Here's the only number you need to know to stick to a successful budget
In fact, according to Jason R. Hastie, author of "The Dollar Code: Get Out of Debt With One Number," it can be as simple as figuring out one number: your daily allowance.
"Learn to think about your spending on a daily basis, rather than at the end of the month," the author advises. "Budgeting on a monthly basis is too overwhelming."
This is where the daily allowance (DA) comes in. Hastie describes your DA as "the amount of money you can spend freely each day. It is the number you should not exceed for your daily spending."
By "freely," he means cash left over for discretionary spending outside of your bills and fixed expenses, whether that's a coffee, a jacket, or a movie ticket.
According to Hastie, you only need two numbers to calculate your DA:
- Your income each month (your monthly take-home pay)
- Your expenses each month (think mortgage or rent, car payment, and groceries)
To figure out your monthly income, the author recommends finding your latest paycheck stub and converting that number into a monthly figure. For example, if you're paid every two weeks, multiply that number by two. For expenses, collect all of your recurring bills from the last three months in order to a get an accurate average, since bills can differ month to month.
Once you've identified your monthly take-home pay and your monthly expenses, here's the formula Hastie gives to calculate your DA:
Money in - Money out / 31
The number 31 comes from the fact that there are 31 days in the longest months. Hastie explains that by using the number of days in the longest months, you'll have a little extra to spend during shorter months, but you'll never not have enough to spend during the long months.
He also recommends checking in with your finances and recalculating your DA every three months, especially if you've gone through life changes such as starting a new job, getting a raise, moving, or having a baby.
Hastie points out that the goal of using this method is not to make you cut back entirely on your spending. "[It] does not make you give up your morning java or the movies," he writes. "Rather, it makes you take a step back to assess whether or not you really need that thing you are about to buy."
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