Need help with Planning Your Finances?
Need help with Planning Your Finances?
Annual Cash Flow
There are 4 types of money use: Living Expenses, Housing, Taxes and Savings. A more detailed account of these cash flows is presented in our blog Life of an Engineer.
Cash Flow: Calculate your money uses. Your taxes should include Federal, State and FICA taxes, which you can find out from your tax return and W2. Housing should include PITI (mortgage, property tax, home insurance). Figure out your savings using:
Savings ($) = Income - Living Expenses - Housing - Taxes (annualized all numbers)
Savings Rate (%) = Savings / Income
Cash Flow: Calculate your money uses. Your taxes should include Federal, State and FICA taxes, which you can find out from your tax return and W2. Housing should include PITI (mortgage, property tax, home insurance). Figure out your savings using:
Savings ($) = Income - Living Expenses - Housing - Taxes (annualized all numbers)
Savings Rate (%) = Savings / Income
A balanced approach to spending during your working years is one in which the four categories of recurring expenses - Housing, Living Expenses, Taxes and Savings, are approximately equal. Of these four, only Living Expenses should remain in an ideal retirement.
A balanced approach to spending during your working years is one in which the four categories of recurring expenses - Housing, Living Expenses, Taxes and Savings, are approximately equal. Of these four, only Living Expenses should remain in an ideal retirement.
If one of the quadrants is too big, Housing for example, then it means that you are spending way too much of your income towards that category.
Saving early and investing those savings is what fuels asset growth.
PITI (Principal, Interest, Property Tax & Insurance), with a 20% down payment, is about ~0.5% of the property value in today's low interest environment.
Monthly PITI (Principal, Interest, Property Tax & Insurance), with a 20% down payment, is about ~0.5% of the property value in today's low interest environment.
1
Does your Savings Rate match up with your expectations?
2
How balanced are your 4 money use categories?
3
Rework your Living Expenses Benchmark spreadsheet until all of your actual savings (deposits and contributions) match up with the calculated savings from the above equation
1
Does your Savings Rate match up with your expectations?
2
How balanced are your 4 money use categories?
3
Rework your Living Expenses Benchmark spreadsheet until all of your actual savings (including 401k contributions) match up with the calculated savings from the above equation
Read later? Receive modules in your inbox...
+ you won't miss important updates.
© 2019, FinCrafters
Crafted by
