Where Does Your Salary Go?

Knowing where your money goes makes it easier to control your finances.

Knowing where your money goes makes it easier to control your finances.

Everyone wishes for a bit more extra money after all the bills are paid. Although many people blame their lack of money on taxes, that isn't usually where most of the money goes. As it turns out, many Americans allocate a lot more money than the experts recommend for the basics like car payments and rent.

What Percentage of an Average Person's Salary Goes to Taxes?

The average effective tax rate in 2011 was 14.8 percent, according to the Congressional Budget Office, the lowest since 1950. Of these tax dollars, 26.3 percent goes to defense, 24.3 percent to health care, 4.8 percent to education, 2.1 percent to energy and the environment, and 2.0 percent to immigration, law enforcement and justice.

What Percentage of Salary Should Be Housing?

The idea that "affordable housing" means no more than about 30 percent of a family's gross income was initially based on 1981 changes to the 1968 Housing and Urban Development Act. Although this rule of thumb was intended to help low-income families, the idea that you should spend no more than about 30 percent of your income on housing has become common in both the rental and mortgage industries. Despite this, in the early 21st century in the United States, 46 percent of renters and 37 percent of owners spend more than 30 percent of their gross income on housing.

What Percentage of Your Annual Salary Should You Put Toward a Vehicle Purchase?

Including your housing costs and all your other loans -- such as credit cards, student loans, or car payments -- you should be paying no more than 36 percent of your gross income on debt, according to Consumer Reports. For example, if your mortgage payment eats up 30 percent of your monthly gross income, even if you have no other debts, that leaves only 6 percent of your gross income for car payments.

What Percentage of State Tax Do People Pay on a Salary?

State income tax varies by your state and income level. Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming have no state income tax at all, but the average state income tax rate in 2012 for those states that do impose a state tax is about 4.86 percent. Oregon has the highest average state tax -- a whopping 8.56 percent.


About the Author

Kristi Waterworth started her writing career in 1995 as a journalist for a local newspaper. She has also worked as a realtor/contractor and operated a dairy goat farm and seasonal greenhouse specializing in heirloom vegetables. Waterworth received a Bachelor of Arts in American history from Columbia College.

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