A simple quote from The Big Bang Theory, specifically Dr. Sheldon Cooper. Many times the concept of money comes up in this show, especially since the heroine is constantly broke, so the writers of the show put forward many interesting financial theories. If she worked at obtaining more money, she’d be in better shape (financially).
Dr. Cooper breaks down his money needs in detail (as he wants 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 to obtain more money.
Not many people can explain their financial needs down to a percentage in this way. Most folks I know say that 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). Last week, we confronted Sammy with this fact (this topic came up in a Bloggers Dinner Club discussion with Preet Banerjee and Mark from My Own Advisor). He claims that he has become a spendthrift, and his “spending line” might 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.David Copperfield, Charles Dickens, 1849
Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.
Even in the times of Dickens, was that simple rule known? Wow!
What is your net burn rate?