I have a confession to make. I have no idea what my financial status is. A lot of other finance bloggers have a plan and are working toward specific goals with certain milestones. Right now I'm just kind of winging it. My one real goal so far has been to setup an emergency cash fund, and I just took a serious look at that last month. I know overall I'm in pretty good shape. I have no major debt, so my finances are better than many people out there. But I have a few questions that I need to answer: How much am I investing/saving every month? Will this be enough to retire early? How long until I can expect to have a million dollars at my current savings/investment rate? What should my asset allocation be?
In today's post I'll look at how I'm distributing my income each month. I have all the data I need from my Quicken accounts and my pay stub. Of course, things change from month to month, but I can look at some recent data and get an idea of where I stand. This will also be useful to compare when I'm evaulating P2P loans on prosper, because people usually give a break down on their monthly expenses. People who state they only spend a $100/month on food and entrainment I find hard to believe.
Here are my averages for the past 12 months:
| Item | Percent |
| Total Income | 100.00% |
| Investments | 18.71% |
| Taxes | 15.79% |
| Rent | 14.46% |
| Retirement | 12.50% |
| Savings | 10.21% |
| Food | 9.02% |
| Auto | 3.96% |
| Household | 3.84% |
| Utilities | 3.41% |
| Insurance | 2.86% |
| Travel | 2.55% |
| Entertainment | 1.92% |
| Other | 0.75% |
So now I have some numbers on where my money goes each month. These are just averages of course. For instance, I haven't spent a dime on my cars (gas, repairs, oil changes, etc) for the past 2 months. My monthly savings is a healthy 41%. I knew it was significant, but this is higher than I expected. My biggest discretionary expense after savings/investments is food, which is pretty much what I expected.
Rent is 14.46%. This is pretty good. Even though right now I'm paying more than I ever have for housing (its a pretty good house) its not consuming a large portion of my budget. In general, you should be paying no more than 25% of your income toward housing. Housing is something that is difficult to change quickly if you find yourself in a tight spot with money.
If I found myself in a tough financial situation, there is also lots of room to downsize. Cutting back on investments would not be my preferred method though. There is also room to downsize in the food budget. I'm pretty sure I could easily cut my food budget in half if I strongly desired to do so. (Spaghetti'O's and ramen are pretty cheap after all). If I had to, I could also sell some posessions and move to a smaller living arrangment.
This also shows that to maintain my current lifestyle, I need a replacement income of 60% of my current income. In other words, to retire and live off my investments, with nothing else changing, I would need to bring in significantly less than I'm making now. The usual figure quoted by retirement experts is 80% of your current income.
Now that I have an idea of where I am, in some future post I'll examine what it will take to meet my goals.
(photo by mang maning2000 via flickr)
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