108 DAYS LEFT - Calculating your expenses

One of the first key steps in finding your way our of the money hole that you dug yourself into is to look at your expenses.  One thing that you will notice is that it is easier to decrease your expenses than it is to create passive income - but it is just as important.

To really understand why you have more month at the end of the money (and to calculate how much passive income you need), you need to get it all into a spreadsheet (i’ll hook you guys up with a spreadsheet that you can use in a few days), but the basic info is “Expense” in column A and the “Price per month” in column B.

I just updated my numbers today - CLICK the image to enlarge it, so we can talk about it for a minute

Actually seeing your expenses in black and white is a great experience and one that I recommend that you do immediately.  So as you can tell our 2 highest monthly expenses are groceries and rent, those are 2 that you will never be able to get rid of (unless you stop eating and live in a box) - my goal (and yours) should be to remove all the other expenses.

Now, the most important number on this is the “Daily passive income needed” number.  Ours is $82. It is calculated by dividing the total monthly expenses (ours is $2,449) by 30 (for 30 days in a month).  This represents the amount of DAILY passive income I need to create in order to be free.

When I first did this, I was like “wow - $82 dollars a day, that is so low”!

The next logical question should be “That’s great Ian, but where do I find all my numbers?”.  Good question.  I would recommend logging into your bank account and going through a few months worth of transactions, reviewing your checkbook and entering the reoccurring ones like above (skipping your trips to Wendy’s, Dunkin Donuts and BestBuy - we are looking for things like electricity, credit card payments, rent/mortgage, food, etc…).

I don’t know who said it, but I remember a great quote:

If it can be measured, it can be improved

So over the next 108 days I’ll be posting my updated numbers (whenever we pay off a credit card, etc…) so stay tuned.

FYI: You do not need Excel or some such program on your computer to do this - in fact I would recommend getting a computer based program, I would recommend signing up for Google Docs (it’s free and awesome).