I hope at some point over the last week you calculated your net worth. If not – do it right now! You can be inspired by the readers who noted negative net worths – but only due to worthwhile student loans and who also have plans to pay them off more quickly than required. Or the reader who remembered a $6,000+ account they forgot to include earlier in the week. Or the readers who have been tracking net worth for a while now and have noticed the true power of saving and investing over time (even a short time) and the satisfaction of watching their money grow. Remember, it’s not about judging where you are now. It’s about KNOWING.

At this point we’ve talked about our core – the true reasons we value money – and net worth. We’re starting to see the big picture point of view.

This week, I want you to take some time to understand where your money goes on a monthly basis – and again, it is fairly simple to do. I recommend looking at this from a monthly perspective because most bills are on a monthly basis. (If another time period works for you, do that, but I’m going to share this article as if you’re doing it on a monthly basis.) I also recommend you do this for October, as those numbers should be easiest to find and the month is almost over.

So, first things first, we need to know our GROSS PAY. If you’re paid monthly you can pull the numbers straight from your pay stub (or whatever the electronic version of that is called). If you’re paid twice a month, combine the numbers from both paychecks. You get the point.

Then, we’re going to take our paycheck and determine what is taken out every month. This likely includes taxes, pre-tax contributions to a retirement account such as a 401(k), anything taken out of your paycheck for benefits, and anything else (make sure you KNOW what these things are).

MONTHLY GROSS PAY – TAXES/PRE-TAX RETIREMENT CONTRIBUTIONS/EXPENSES FOR BENEFITS = MONTHLY NET PAY

Your monthly net pay is your take home pay. Without checking, did you know this number? Do you KNOW how much you can spend every month?

Next, we want to know how much of our MONTHLY NET PAY is already accounted for. This is everything you’ve ALREADY COMMITTED TO SPENDING EACH MONTH and is (mostly) a fixed, set amount. This list likely includes the following:

  • rent
  • utilities
  • internet
  • a cell phone plan

It may also include the following (among LOTS of other things):

  • cable
  • a car payment
  • car insurance
  • renters insurance
  • student loan payments
  • other debt payments, including credit card debt
  • Netflix
  • Hulu
  • a gym membership
  • Spotify
  • tithes
  • charitable donations
  • any other memberships or subscriptions

Now, we take our MONTHLY NET PAY and subtract all of the items above that apply to us (and any I didn’t include on the list). We’re subtracting all of the money that’s already accounted for.

MONTHLY NET PAY – RECURRING, FIXED MONTHLY EXPENSES = WHAT’S LEFT

What’s left is the money available for EVERYTHING ELSE. Remember, we haven’t paid for gas or public transportation or food or entertainment or that Target run or the one-time unexpected monthly expenses that seem to come up every month.

AND, we haven’t even SAVED yet! (Except for any pre-tax contributions, which may be automatically coming out of our paychecks.)

If I can simplify this even further, focus on GROSS PAY, NET PAY, RECURRING MONTHLY EXPENSES, and then WHAT’S LEFT.

Just take NOTICE of these numbers. Are you living within your means each month? Are you using some of the “what’s left” to save each month? What do you notice? Did anything surprise you?

Thanks for reading and sharing your experiences. I love hearing from you.

We’ll be talking in more detail about these many of these items in future posts to give you a better sense for how much you should be saving and spending and how you can save even more.

This topic is continued in a follow-up post, “What’s In A Month? Part 2.”


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