Income allocation

 “Money frees you from doing things you dislike. Since I dislike doing nearly everything, money is handy”

Groucho Marx

We believe the best income allocation is to divide our money as follows:

10% Living costs

15% Housing costs

75% investment

Every paycheck 75 % of our earnings goes automatically to our investment call account. When the balance in that account reaches $10,000 we invest what we call an ice block ($10,000).

It is easy to manage investments and it is easy to compare performance of investments because all of our positions started out at $10,000 greenbacks.

We automatically pay our mortgage, city taxes, and home insurance from the 15% that we set aside for housing. The remainder is saved in a separate account for home repairs, maintenance or any other home management cost.

This leaves about 10% of our income in our day to day account. With this we juggle our bills against the other things that we would like to spend on. There are a lot of priorities competing for money in this pit. This includes all of our utilities bills, clothing, food, haircuts, money for hobbies, entertainment , the replacement of things that have broken and whatever day to day cash we both want for the period.

As first it was tough to live off so little, but as our savings have ramped up (and we can now see retirement in our very near future) it has become a lot easier.

For the record we don’t have any credit cards. We complete as many of our our transactions in cash as are practical. Using real money has helped us to keep in closer contact with our spending than when we operated our finances electronically and automatically.

Bottom line. It’s very simple and it works for us.

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