# Where are you spending too much money?

Question Where are you spending too much money?

ExampleFor one month, Adam’s (imaginary person) income was \$3,600. Tracking his expenses revealed the following; housing \$1,170, car \$590, credit cards \$525 and lifestyle \$1,500.

 Income Expenses Amt. % Amt. % Take-Home Pay \$3,600 100 Housing Expense \$1,170 33 Car Expense \$590 16 Credit Card Expense \$525 15 Lifestyle Expense \$1,500 42 TOTALS \$3,600 100 \$3,785 106

Can you identify where Adam is spending too much money?

Complete Answer  You have all the information needed to answer that question.

1. You know how to calculate income for the month. (Post of July 18, 2016)
2. You can track spending. (Post of August 15, 2016)
3. You know what a typical spending plan (budget) should look like. (Post of Jul,y 25, 2016)

In the above example, Adam’s total expenses (\$3,785) are greater than his total income (\$3,600). Adam will eventually go bankrupt if he continues spending more than his income.

To identify where Adam is spending too much money let’s examine his spending.

• Housing Expenses which include mortgage/rent, utilities, cable/satellite/Internet  service, cell phone, insurance, et cetera. Adam is spending 33% of his income. The recommended amount is 30% and may vary between 25% and 35%. Adam’s amount spent for housing is a little on the high side, but within the recommended amount.
•  Car Expenses which includes car payments, gas and oil, maintenance and repairs, license plates, insurance, et cetera. Adam is spending 16% of his income. A little over the recommended amount, but close enough.
• Credit Card Expenses are in reality debt. Credit card debt will be address in a future post. For this example, we will assume it is debt pay down. Fifteen percent is within the recommended amount.
• Lifestyle Expenses could be classified as discretionary spending, which would include such things as dining out, clothing, entertainment, hobbies, vacations; all those things that that you enjoy and like. Adam is spending 42% of his income on lifestyle things. The recommended amount for lifestyle is 25%. Adam is spending too much money on lifestyle things.

Financial Literacy Knowledge/Skill

Identify where you are spending too much money.