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Your Money and Financial Freedom Guide: Let’s Do Money Math

Written By Millen Livis

Annual Spending Rate Calculation

I invite you to discover your own spending strategy, the one that allows you to live your best life, free from financial stress and filled with possibilities and joy.

Step 1: Let’s determine the size of your spending jar–your annual spending rate (ASR). Take some time and, using Excel spreadsheet, make 2 columns: Must Have—Must Pay and Nice to Have—Choose to Pay.

Now, enter your monthly necessary expenses into the Must Have—Must Pay column: rent, food, cloth, transportation, utilities, medical insurance, student loans, taxes, etc. Next, enter your arbitrary expenses into the Nice Have—Choose to Pay column: phone, computer, car, gas, insurance, TV subscription, entertainment, eating out, etc.

Step 2: add monthly amounts from these 2 columns and multiply by 12. This amount is your annual spending rate, ASR. Make sure that your Nice Have – Choose to Pay amount doesn’t increase every year!

If you truly want to achieve financial freedom, you must know your ASR in order to be aware of your spending habits. Your monthly spending rate is very important but I prefer to calculate the annual spending rate because there are a few expenses that you have to pay annually.

911 Fund and Short-Term Fund Calculations

Let’s determine the size of your 911 Fundyour 12 month survival fund. This should be fairly easy since you already calculated your ASR (annual spending rate).

Now that you have your Must-Have—Must-Pay amount and Nice-to-Have—Choose-to-Pay calculations ready, all you need to do is to add most important items from the Nice-to- Have—Choose-to-Pay list of expenses to your Must-Have—Must-Pay expense amount.

To calculate your Short-term Fund, add all your up-coming debt obligations (mortgage down payment or tuition amount, cost of a new car, etc.) and retirement contributions. It is expected that you may not know all your short-term up-coming needs at this moment. Thus, simply keep this calculation up-to-date as your situation changes.

Read more on this topic next week.

To your Health, Wealth and Happiness,

About the Author

Millen is a Wealth architect and Financial Independence Coach, entrepreneur, and a bestselling author. Being a Possibilities' Catalyst, she uses her intuition, business, and investment expertise to support entrepreneurial women (like you) who want to master their money, live their purpose achieve financial prosperity and freedom. With her physics and business education, corporate and entrepreneurial experience, money management know-how, mindfulness practices and transformational coaching skills, Millen has a unique ability to guide and support clients in achieving extraordinary success in their lives.

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