I’d like to suggest a different way to think about your income versus your expenses.

I call it “days per dollar earned.”

When I recently wrote about the Tim Ferriss Financial Plan and shared his concepts of Target Monthly Income and Target Daily Income, I included a note about how it didn’t account for taxes. And as you know, taxes are important.

After giving it some more thought as well as considering how to include the impact of taxes, I’ve arrived at dollars per day earned.

And while I don’t expect this to become part of the personal finance lexicon, my hope is that you might find it helpful in managing your own finances.

First, let’s start with an assumption.

Let’s say you earn take-home (after-tax) pay of $2,500 every two weeks. In other words, your after-tax, after-401k-contribution spendable income is $5,000 per month.

But rather than thinking in terms of months or your two-week pay period, let’s break down your after-tax earnings into a daily figure.

$2,500 divided by 14 days = $178.57.

That means $178.57 is your dollars earned per day on an after-tax basis.

But I want to flip this around a bit and look at it from a different angle.

Let’s say that your lifestyle and all its associated expenses cost you $2,000 every two weeks.

Given your after-tax earnings above, that means your “days per dollar earned” quantifies the relationship between what you bring home in after-tax earnings and your lifestyle expenses.

In this example, if your lifestyle, on average, costs $2,000 to maintain for two weeks, we can do some simple math to calculate your days per dollar earned.

If you can comfortably live on $2,000 for 14 days, that equals $142.86 per day. ($2,000 divided by 14 days)

If you earn $2,500 after-tax every two weeks, this means that if we divide $2,500 by $142.86, we get 17.5 days. This means that based on your current lifestyle, each paycheck will last you 17.5 days before you run out of money.

Now clearly this isn’t rocket science, but I think it might prove helpful as a tool to reconcile your income with your ongoing expenses.

And for some of you, perhaps it makes more sense to think of this on a monthly basis. To do this, simply divide your monthly after-tax income of $5,000 by $142.84 to get 35 days.

This means that your bi-weekly paycheck, based on the numbers above, will last you 17.5 days, or 3.5 days into the 3rd week of each month. Or, on a monthly basis, your after-tax income will carry you through the month and 5 days into the next month.

This indicates that you’re living within your means. Or in budgeting terms, you’re operating at a surplus because your income is greater than your expenses.

But what if your days per dollar earned were under 14 (biweekly) or under 30 (monthly)?

Let’s flip the numbers and assume that you earn $2,000 after-tax every two weeks, but your lifestyle costs $2,500 every two weeks.

Based on lifestyle expenses of $2,500 for a two week period, if we divide by 14 days, we see your lifestyle costs you $178.57 per day.

But your income of $2,000 equals $142.86 per day.

If we divide your 2-week income of $2,000 by your average expenses per day of $178.57, we get 11.2 days.

On a monthly basis, if we divide $4,000 monthly income by your average daily expenses, we find your income only covers 22.4 days of your monthly expenses.

Obviously, if your income isn’t enough to cover your expenses, then you’re operating at a deficit. Your lifestyle costs more than your income can support.

If you read about the soaring levels of consumer debt, it seems that most folks are living beyond their means.

And I’ve had conversations with some folks about their “fake it til you make it” mentality where they expect their earnings to eventually catch up and surpass the cost of their lifestyle. All I can say is good luck with that strategy.

So what’s the big deal with this idea of “days per dollar earned”?

How will it transform your budgeting and finances?

Frankly, I doubt it will lead to any earth-shattering realizations for any of you, but I’m hopeful that by introducing you to a different way of looking at your income versus your expenses, it will provide some better self-awareness of which way your finances are heading.

No one likes budgeting. I’m no exception.

But instead of budgeting and looking at every bill and every paycheck down to the penny, I suggest instead that you first look at things from more of a bird’s eye view.

And whether that’s using something like monthly discretionary income, target daily income, or days per dollar earned, find what works best for you to first build awareness and ultimately measure and manage your finances on an ongoing basis.

As the well-known management consultant Peter Drucker once said,

If you can’t measure it, you can’t manage it.