in Saving, Spending

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).

obtaining more moneyDr. 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?

 

{ 5 comments }

  • Bet Crooks March 13, 2013, 4:04 PM

    I actually ran the numbers for this earlier this year because post-mortgage we’ve been making huge attempts to save for education and retirement etc. We’re living off about 50% of our after-tax/CPP/EI/LTD income. Which is a good thing because I don’t think our income will stay this high for very long.

    The one “take away” I got from “I Will Teach You to be Rich” was that you should save money on things that are not meaningful/important to you and spend it on things that matter to you. Luckily our family wants similar things. So we live like starving students in many ways. (anyone want to borrow our 21″ cathode-tube ray TV?) But we aren’t afraid to spend on the things that we really want. It was a good reminder not to just blindly save, but to also spend when it’s worth it.

    Reply
  • LifeInsuranceCanada.com March 12, 2013, 12:39 PM

    This is a tough question. I don’t think we pay any attention to the % spent on lifestyle vs. savings. We have to pay for kids and university and our general lifestyle, everything else goes to savings right? We’d like to have more for long term savings, but to do so would mean either jettisoning the kids or modifying our lifestyle. And I’m reluctant to modify our lifestyle :).

    Reply
    • bigcajunman March 12, 2013, 2:00 PM

      Something to keep in mind? Another interesting calculation to help you understand where you stand?

      Reply
  • Jane Savers @ The Money Puzzle March 12, 2013, 5:37 AM

    Sheldon keeps his money hidden in or under different super heros in the apartment. I hope your friend tries a safer interest bearing option.

    My take home is $1,300 every 2 weeks and my basic expenses seem to eat most of it but I am trying to live on 50% (40% to debt and 10%) for savings. That will be easy as long as nothing breaks or the dogs don’t get sick and I can remain happy sitting at home watching reruns of Big Bang and don’t want to go out with friends.

    Reply
    • bigcajunman March 12, 2013, 5:55 AM

      Friends? If they were real friends they would applaud your frugality.

      Reply

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