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That's FijiAirways.com. From here to happy. Flying direct with Fiji Airways. Radical Personal Finance, quick tip today. How much does it cost you to live today? One of the major challenges that we face in our wealth building goals is making sense of all the numbers in life. We know that wealth building and financial planning is fundamentally all about the numbers, but yet those numbers come and go and we don't often see the actual practical impact of those numbers on a day-to-day basis.

This is especially magnified in our modern era where many of our transactions are digital and where many of our digital transactions are automatic. The money comes in, the money goes out, it just flies through the checking account. We don't have any tangible connection to the expenses. And that can be a real challenge because it's very easy for our expenses to increase and to total a lot more than we would otherwise think.

Now you're the one who gets to decide which expenses you value. We all have different values systems. We all have different measurements by which we measure the things that are valuable to us and the things that I find important to spend money on may be different than the things that you find important to spend money on.

But the key to being able to make that judgment is having good data and being able to understand the data that's involved in your life. And frankly, this is tough. Here's an example. How much money is your house costing you today in electricity? And I mean today, not this month.

I mean today, one day, one 24-hour period, which is an amount of time that we can easily connect with. How much is it costing you today in electricity? Well, let me help you answer that question. Let's pretend that your electric bill is $150 per month. Take $150 this month and divide it by, usually what I do is divide it by 30.5.

If you remember that some months have 30 days, some months have 31, and February, of course, has 28. If I use 30.5 as my easy number, that winds up with 366 days, which is close enough. So take $150 and divide that by 30.5, and you wind up with $4.92.

So if your electrical bill costs you $150 per month, that means that today you're spending about $5 to light and heat and cool your home. Now I don't know if for you that would be a high number or a low number. I don't know if you would consider that to be a worthy expense or not a worthy expense, but it's a number that you should know and that you should know, if not immediately, you should at least be able to connect with it.

So here would be another example of a question. How much does your household cost you on a daily basis? Now this is much simpler if you rent. Let me rephrase. Instead of household, how much does your dwelling place cost you on a daily basis? This is much simpler if it's a rental cost because we can just measure pure cost.

Assume for a moment that your rent is $1,500 per month. Assume that your electrical bill is $150 per month. Assume that your water bill is $100 per month. Assume that your cable, TV, and/or internet and/or satellite bills total $100 per month. And right now we're at $1,850 per month.

Now you may have a couple more bills, but let's just go with that. $1,850 per month, your normal monthly cost. How much is that per day? We'll divide by 30.5 and you have the number of $60.66 per day. Now the great thing about doing these numbers is you're going to have some numbers that are useful to you to think about alternatives.

If that were your scenario, are you getting $60 per day of value from your dwelling place? Maybe so, maybe not. I don't know. What else and how else could you spend that $60 per day? Incidentally if you're a homeowner, you should do a similar type of analysis, but there are a few more steps involved.

The way that you would do that type of analysis as a homeowner is instead of your rental payment, you would figure out the pure costs of your mortgage payment. So pull out your taxes and your insurance, which those are in many ways equivalent to rental costs because they're just consistent expenses.

You're not building any equity there. And then do your best to, out of your principal and interest payment, do your best to figure out what you think your house is actually costing you over the course of a year. And it will be more challenging because you'll have to bring in improvements, maintenance, other types of expenses, things like that.

It may be simpler. Just use your mortgage payment. It's probably a fair enough assessment of what your costs would be because for most people my guess would be that any potential increases of the value of the property would be offset by expenses and improvements that you would make in the property.

Most people don't come out too much ahead on their house. If you think you're going to come out ahead, go ahead and adjust that a little bit. But figure out what is your daily expense. The cool thing about doing this math is it gives you a basis for comparison that may be very useful to you.

Pretend for a moment that you wanted to live in multiple places and during the year 2018, instead of staying in one rental apartment in one city, you wanted to move around. Well, what could you get in terms of a daily rental rate or a weekly rental rate? You can jump onto Airbnb and if your current cost is $60 per day for your dwelling, you could jump onto Airbnb and look around and see what you can rent for $60 per day and you know that you would have an equivalent cost to what you're spending right now.

Or maybe you would like to do some traveling and you look at hotel costs. Or maybe you intend to buy a boat and live on a boat and so you try to figure out how much your boat payment would cost you and how much your marina fees would cost, etc.

But that's a very useful number for you to know, that daily number, because then it opens up points of comparison. Frequently people don't make accurate comparisons because they don't have an accurate understanding of what the numbers mean. You're used to writing that $1,500 a check every month for your rent.

You're used to writing that $2,500 a month check for your mortgage payment and you don't think about alternatives. But sometimes if you'll just convert that into a daily expense, it'll open your eyes to something new. I've just done this analysis for myself and you can do this incidentally with just any of your payments.

If you have a monthly payment, you don't need a full year's worth of data or you can do it with a full year's worth of data. It's January 2018 as I record and release this episode of Radical Personal Finance. That means that you should have a year of data accumulated from 2017 and you can look back.

I've been doing this analysis because one of our plans during 2018 is to do some extended RV travel. I'll share more about that on a future episode as far as our specific plans, but we intend to take a multi-month trip around the United States with the goal of meeting you.

But in order for me to understand those expenses, I need to compare what would be my expenses on the road versus the current expenses. I can do that very effectively with a daily budget. You can also do this just to get an idea of your normal expenses that you're always going to incur and try to figure out what they actually would mean to you on a daily basis.

Let me give you an example from my own budget. During the year 2017, Mrs. Radical Personal Finance and I spent a total of $7,934.41 on groceries. Now that grocery category in my tracking system is inclusive of paper products and things like bottled water, but any kind of food-related thing.

Going forward, one of the things that I'm changing in my own accounting system is to be more discriminating in my subcategories. My general philosophy regarding budgeting is keep it as absolutely simple as possible, meaning in many cases as few categories as possible, but it must be detailed enough to be helpful for you.

So that number of $7,934 comes out to a total monthly of $661.20 per month as far as a monthly average. Now, the reason that that number feels high to me and it's frustrating to me, I feel like it should be at least under $500 a month. In my mind, that would be a reasonable budget for a family of five, but one of the – of course the youngest is only just starting solid food and the other two really don't eat that much.

But I feel like that's a sloppy number and I need to tighten that number up. So when I look at it on a daily basis and I calculate it, it comes out to $21.74 per day for groceries and paper products. When I think about that, it's actually not quite so unreasonable to me in that case.

To feed four people every day for $21.74 at three meals per day, that comes out to $7.25 per meal. Is that awful? Well, I feel like it's unnecessarily high, but I don't think it's necessarily awful. Now another interesting thing that I calculated was fuel use. During the year of 2017, we spent $1,936.50 on fuel.

Total is $161.38 per month and that's $5.31 per day. It's interesting because fuel is one of those things that I don't think we actually use very much. We live in a county and have a geographic lifestyle. The county that we live in is huge and our lifestyle is very spread out.

But I don't drive for work and my wife doesn't drive for work. So all of those miles are personal roundabout miles. But $5.31, that feels high to me. I didn't really realize that we're spending $5.31 per day on fuel. There are other interesting categories as well. For example, one of the ones that has been rough the last year, a couple years for our budget has been the expenses for our dogs.

My total spending on dog expenses for 2017 was $2,063.21 which comes out to $5.65 per day. Now that's a very high number, $171.93 per month. It's a very high number because my dog has had some extensive health issues and he has a specialized dermatologist veterinarian and we've gone through all kinds of things.

He's on an expensive medication right now which has solved some of the problems. We've tried all kinds of different treatments, tried changing foods, tried changing supplements, all kinds of different things and we're still trying to get that budget category under control. But it's a little sobering to look and say $5.65 a day?

I love my puppies so I've spent the money but well, it's illuminating to have that daily number. I don't need to go on with my examples. What are yours? What are your monthly expenses? If I paid you $10 a day to cut your grocery bill in half, would it be worth it to you?

For me it would. When I look at that number, that $20 a day number for feeding my family on groceries, I look at that and I think, $21, sorry, $22 number, I look at that and I think, "Well, you know, it's not awful but it's probably worth $12 a day to me if I could cut that number in half." So let me focus more intensely.

Let me stop being sloppy with that category because if you told me and put it into context and say, "Joshua, if you can cut your bill from $22 a day to $12 a day and you're going to get an extra $10 bill stuffed into your wallet every single day of 2018, are you willing to do that?" I'm willing to do that, especially when that's after-tax money.

If depending on your tax rate, that $10 a day extra money in your pocket could be worth an extra $13, $12, $13, $14 a day that you'd have to earn an hour of labor per day every day. I challenge you to do your own analysis. And again, here's how you do it.

If you have data for the year 2017, take that data and if you are competent with a spreadsheet, put into the spreadsheet your annual expenditures. If you use a personal finance software platform such as YNAB, the You Need a Budget software that I use that I recommend to you, radicalpersonalfinance.com/ynab, make me a little cash for doing the show.

I appreciate that. Radicalpersonalfinance.com/ynab. So if you use a software like YNAB, that's great. If you use Mint for categorizing your transactions, if you use Quicken, if you use Tiller, you have a Tiller spreadsheet. I forget my – maybe it's radicalpersonalfinance.com/tiller. Go to the website and there's a link through for Tiller or tell them, "Joshua, Radical Personal Finance sent you." If you use Quicken, et cetera, just export the data from 2017, your totals, drop it into a spreadsheet and run a couple of formulas.

Take your annual total, divide it by 365 and get your daily totals and then divide that annual by 365 and get your monthly totals. So that's a simple way to do it if you have good data for the past calendar year or for the past rolling 12-month period that you're listening to this show.

Another way to do it is just simply take your expense, take the monthly bill that you have and figure it out for yourself. With a monthly bill, I recommend you go smaller down to daily and then bigger up to annual because this will impress upon you the value of certain changes.

Assume for a moment that your internet and TV bill is $100 per month. Well, question. Do you really need that? For example, on TV, did you know that you can get free TV that just comes through the air if you need TV? Or did you know that you can get free DVDs from the library?

Did you know that you can read a book? With your internet usage, do you really need to have a separate high-speed internet line into your home? For some people, that's an absolute necessity, but for others, that's a total option. Maybe you can get by with just using your phone here and there for internet if you have a data plan on your phone, or you can just use the internet and do whatever necessary internet work you have while you're at the office or at another location.

$100 a month dropped down to a daily expense comes out to $3.30 per day. Is it worth it to you to pay $3.30 per day? Or multiply it by 12, and let me ask you this question. At the end of 2018, if you could cut your internet bill and your TV bill by $100, would you rather have an extra $1,200 in your savings account?

Would you rather have an extra $1,200 of your debt paid off? Would you rather have an extra $1,200 available for your investments? The choice is yours, and it all comes down to your expenses. So take, if you don't have records for the last year, take your monthly bills and run them through this analysis.

I encourage you, don't discriminate. Run all of your bills through this analysis. You can just do it by hand. Write them down. Write down your categories on a sheet of paper and calculate it out, and then look at each one and say, "Am I satisfied with this?" If the answer is yes, good.

The goal of life is not to spend the least amount of money possible. The goal with your expenditures is to spend the least amount of money possible to buy the lifestyle that you believe is important for you at this stage of your life. There's a balance, and less is not always better.

One recommendation in frugality is this. Cut your expenses down to where you're uncomfortable and then increase them slightly. If you live at the ragged edge of discomfort all the time, you will probably find that very wearing. If you have an aggressive financial goal to get out of debt by a certain time or to save a certain amount of money for a down payment on a house or to become financially independent by your 35th birthday, etc., then living on that ragged edge of discomfort may be what you can do.

As long as that goal is in your sights, you can push yourself through to that. Don't keep yourself on that ragged edge of discomfort for the long term if you don't have some impressive goal that you're working towards. Take yourself down to that point of being uncomfortable in your expenses and then increase just a little bit.

I think that's where you get the best bang for your buck. Have a great 2018. This show is part of the Radical Life Media network of podcasts and resources. Find out more at RadicalLifeMedia.com. Programming subject to change. Fees, terms, and restrictions apply. See cricketwireless.com for details.