The Internal Revenue Service has a set of standards for living expenses that it uses with people who are repaying delinquent taxes. Those filing Chapter 13 bankruptcy, the kind of bankruptcy where you gradually repay your debts, are allowed the same amounts by the U.S. Department of Justice. So it would seem safe to say that these amounts represent at least a bare minimum, if not a little more, of how much these expenses should cost each month.
National Standards: Food, Clothing and Other Items
Apparel & services
Personal care products & services
More than four persons
Additional Persons Amount
For each additional person, add to four-person
National Standards for Health Care
The IRS allows this amount in addition to a monthly amount for health insurance premiums. This money is expected to cover expenses such as doctor visits, eyeglasses, contact lenses, and prescriptions.
65 and Older
The IRS also allows expenditures for transportation, of course. How could you repay your debts if you couldn’t afford to get to work?
National Standards for Public Transportation
National Standards for Ownership Costs
Personally, I think the food allowance is very generous. For $528 a month, my two-person household could go out to eat quite a bit or buy all of our groceries at Whole Foods. We normally spend about $300 a month on groceries and a little more for restaurants. However, we spend a lot more than $165 on “miscellaneous.” It’s hard to say what we spend on housekeeping supplies or personal care items since we generally only buy these items a couple times a year — I try to stock up during sales. The health care allowance seems reasonable to me only if you are completely healthy.
I couldn’t believe it could cost $173 a month to use public transit, but some research revealed that a certain commuter bus pass in the Los Angeles area costs $180, and I imagine lengthy commutes on public transit in other geographically large cities might be equally as pricey. The national vehicle ownership costs are based on the monthly expected payment for a loan or lease. According to Bankrate.com’s monthly auto loan payment calculator, $489 would be the monthly payment on a $19,300 loan at 10% with a four-year term. Considering that it’s possible to purchase a brand-new, entry-level car for around $10,000, this amount seems pretty generous to me. And if you had this much money to buy a used car, you would have a wide range of options, many of them quite nice — a 2007 Toyota Camry hybrid, a 2005 Acura sedan, or a 2006 Mazda 6, to name just a few I found in a quick perusal of vehicles listed for sale by owner on Craigslist.
Note that there is no allowance for things many of us consider “necessities,” like cable TV or internet or even pet ownership.
For expenses like housing, utilities, and the operating costs of owning a vehicle, local standards, determined by the U.S. Census Bureau, apply. Look up the local standards for your area here. To give you a couple of examples, a 2-person family in St. Louis, Missouri is allowed $1,008 per month for housing and utilities; in San Francisco, it’s $2432; and in Dallas, Texas, it’s $1451. All of these amounts seem reasonable to me; you might not be renting a luxury apartment, but you definitely wouldn’t have to live in a bad neighborhood to meet these allowances. It might be hard in some areas to get by on these amounts if you’re a homeowner rather than a renter, however.
Another standard is the amount allowed for food by the food stamp program. This benefit is not a set amount, but is determined by factors like size of household, childcare expenses, income, and housing costs. For a 2-person household with no income, no childcare expenses, $1000 in housing costs and $100 in utility costs, $323 in food stamps would be allowed. Some people might look at this number as a poverty standard, but my household spends less than this amount on groceries and we’re not exactly living off ramen. Our diet includes fresh fruits and vegetables and frozen food items, none of which are particularly cheap. You can use this calculator to plug in variables and calculate a monthly food stamp benefit.
Since the government standards for living expenses mostly seem pretty reasonable, if your expenses fall far above these amounts and you’re trying to cut back, these guidelines should give you a reasonable, if not generous, starting point. How do these national standards compare to your spending habits?