I was inspired by the latest Chain Gang challenge on the Rockstar Forum to create a money map. At first I didn’t immediately know what a money map is. Look, it was a tough work-week, I may not be running on all cylinders right now. But then, duh. Of course! A map of where your money is coming from and going each month. Excellent idea. I thought it would be a great thing for us to do, being the personal finance nerds that we are.
After an investment of 2 cups of coffee, this is what I came up with:
I wanted to delineate the deductions that come directly out of our paycheck before we even get our hands on the money. These are shown above the dotted line. Sadly, the biggest chunk goes to payroll taxes. Last year we paid almost $150,000 in taxes between federal, state, FICA, and real estate taxes, ouch! Then our 401(k) contributions and other benefit deductions like for our health and dental insurance and our Health Saving Account (HSA) & Limited Purpose FSA contributions which are all tax-free! Lastly, Mr. Need2Save has money deducted each paycheck for his employer’s stock purchase plan, which we then sell following the end of each quarter with a little 15% profit.
The leftover funds are funneled to our primary checking account. From here, we pay our normal living expenses including paying off our credit cards (every month in full of course) and paying off our mortgage (with some extra principal). We have our regular utility bills such as electricity and water. Then we are saving for anticipated future expenses (some fun, some not so fun). We invest the rest in our after-tax brokerage accounts. This is where we are parking our Gap Years saving to live off between our Early Retirement and around age 60. You will note that we are ineligible to fund Roth or tIRAs because our income is too high and we have employer sponsored retirement plans. However, we partially assist our young adult sons in funding their Roth IRA accounts. We are not subsidizing them a huge amount, but like to keep their momentum going by encouraging them to save part of their earnings for their future selves. We wrote more about this here.
We choose to pay for our car/motorcycle insurance (and our new to us Umbrella policy) annually to reduce the hassle of having these monthly bills.
Then lastly, we have occasional gifts to family and friends and our charitable donations.
You’ll also note that we do not add to our Emergency Fund account each month either. After many years of careful saving, we determined that our ER fund is more than adequate for our potential needs and the closer we get to our Early Retirement goals, the less likely we will need to tap into this account due to significantly reducing our expenses and the availability of our other assets. We wrote about evolving Emergency Funds needs here.
A while back, I had put together this pie chart showing where our money was going every month. These figures are not current. But in terms of rough percentages, our earnings are divided into thirds. One-third goes to taxes, one-third goes to our savings and investments, and one-third is going to our current expenses such as housing and other spending.
Although the dollar amounts vary over time, we have noticed that this 1/3rd phenomenon has been pretty consistent for a few years now. You would think as we make more money, more of our earnings could go into saving and investing and that has been partially true. But unfortunately we also pay a lot more in taxes now too. In fact, in 2016, we paid a combined 39% of our income to federal, state, FICA, and real estate taxes. This was the largest % ever for us so that chunk of our pie is slightly nudging out the other 2.
As a result, depending on how you calculate our savings rate, we save/invest roughly 50% of our take home pay. This percentage thankfully goes up further once you add in company match on our 401(k) plans and HSAs.
OTHER MONEY MAPS:
Before I started to craft our money map chart, I checked out the other maps in this chain, which are linked directly below. What I thought was most interesting was the added complexity of having young children in daycare age on some charts. It’s been a long time since we forked over money for summer camp for example, and we never had to pay for daycare because we chose for me to stay home full-time when our kids were very young. Additionally, our sons are now out of youth sports age, so we no longer have uniform, equipment, and team participation fees that we know a lot of parents face.
Also, we are not currently business owners, but if we were, we’d have to worry about additional taxes (including estimated taxes – oh my), insurance, and possibly payroll expenses. On the plus side, we’d be able to take advantage of other saving opportunities like having a Solo 401(k), for example.
We also don’t have notable income stream diversity. Some of the other maps have rental income, for example and this is not something we’ve dabbled in yet. Of course, we do have regular dividend and interest earnings, but right now we reinvest those so we don’t actually handle the earnings. Therefore, we left those off of our map for simplicity.
Check these out for some inspiration:
Anchors: Apathy Ends, Budget on a Stick
Link 1: The Luxe Strategist
Link 2: Adventure Rich
Link 3: Minafi
Link 4: OthalaFehu
Link 5: The Frugal Gene
Link 6: Working Optional
Link 7: Our Financial Path
Link 8: Atypical Life
Link 9: Eccentric Rich Uncle
Link 10: Cantankerous Life
Link 11:The Retirement Manifesto
Link 12: Debts to Riches
How about it? Join the chain gang and show off your money map!
The Rules To Join:
Write a post where you create your map and explain how you go about doing such. Make sure to include any insights you discovered about your finances by doing this exercise.
Backlink somewhere in your article to all articles written before you “in the chain” (try to also update any posts after you if possible).
Tag all previous chain gang members in a Twitter post with your final article.