A simple quote from The Big Bang Theory, specifically Dr. Sheldon Cooper. Many times the concept of money comes up on this show, especially since the heroine is constantly broke, so there are many interesting financial theories put forward by the writers of the show. If she simply worked at obtaining more money, she’d be in better shape (financially).
Dr. Cooper breaks down his money needs in detail (as he is
want wont to do), and points out that he only needs about 40% of his income to live on (I am assuming he is talking about his net income). He does not need to work at obtaining more money.
Not a lot of people can explain their financial need down to a percentage in this way, most folks I know simply say that at the end of the month they usually don’t have money left over (or worse they have less than no money (i.e. credit card debt, etc.,)).
Michael James and I have a friend (we’ll call him Samuel) who is the epitome of this concept, in that most of his life (from what we can tell), he has lived on about 10% of his monthly income (when he has had income). We actually confronted Sammy with this fact last week (this topic came up in a Bloggers Dinner Club discussion with Preet Banerjee and Mark from My Own Advisor) and he claims that he has actually become a spendthrift and his “spending line” might actually be up to almost 20% of his net income (we both laughed very loudly at that one).
As I pointed out in one of my first posts about Dickensian Economics:
Annual income twenty pounds, annual expenditure nineteen six, result happiness.
Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.
David Copperfield, Charles Dickens, 1849
Even in the times of Dickens, was that simple rule known, wow!
What is your net burn rate?