your wants unless you have some concrete figures. Well, there is an answer. Spend 30 percent of your after-tax income on discretionary items. But there’s a huge catch: your necessities can consume only 50 percent of your after-tax pay before you can spend 30 percent on wants. The other 20 percent should go to debt or savings.

## About the 50 Percent Figure

It’s the rare couple who can take care of all necessities using only half their take-home pay. Even high-income earners have a difficult time doing this. You're not expected to be at the 50 percent figure the first time you do the math. Most folks’ must-haves take way more than 50 percent of their take-home pay. It can take some time to adjust your expenses to reach that goal. But, by figuring out how much you’re spending on necessities, you’ve completed the first step in getting your finances in order so you can have some fun out of life without going bankrupt.

## Tips to Get to 50 Percent

Cut your food spending. Eat out less often, and use coupons at the grocery store. Eat leftovers for lunch instead of going out. Cut your utilities. Turn down the heat in the winter and the air conditioner in the summer. Avoid car payments. You don’t need to drive a new BMW. Get a used, affordable car instead. Get rid of your life insurance if you don’t have kids, and because you are now driving an older car, drop the collision and comprehensive coverage. Cancel your gym contract, and work out at home or outside. Brainstorm with your honey to figure out how to cut your necessities; then go with him to the next game right after your trip to the hair and nail salon.