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4 Numbers You Should Track for Financial Stability
Financial Freedom Starts Here!
Hi Reader,
Welcome to The Money Series and if you are new here, thank you for signing up. Personal Finance can feel ambiguous and overwhelming, but I am here to help simplify the journey.
When it comes to financial stability and building wealth, tracking expenses and budgeting are important—but they aren’t everything. While sticking to a budget can be challenging (I’ve been there!), simplifying your financial approach can make a world of difference.
Today, I want to simplify things by sharing four key numbers that will keep your finances on track, even if you don’t follow a budget.
By the way, this you?

Financial Baseline. This is the foundation of your financial health and covers essential expenses such as rent/mortgage, transportation, groceries, insurance, and debt payments. Any costs that you incur regularly belong here. Once you've listed and summed them up, add a small buffer for overlooked costs like repairs, donations, maintenance, etc that you may have skipped. What percentage of your income goes toward these essentials? Ideally, these costs should not exceed 60% of your take-home pay. If they do, it's often due to high housing or transportation costs. Your rent or mortgage should generally stay within 30-35% of your income. If you find your housing and transportation costs reasonable, look closely at other spending categories.
Savings. Aim to save 5-10% of your take-home pay. This should be money you plan to spend between 1 and 5 years. Savings should typically held in savings accounts and liquid investments for accessibility. This may be saving for a trip, an engagement, or a mortgage down payment. Your emergency fund, which should cover several months of living expenses, also falls into this category. If you’re saving less than 5%, review your spending to see where to cut back to increase your savings.
Investments. This is where real wealth-building happens, and it should account for at least 10% of your take-home pay. Here, you invest money you don’t need for at least 5 years, allowing your money to grow and compound over time. Ideally, you should invest more than 10%, but never less. The sooner you start, the better. Remember our conversation about starting early?
Fun Money. One of the biggest perks of financial success is enjoying your money. Allocate up to 20% of your take-home pay for discretionary spending - dining out, shopping, or vacations. While it's important to prioritize bills, savings, and investments, don’t forget to enjoy your hard-earned money. This 20% may seem like a lot but if you are not paying attention, you might already be overspending in this area.
Pro Tip:
To simplify money management, consider setting up dedicated accounts for each category. Automate transfers from your income account to separate accounts for fixed expenses, savings, investments, and discretionary spending. For example, using a dedicated debit card for essential purchases can help you stay on track without overcomplicating your budget.
Remember, these categories can be flexible. These percentages aren’t rigid rules—they’re guidelines. What might be an essential expense for me could be a luxury for you. What counts as an essential expense for you may be a luxury for someone else. Your financial plan should be as personal as your lifestyle.
Feel free to send in questions and comments!
Reflect on This:
Do you know the proportion of your income that goes into fun and entertainment? You might be surprised when you check!
Till next week, I am rooting for you, money-ly!
Dee
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Disclaimer: This does not constitute financial advice. Please conduct your research or consult your financial advisor for important financial advice.