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!