What if I made $42k?

Currently I have a very healthy annual salary of over $100,000 including bonuses. My spending rate reflects my income in many ways. I have cable TV and we take vacations and eat out a lot. Even though we spend a fair amount we still save about 30% of our gross income. However my budgeting is based on a relatively high income. If I made less then I would have to significantly reduce our spending in many categories. As a hypothetical situation I decided to look at a theoretical budget based on an income of $42,000.

First lets figure out what taxes and health insurance would cost.

GROSS PAY - $42,000

Health insurance & Taxes:
HSA deduction = $4,200
Federal taxes = $2,150
SS/MI = $3,024
State tax (5%) = $1,000
Health / Tax total = $10,374

I'm basing the taxes on estimate for married couple filing jointly. The exact state tax rate would vary depending on the state you live in. I'm using a rough 5% tax rate on the $20k that would be taxable. This is a very rough guesstimate figure.

Net income = $31,626
Monthly net = $2,635

So thats $2,635 a month after health insurance and taxes left for us to live on. Now that I know how much we have available I'd go about making a rough budget built around that.

Rent a home
Right now a major expense is our home mortgage. Owning a home around here is fairly expensive. With an income level of $2,635 a month owning a home would eat up too much of the income. I'd rent a home instead. This would cut down our #1 expense into a reasonable level. If we bought a home the cost would eat up too much of the budget.

Cut down on luxuries
One of the first things I'd cut back if I had a significantly lower income is the amount that we spend on 'wants'. We'd cut back on eating out substantially and cut down on travel and entertainment. I wouldn't cut these things out all together as I believe they are important for quality of life.

One car family
We'd cut back to 1 car. That would be doable for my wife and I since she doesn't work. This would cut our car insurance and car maintenance costs in half.

I wouldn't skimp on insurance.
Cutting back to one car would save about 50% on our insurance. I'd still keep my life insurance and car insurance at similar levels. I would keep the Health Savings Account health insurance plan at work since its the cheapest overall. But I would not put the max into the HSA, but instead put enough to cover the maximum out of pocket expenses. I would also get renters insurance.

Monthly budget:
Rent - $800
Electric - $100
Phones - $100
Internet - $30
Gasoline - $75
Car maintenance - $30
Auto Insurance - $50
Renter Insurance - $10
Life Insurance - $30
Clothes - $50
Grocery - $400
Eating out - $200
Entertainment - $200
Travel - $100
Gifts - $100

MONTHLY SPENDING = $2,275

Surplus - $360 / month

Keep in mind that this is just an example budget. The cost of rent, utilities or other 'needs' items will vary depending on your location and circumstances.

Luxuries would be individual choice
I have $500 budgeted for eating out, entertainment and travel. I could change the exact amounts if I wanted based on my priorities. If for example I prefer to travel more then I could cut back the eating out budget and increase the travel budget.

The surplus amount of $360 could go towards savings or other expenses that some people might have. I might also put a $100 buffer into a 'misc' category for stuff like car repairs or postage stamps or whatever else doesn't fall into the main spending categories that I've listed.