Something I have found myself doing more and more recently, has been to measure my expenses as a percentage of my total after tax income. That might not make a whole lot of sense to everyone, so i’ll give you an example to help clarify what I mean.
Let’s say for arguments sake that through my job I make $100,000 per year and then after tax I earn $65,000 per year ($1,250 a week). What I then do is measure my expenses against the $1,250 I get each week.
Now let’s assume that I was buying 3 coffees a day at $3 each everyday I was at work.
- That’s $9 a day
- $45 a week ($9 x 5 work days)
- 3.6% of my total after tax weekly wage.
That leaves 96.4% of my wage left for all the other expenses I have.
I’m not sure why, but when I put things into a percentage format it seems to resonate with me a lot more than just looking at the dollar figure. If I look at $45 a week I think it’s a bit, but not massive. However, as soon as I see it as 3.4% of my total take home pay, I start thinking – what the hell, that’s a stupid amount to spend on coffee. I know it’s the same amount of money, but the percentage amount seems to drive me a lot more.
I have even found myself telling others how much certain things cost as an approximate amount of their take home pay. As an example – the other day at work a colleague was eating their breakfast at their desk. It looked quite good, and I asked how much it cost. I can’t remember the exact amount, but it was something like $4.50. At first I was like, $4.50, that’s not too bad for breakfast everyday. Then I thought about it in terms of a percentage of my take home pay:
- $4.50 per day
- $22.50 a work week
- 1.8% of his take home pay on just breakfast (excluding weekends)
As a comparison, I have toast and honey most mornings prior to going to work.
- The bread is $1.50 a loaf with an average loaf containing 22 slices. I have 2 slices and so the toast costs me 14.6 cents per slice, or 29 cents per morning.
- The honey is $15 per 1.5Kg, and that normally lasts at least 2 months meaning I use about 24g of honey each day, or 24 cents of honey every morning.
- Total breakfast cost each day – 53 cents (excluding electricity costs)
- $2.65 a work week
- 0.21% of take home pay on breakfast (excluding weekends)
To be fair, my colleagues breakfast looked very nice when compared to my honey on toast.