How much of your money do you actually control? This is an important question to ask yourself so that you will have the proper perspective when making spending and savings decisions. I have set up an example of a typical household to illustrate my point. What I have done is to take a typical American household budget and put in what I believe is the minimum amount they will need to spend in order to function.
- Household Income $ 50,000
- Taxes $16,000 32%
- Housing (including Maint.) $14,000 28%
- Clothing $500 1%
- Transportation $2,500 5%
- Utilities $1,000 2%
- Food $4,000 8%
- Misc $500 1%
- INCOME CONTROLLED $11,500 23%
In this example you control 23 cents for every dollar you earn. Keep in my that this example does not include cable, cell phones, and other items that someone else might think is a necessity. Finding a way to save 1,000 over a year might not seem like a big deal if you compare it to the $50,000 that was earned, however it becomes quite significant when you compare it to the $11,500 that you actually control. The great thing about money is that you can exactly measure your financial situation, but without the proper perspective any measurements you do can be counter productive.