Select spending as a percentage of take home income. The recommendation below suggests using monthly information and smoothing bonus and tax breaks. For most of you this will be equivalent to: (12 x Mthly Spend)/(After tax base Salary + after tax target Bonus).
Spending should include: All expenses, vehicle depreciation and student loans. Deduct rental property net income from spending category.
Take Home Income Monthly (multiply bi-weekly paycheck by 2.166): After taxes, deductions, credits, and after 401(k) (ER matched portion only), after HSA contributions, after Medical/Dental/Vision or any other pre-tax contributions. All target bonuses/stock incentives/other incentives should be smoothed uniformly by month.
Example Total spending: $2500
Example Per paycheck take home income: $2307.69 x 2.166 = $5000
Example Percentage 50%
On rare occasion spending may be less than zero for non-employer earned income, like rental properties, but associated expenses should be netted out.
Spending should include: All expenses, vehicle depreciation and student loans. Deduct rental property net income from spending category.
Take Home Income Monthly (multiply bi-weekly paycheck by 2.166): After taxes, deductions, credits, and after 401(k) (ER matched portion only), after HSA contributions, after Medical/Dental/Vision or any other pre-tax contributions. All target bonuses/stock incentives/other incentives should be smoothed uniformly by month.
Example Total spending: $2500
Example Per paycheck take home income: $2307.69 x 2.166 = $5000
Example Percentage 50%
On rare occasion spending may be less than zero for non-employer earned income, like rental properties, but associated expenses should be netted out.
Percent Monthly Income Spent (READ FIRST)
