Hump Day Help – Add Up Your Fixed Living Costs
Welcome to the Hump Day Help. Each Wednesday we take one of the weekly actions from Jonathan Clements‘ blog Humble Dollar and “militarize” it for you. Jonathan Clements was a longtime personal finance columnist for The Wall Street Journal, and he offers great advice at the best price you can get…free. Here is this week’s Hump Day Help:
ADD UP YOUR FIXED LIVING COSTS. Include mortgage or rent, car payments, property taxes, insurance premiums, utilities and other recurring monthly expenses. How long could you cover these costs if you lost your job? Are these expenses so high that you find it tough to save—and suffer constant financial stress? Our advice: Keep fixed costs below 50% of pretax monthly income.
This is a revealing exercise to show you where you stand financially. Here, for example, are my approximate numbers:
- Mortgage – $0
- Car payments – $0
- Property taxes – $340
- Insurance premiums – $270
- Utilities – $300
- Monthly expenses – I have no idea. Because of the first two being $0, it really doesn’t matter.
If the $hit really hit the fan, we could live off of $2,000/month easily. It wouldn’t be the best life, but it would be a life. Walks to the local Aldi would be our form of entertainment.
What’s the bottom line? Get the first two bullets above (mortgage and car payments) down to $0. Then you’re financially free.