From Here to Financial Happiness

Day Twenty Three Fixing to Win

Grab your latest paystub. You'll probably also need recent bank and credit card statements. Start with monthly pretax income – and figure out how it gets divvied up among these four categories:

Fixed living costs
Discretionary expenses
Taxes
Savings
TOTAL

Fixed costs include your rent or mortgage, car payments, insurance premiums, property taxes, utilities, internet, phone, groceries, and other regularly recurring expenses. If you recall, you calculated this number back on day 17.

For taxes, you'll want to include federal and state income taxes, as well as Social Security and Medicare payroll taxes. If you're an employee, this information should be on your paystub. For savings, include any contribution you make to your employer's retirement plan, which should also be on your paystub. To that amount, add any other money you sock away each month.

Take your pretax income and subtract your fixed living costs, monthly savings, and taxes. Result? Whatever is left should be your discretionary expenses – spending on fun stuff like eating out, concerts, hobbies, and vacations.

Is your financial life in balance? Focus on two numbers. Ideally, your fixed living costs should be eating up no more than 50% of your income. Meanwhile, unless you'll receive a traditional employer pension, you ought to be socking away at least 12% of your income toward ...