Among all the financial data and information that is necessary to build and maintain your financial and retirement planning, there's one number that, in my opinion, is important above all others.
It's your "MDI" or monthly discretionary income.
This is the average number of dollars you have each month after you've paid all your normal bills and supported your lifestyle. This number can be positive (surplus) or negative (deficit).
Having a surplus MDI each month affords you additional financial flexibility and choice which, in my experience, is something most people seem to appreciate.
Figuring out your personal MDI is pretty simple and straightforward.
Get your last 3 months statements from all your spending accounts (checking, credit cards, etc.) or login online and access this same information. Add up your total spending for the last 90 days and divide by 3 and this will give you your average monthly spending.
However be sure not to double-count your credit card transactions if you're paying off your credit card bill every month from another spending account.
Once you have your average monthly spending, simply deduct this number from your monthly take-home pay. This will give you your MDI.
There are some software tools & apps to help you with this process:
There are countless benefits to calculating your personal MDI and reconfirming it every year or so. We cover many of these in this episode.
If you have any questions about your MDI or anything else covered in this episode, please get in touch and let me know.
Thanks for listening.
Visit my website to learn more.
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Your Most Important Money Number - Episode 6