Lately I’ve been spending some time looking over our budget to see if we have any areas that we can shave our expenses and I thought I’d summarize a few key data points. We have always strived to minimize our expenses for things that don’t matter to us. The result has been that we don’t have much of what I’d call “leakage” to our monthly budget. We define leakage as all those little monthly expenses that don’t seem like a big deal if you look at them individually, but that really add up when you put them all together. Leakage is definitely a blind spot for a lot of people and we do our best to keep it in full sight. The other thing we do to keep our budget manageable is to avoid debt (other than a mortgage). This drastically improves our monthly cash flow because we don’t have a bunch of monthly payments eating away at our budget. Anyway, here is a look at some of the key data points of our budget:
- We currently spend 48% of our after tax, after investment (ATAI) income each month
- Our mortgage is just under 16% of our gross income
- We both contribute the maximum allowed to our retirement accounts each month (this doesn’t show up because it’s pretax and isn’t included in the ATAI figure)
- We save $400 a month in a college 529 plan for our daughter (not included in 48% since it’s an investment)
- We spend about 5% of our ATAI income on insurance (yikes)
- We spend about 2% of our ATAI income on daycare
- We spend roughly 6% of our ATAI income on food
- We usually spend around 5% of our income on gas
- Communications (home phone, cel phones, Internet etc) makes up about 3%
Overall, I continue to be pretty happy with our expense vs income percentage. There are definitely months where we don’t hold to our budget, but for the most part, keeping our budget this low helps give us peace of mind that we could get by with a lot less income than we currently make. Our goal is to keep our expenses at less than 50% of our take home pay. I consider this to be a key piece of our “Armageddon plan”. “What is that?”, you ask. Well, that’s what we’d do if we both lost our jobs. If one of us loses our job, we can get by okay for the foreseeable future due to our ability to keep our expenses low.