Break It Down – Daily Income and Expenses

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I always see people talking about how much things cost in total, by month or by paycheck. These are all important measures. You really do need to know how much the total cost of an item is going to be. It is also important to be able to fit that purchase into your monthly budget. Of course a monthly budget is useless unless you know how much each item takes out of every paycheck.

There is another dimension that you can consider and it is mostly a mental exercise. It can be useful in some situations, like for controlling spending, but the largest value to me is being able to compare your spending to your values.

Break Your Income and Expenses to Dollars per Day

It is a relatively simple exercise if you already have a budget. Take your monthly or biweekly budget and divide by 30 days for a month or 14 days for biweekly. Yes, I know, not all months have 30 days but one (or two days in February during non-leap years) don’t make that big of a difference. Once you’ve calculated how much your different budget items are a day take a look at your list. Does anything look surprising?

Let’s go through a theoretical example of a couple without kids. I completely made all of these amounts up so I don’t want to hear any complaining about how inaccurate they are.

  • Income – $5,000/month – $166.67/day
  • Rent/Mortgage – $1200/month – $40.00/day
  • Car Payment 1 – $450/month – $15.00/day
  • Car Payment 2 – $300/month – $10.00/day
  • Car Insurance – $200/month – $6.67/day
  • Food – $600/month – $20.00/day
  • Gas – $250/month – $8.33/day
  • Cable/Internet – $150/month – $5.00/day
  • Cell Phones – $150/month – $5.00/day
  • Electric – $100/month – $3.33/day
  • Water/Sewer – $60/month – $2.00/day
  • Other Random Expenses – $150/month – $5.00/day
  • Fun Money – $200/month – $6.67/day

Based on this theoretical example here are some key takeaways I’d see.

I bet this person didn’t realize that every day they pay two twenty dollar bills just to live in the house they’re living in? It is cheaper than a hotel though and probably a lot nicer.

This person spends $40.00 a day on their two cars which is just as much as they spend on their rent/mortgage! Are your cars worth as much to you as your house is?

This person might want some more spending money. If so, they could almost double their fun money if they cancelled their cell phones or their cable/internet/home phone package. Or this theoretical couple could cut down on their food spending by not eating out as often.

Are their cell phones really worth as much to them as their home cable and internet? Do they need both?

How awesome would it be if the couple wasn’t spending $25.00 a day on car payments? It is possible if they keep their cars after they are paid off and save up and pay cash for their next cars!

The List of Ideas Could Go on for Quite a While.

The big takeaway is that when numbers are larger sometimes we lose perspective on how much things cost relative to each other. When it is broken down into smaller pieces sometimes it is easier to see the big picture.

If you want more reasonable numbers that are closer your budget I have a novel idea… do it for your budget! You may be surprised at what you see.

Have you done this exercise before? Are you doing it now? Either way, were you surprised at any of your per day numbers? While I don’t expect anyone to list them below general comments would provide some great insights!

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About Lance Cothern

Lance Cothern, a Certified Public Accountant (CPA) licensed in the Commonwealth of Virginia, is the founder of Money Manifesto. You can read more about him here or connect with him on Facebook, Twitter, Google+ or Pinterest.

Comments

  1. Hmm, I’ve never done this exercise exactly. I have looked at our monthly spending as percentages, which gives you the same ratio information but doesn’t bring it down into “real dollar” terms the way this does.

    Actually we did calculate our rent-per-day figure because we were looking at an apartment complex that charges by long-term lease or nightly rentals and there’s no comparison!

  2. I’ve never done this exercise quite like this but that’s a great idea. I’ve done the “how many hours of work did this shirt cost me” exercise and enjoyed that one so I’m going to have to do this one sometime soon.

  3. That’s an interesting exercise and I think it could be useful for somebody new to budgeting that hasn’t really grasped how much they’re spending on various items.

    I’ve never tried anything like this but it could be fun to see how it comes out!

  4. I never looked at my expenses this way, although I review my expenses monthly. I notice there is no savings! There is $1,190 left after expenses. What will be done with that?

    • Yup this was an income and expenses exercise AND I made everything up so it is up to you what they do with the rest. I hope they’re saving for retirement!

  5. Great way to go to the heart of the budget. If you know how much you spend in a day for all your expenses then you might think twice about dropping benjamins in the clubs. How would it look you spending more on one day than all your expenses combined. Not to smart or frugal.

  6. Interesting way to look at the household budget. I think it helps–even shocks sometimes–to break things down to daily costs. Helps us think about priorities and ask good questions that will lead to better money choices over time.

    • Definitely makes it easier to see what you are having as your priorities whether or not it is actually what you want them to be.

  7. We had a speaker come in and ask us one day what it cost to turn the lights on every day. Nobody had given it a thought. The whole concept of how much you needed to make per hour to break even was foreign at that point. Great post. Everyone should do this.

  8. Gee! Only 6.67 cents for two people to have “fun” with every day? Definitely puts things in perspective, don’t you think?
    Great post!

  9. No, I haven’t done this and I am not convinced that I’ll find it very useful. What I have found is that it is not so much how much per day one spends that allows us to make decisions about spending, saving and earning but what do we spend on. No way around keeping track of all spending by item for at least three months, I am afraid.

  10. Interesting idea, but if you’re overspending don’t you already know you’re overspending? Could be interesting to compare different countries on how much they need to “survive” per day.

  11. I like this idea of breaking things down into daily spending. Very interesting concept and easy to implement.

  12. Our budget is even more specific than this. I do a meticulous breakdown of our expenses (food, toiletries, bills, etc) and create a monthly budget from this. It has guided all my spending habits all these years. If it’s not within budget, and necessary, we try to find the money from savings and even emergency fund.

  13. I make less than $40 a day. That hurts.

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