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Calculate Your Monthly Freedom Day
Posted By Jim On 08/10/2010 @ 7:27 am In Frugal Living | 9 Comments
Every year, the Tax Foundation points to a day in April and proclaims it Tax Freedom Day . It’s the day after which you have effectively earned enough to cover your tax liabilities for the year. For 2010, that day was April 9th. In 2009, it was April 8th. The idea is that, based on what you are projected to owe in taxes, every hour you work until that day goes towards funding that liability. It’s more a gimmick than anything else but it does underscore an important point, each month you experience your own “Freedom Day.”
Your personal Monthly Freedom Day is the day where you earned enough that month to cover your fixed monthly obligations like your rent or mortgage, your car loan or your student loans. Today, I’m going to help you calculate your Monthly Freedom Day.
First, why should you calculate your Monthly Freedom Day? There are two reasons:
The first step is to find every monthly expense you have and adding it up. You can start by looking at your credit card bills and bank statements, as you probably pay for most of your services through one of those two methods. If there are monthly bills you pay in cash, it’s important to include those as well. Next, you need to recall all the things you pay for on a quarterly, semiannual, or annual basis. If you own a home, this might be quarterly water bills or the annual property tax assessment (these may be integrated into your mortgage payment). One common one is insurance, as my auto insurance is billed every six months. If you’re a stickler for details, try to estimate gasoline usage (or mass transit expenses) and parking fees if you want to be more precise.
Here are the ones that were in my list of monthly expenses: mortgage (including property taxes and homeowners insurance), auto insurance (semiannual), Netflix membership, pest control services, cell phone, cable television/internet, gym and magazine subscriptions.
There are two different strategies you can take for calculating your earnings:
The first way is easier and creates a much earlier day in the month but the second way is more in the spirit of the Tax Foundations calculation.
So now you have your earnings per day (per eight hours) and your expenses, simply divide and you know how many days you need to work in order to hit your Monthly Freedom Day. This day will change each month, depending on when the weekends fall, but you get the general idea.
Which day is your Monthly Freedom Day?
(Photo: joelanman )
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