I’m going to run some household budget scenarios on the Monroe County median income, which was reported at $55,823 for 2005. That’s a recent enough statistic to play around with. (Update: the 2007 median household income for Monroe County, Mich., was $53,750. Yes, that number has dropped.)

And it’s a pretty timely figure, with headlines in the Detroit News about $14 an hour jobs. Two wage earners at $14 an hour, 40 hours a week, would earn $58,240 a year.

Crown Financial Ministries, which was founded by the late Larry Burkett as Christian Financial Concepts, and later partnered with Howard Dayton to form the current organization, has a “spending plan online calculator” where you can punch in the numbers and see what the recommended spending ranges are.

Let’s take the $55,823 and put it in the CFC calculator.

CFC encourages tithing, but let’s assume this family gives only $2,000 a year toward charitable causes. Although some churches teach and encourage a 10 percent contribution, not all do, and it’s fair to say that many Monroe County residents are well below that mark even when all their church and non-profit donations are added up.

Taxes are a line item you’ll need to add up on your own to make the calculator work correctly. But for this scenario, we’ll take out $7,000. (Property taxes are listed elsewhere.) The rest is what you have left to spend.

Here’s what the CFC budget recommendations end up as:

• Housing: $14,983 a year or $1,248 a month. This includes mortgage or rent, gas, electric, maintenance / repair, trash pickup fees if you have those, laundry service costs if you don’t have laundry hook-ups, home or renters insurance, property taxes and cleaning supplies. Did this amount turn out higher than you expected? I would not be surprised. After all, the 2006 fair market rent in Monroe County was $723 for a two-bedroom apartment BEFORE the other housing expenses are included. (Update: the 2008 fair market rent for Monroe County was $779 per month for a two-bedroom apartment.)
• Food: $6,096 a year or $508 a month. This is for basic groceries, not eating out. It also shouldn’t include cleaning supplies. Does your grocery bill seem high compared to what you are actually spending? If so, that grocery bill was skewed by restaurant food. You may be surprised as to how little you’ll be able to spend on dining out when we get further into this scenario. And based on expenses elsewhere, you may have to lower this amount anyway. (Update: for a real eye-opener about grocery bills, take a look at the USDA Cost of Food study.)
• Auto: $6,086 a year or $508 a month. This includes auto payment, auto repair, maintenance and auto insurance. Given the auto insurance rates in Michigan, a Monroe County median income family is rarely going to be a three-car family. They are more likely to be a two-car family with one car possibly designated as a backup or “go-to-work” car rather than daily transportation. (Can it be done even with three drivers? Yes, we did it.) Now here is the other reality for Monroe County families – 47 percent of local workers commute to another county for work. A median income family could handle gas and maintenance expenses for one commuter, but auto-related expenses for two commuters will cause a lot of budget headaches.
• Insurance: $2,341 a year or $195 a month. This includes life, health, vision, dental and disability insurance premiums. It doesn’t include homeowner’s or auto insurance. It also doesn’t include out-of-pocket medical expenses, which show up later in this scenario. Many of you are paying more than that for your insurance, and you’re not the one who decides how much comes out of the paycheck to pay for those policies. So when you run into a roadblock like that, you have cut back elsewhere in your household budget to make the numbers work.
• Debt: $2,341 a year or $195 a month. If you have no credit card balances, student loan debt, home equity line of credit payments, etc., congratulations! You now have $195 a month available to allocate to other needs. If you do have debts to pay, you can significantly improve your monthly cash flow after you pay those bills off.
• Entertainment / recreation: $2,809 a year or $234 a month. This fund will not going to go as far as you think. This money is all of your eating out, vacations, movies, concert tickets, social club fees, lunches with girlfriends, campground reservation fees, water park fees, hotel stays, traveling to family reunions and such. A family trip to Mackinac Island each summer and one date out for mom and dad a month could easily wipe out the entertainment budget for a median-income family.
• Clothing: $2,341 a year or $195 a month. This is a budget area where a frugal family can cut back with the use of hand-me-downs and thrift shop purchases, but you can’t cut out this expense completely. CFC recommends setting aside at least $10 a month per person for clothing. After all, socks will get holes in them and then what will you do? You also need include seasonal or special occasion expenses such as winter coats, snow boots, back-to-school outfits, work uniforms or boots, and prom dresses when adding up your clothing costs.
• Savings: $2,341 a year or $195 a month. If you’re living paycheck to paycheck, you’re may be wondering how to do this. The problem is if you live too close to the edge financially, an unexpected expense such as an emergency car repair could result in much higher expenses with credit card finance charges, bounced check fees, overdraft fees or (ugh!) a payday advance loan. CFC recommends saving even $5 to $10 a month, if that’s all you can afford, so that you have the flexibility to make it to the next payday. After you pay off your debt, you will have more money available to save or spend.
• Medical / dental: $1,872 a year or $156 a month. This is your out-of-pocket medical expenses for things like co-pays, deductibles and over-the-counter medications. (I pay for as many of these expenses as I can with a Flexible Spending Account for medical costs. Yes, the FSA does involve a bit of paperwork. But since we’re spending the money anyway, we may as well get a tax break.)
• Miscellanous: $3,277 a year or $273 a month. CFC says this is one of the most dangerous categories as far as budget-busting expenses because it includes anything that doesn’t fit into any other category: birthday gifts, Christmas gifts, haircuts, candy from the vending machines, gym memberships, hobby expenses, … even the annual family studio picture would fit into this category.
• Investments: $2,341 a year or $195 a month. This is listed as stocks, bonds and other investments. I would also put 401k and IRA contributions into this category, since many of us have to take the initiative for starting or funding our own retirement accounts.
• Extra: School / child care: $2,341 a year or $195 a month. CFC treats this as an extra budget category because not everyone has children at home. If you have to include this category, you have to subtract what you are spending elsewhere. This category includes babysitting and day care expenses, school tuition, ACT / SAT test score fees, pay-to-participate sports fees, summer camp fees … anything relating to children that isn’t already part of the family budget.

Tinker with the numbers all you want on the calculator page. You can use other calculators and tools at CFC. There’s also a budget-o-meter that focuses on the impact of the “big 3″ categories: housing, auto and debt.

Regardless of how you arrange the details of your household budget, the bottom line is that the expenses don’t add up to more than your income.

How do you cut back on some of these expenses? Well, that’s the main goal I have for this blog – to help Monroe County residents figure out how to make it to the next payday.