Determining your Daily Disposable Income (DDI) is a smart thing to do, as an adult and even as a teenager moving out on your own for the first time, so you are aware of the amount of money you actually have to spend. This will help you to budget and keep some financial goals in mind. It’s very hard to try and stay in that budget and not go into debt, but seeing it on paper makes it all the more easier to accomplish. Knowing how easy it is for us to spend money, we should definitely be aware of the amount of money we really spend outside our normal responsibilities of monthly bills. The whole idea of Daily Disposable Income, is to help you see how much money you have to spend or save.
Daily disposable income is the amount of money you have left over after all your monthly bills are paid. Seeing it on paper makes a huge difference in being able to see when you are over spending and when you need to start cutting back. Its easy to save up for a huge purchase by trimming up on the amounts you are currently spending. Knowing what money you can spend does make life easier. It also helps you to stay focused and keep you on track with your financial goals.
To calculate your actual daily disposable income, you need to multiply the amount of your take home checks by the number of times you are paid during the year. Now divide that number by twelve. Next, figure out your monthly expenses that are fixed expenses. An example of fixed expenses include your mortgage or rent, child care, car payments, insurances, etc. List them on paper so you can see the actual amount. Next figure out your semi fixed expenses. Examples of these included your cable bill, phone bill, heating bill, and electric bill. Now add the two expenses, fixed and semi fixed together. Then subtract those expenses from your amount of take home pay you previously had figured. Now multiply that number by twelve and then divide it by 365 and you will have your daily disposable income.
For example:
Your weekly paychecks are $650.00
Multiply that by
x 52 weeks
= $33,800.00
Divide by 12
= $2816.00 monthly income
Fixed Expenses: rent, childcare insurances and car pmt.
= $1,850.00
Semi Fixed Expenses: cable bill, phone bill, heating bill, and electric bill
= $ 450.00
Two expenses added together
= $2,250.00
Take home pay per month
= $2,816.00
Subtract Expenses
-$2,250.00
Leaves
$566.00
Multiply by 12
= $6,792.00
Divided by 365
= $ 18.60 this is your Daily Disposable Income
Food is not included in your semi fixed expenses. Money that is spent in this area is so flexible. It is one of the areas where you should first be looking for savings. You could include it if it helps you in your calculations better.
The advice to keep track of your spending is not a new concept. This just puts it in black and white and really helps you to see what you have to spend or how much you can save. This example shows no savings. What amount do you thinks you could save out of this? If your basic expenses are manageable, determining out your Daily Disposable Income is a great way to keep your spending under control and helps you to see that saving money is within your reach.