An Ideal Money Breakdown, where are you?

In working with a new client I had thought of something that people really need to be aware of and figure out what their individual situation says. To be completely honest, I hadn’t checked mine in a long time, I actually had to see if I am practicing what I am preaching (I will tell you mine down the way, I have to go calculate) I have a little pie graph as part of the Financial Statement on the second sheet as an ideal breakdown of income(where all the money goes each month) ideal vs actual. This is broken down into 4 catagories:
The Ideal:
Good Debt (this is debt backed by assets, ie mortgage, equity line, tax deductible) 20%
Consumer Debt (Credit cards, car payments, student loans, etc) 10%
Living Expenses (if you rent, it would be part of this catagory and all other expenses, fixed living and descretionary) 40%
Cash Flow (Income minus Expenses): 30%
So where do I land……
Good Debt 26%–so this is higher, but we have had to buy 2 cars in the last 2 years, which we put on equity line
Consumer Debt 5%–low because we put most everything on equity line, only thing out there is one 0% card, not many offers, so I guess technically this could be considered “good debt” because I use the 0% card to pay down equity line
Living Expenses 20%
Cash Flow 49%–we are really making an effort to pay down as much as possible on debt right now
Also we are set up for interest only on both the mortgage and equity line so we create this “cash flow” and can direct it to the best possible place, ie the dilemma entry I wrote about previously. when my ARM readjusts this spring, my Good Debt is going to go higher. Hence why we are working very hard to pay down as much as possible now. So every month we use that Cash Flow to pay down good debt the better our financial situation is getting. If you don’t know where to put that Cash Flow for the biggest bang for your buck, ask questions, maybe someone else can learn from your same situation. Add to comments.

So as you can see the “ideal” isn’t perfect but it is something to work towards. It was even a good exercise for me to do, showing that even adding all good/consumer debt, we are still at 31%, meaning pay down that debt. Which is our full intention.
If you need help doing the breakdown or want to plug your numbers into the Financial Statement shoot me a quick note. It is just another guage to help you see where you are at with your financials.


~ by debt2dreams on December 10, 2008.

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