SMART MONEY

THE FIVE THINGS YOU SPEND HALF YOUR MONEY ON:

If you're like the average person in America, you spend 50 percent of your income on just five things: your education, your car, your home, your kids, and your retirement. Here's what you need to know about each one.

#1.) YOUR EDUCATION. You're TOTAL student loan debt should equal what you expect to make per year . . . on average . . . during your first ten years out of school. In other words, if you expect to make around $50,000 a year, don't borrow more than $50,000 in student loans.

--Here's the thinking behind that: you DON'T want to spend more than 10 percent of your income on student loans. Otherwise, you'll have a hard time paying the rest of your bills.

#2.) YOUR CAR. Most people can afford a car that costs less than ONE-THIRD of their annual income. So, if you make $60,000 a year, look for a car that costs LESS than $20,000.

#3.) YOUR HOME. The same logic applies here, but multiplied the other way. So, most people can only afford a house that costs three times their annual household income, or less. So, if you make $100,000 a year, you can afford a $300,000 house.

--If you have a 20% down payment, a 30-year fixed rate mortgage, and an interest rate around 5 percent, you'll still spend around 30 percent of your gross income on your house each year.

#4.) YOUR KIDS. The Department of Agriculture says it will now cost a total of $220,000 to raise a child until the age of 18. And that's BEFORE you add in the cost of college.

#5.) YOUR RETIREMENT. If you're still young, a good way to figure out how much you'll need is to multiply your current income by 25. If you make $50,000 a year, that's $1.25 million, which is about what you'll need to retire comfortably for 25 years. (HuffingtonPost.com)