Do You Know Your Monthly Nut?

by Evan

Regardless of whether you make $46,000 or $460,000 almost everything in personal finance starts with what I commonly refer to as the “monthly nut.”  I am not sure where I got the term from, but knowing myself I probably giggled at first but now use it almost every single day when discussing someone’s financial situation.  Your monthly nut is the base line for all other things in your personal finance world, it is the base of your financial pyramid.  I define monthly nut as,

Those fixed costs that regardless of what occurs will be owed next month

Obviously, almost anyone’s life can be minimized, but I consider these expenses as the ones that are unlikely to change.  For example, you can eat out less, but can you really just refinance your mortgage or grieve your property taxes and get the same instantaneous result?

Your Monthly Nut Is Not a Budget

It is amazing how many times I run into people who literally do not know how their cash flows nevertheless knowing how much money they actually spend per month.   Determining your monthly nut is not about writing down your “budget” or that amount you hope to spend.

Knowing your monthly nut is about knowing how much money you need to spend to keep your family in the same more or less position they are financially.

My Monthly Nut

Obviously all spending outflows can be changed, optimized and minimized but the point of the monthly nut is knowing what is going out every month regardless if my multiple streams of income make any money or not:

  • Mortgage
  • Property Taxes
  • Electricity
  • Gas
  • Student Loans
  • Cable/Phone/Internet Bill – Damn Triple Play Plans!
  • Cell Phones
  • Martial Art Bill – Signed up for a 6 month or 1 year contract
  • Gas – I go for the high end probably about $250 a month
  • Food – Groceries will be about $500 a month
  • The Wife’s Lease
  • Auto Insurance
  • Home Owner’s Insurance
  • Life Insurance
  • Pet Insurance

All in all my monthly nut is about $4,400 per month.  Sometimes it is higher sometimes it is lower due to variable costs and timing of bills but all in all it averages out to about that.

Optimizing The Monthly Nut

I think when one takes that first step towards financial freedom (however, that is defined by the person) the easiest first step is to determine which monthly nut items he or she can optimize.

When I first started this blog and was battling (yup, it was a battle) credit card debt I focused heavily on lowering my monthly nut.  I will be the first to admit I have become very lackadaisical in this area.  Once we close on our home and purchase another one I will make sure I gain some re-focus in this area.  The reason I can’t do it now is because bringing down some of the bills like insurance or servicing debt is directly tied to getting a hard credit pull which I can’t do until my new mortgage is in place.

Lastly, bringing down your monthly nut easily ties into one of my favorite results of paying of debt – added positive monthly cash flow!


Do you know your Monthly Nut?

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Jeff March 7, 2012 - 11:26 am

Love the monthly nut – and looking at yours im thankful for mine. Right now, mine is less than 1500!

Evan March 7, 2012 - 2:44 pm

Wow $1,500! Including living arrangements?! That wouldn’t cover rent for where I live nevertheless a mortgage, property taxes etc

slug March 7, 2012 - 11:54 am

Mine’s about $6500 but that includes allocations to DW’s office rent, travel, play, and Roth accounts. Removing those and non-essentials I could get it down to a run rate around $4000 if I had to.

Evan March 7, 2012 - 2:55 pm

I think we are on the same scale since mine doesn’t include any savings…Ever give any thought to trying to optimize that last 4K?

Kevin March 7, 2012 - 12:05 pm

That is a lot of money! 4,400 a month is $52,800 a year. That doesn’t even count retirement savings. You must have a pretty high income to be able to pay that much every month!

Evan March 7, 2012 - 3:04 pm

It is a lot of money! but When my property taxes for my 1400 sq townhouse is 5700 a year, it starts to add up LOL! and electricity on this damn Island for that same space is over $200 a month.

Although when I try to complain to a friend offline they just remind me of NYC prices were 2K barely gets you a 1 bedroom

Marie March 7, 2012 - 12:35 pm

I like the phrase, and I know about what mine is. I’ll start tracking it more steadily, now. Thanks!

Evan March 7, 2012 - 4:01 pm

You don’t have to track it but it is good that you at least have an idea what your’s is.

Financial Samurai March 7, 2012 - 1:48 pm

E-Dog, where is your line item for pizza?!

Does your monthly nut your own, or you plus the little one?

Hungry now.

Evan March 7, 2012 - 4:12 pm

Hmmm I tried to get that into the Monthly Nut but The Wife wasn’t having it as a fixed cost!

Joe March 7, 2012 - 5:57 pm

Don’t know if I agree with the term monthly nut, but after keeping track of spending for about a year our monthly expenditure is about $4,000.
I think everyone should keep track of their spending for a few months. It’s quite helpful.

Evan March 8, 2012 - 1:20 pm

Joe, Does that include your rental properties? or just you/wife/baby40 – and then that world is separate?

Marianne March 7, 2012 - 9:15 pm

I have a system sort of like this but I include retirement savings, and a monthly amount for clothing, house and car maintenance etc. All in it comes to $3600 a month but this number does not include payments to the principal of our mortgage (because of the type of mortgage we have). We live on the 3600/month and then everything we bring in on top of that goes to a principal payment on our mortgage. I suppose if I took out all variable costs except food and gas our number would be $2600/ month but again this only includes an interest payment on our mortgage and nothing towards the principal.

Evan March 8, 2012 - 1:34 pm

What kind of mortgage do you have? an interest only?

Marianne March 10, 2012 - 10:50 pm

I have a Manulife One account so it’s basically a HELOC. I have a bank account for up to 80% of the value of my house and I can choose to do what I please within that. I could pay it off tomorrow and then take the money back out the next day. I could not pay anything for awhile if I wanted or just make interest payments. The interest is accrued monthly so every month the balance would go up if I didn’t pay anything on it.

The Financial Blogger March 8, 2012 - 12:04 am

Interesting concept but very useful. It’s basically comparing one’s budget with a company’s fixed and variable costs :-).

Fixed costs always kill you regardless if you have a company or a simple budget to manage!

Evan March 8, 2012 - 1:34 pm

Great analogy to fixed costs and companies balance sheets. I never looked at it that way, but it is perfect.

Lisa March 8, 2012 - 7:38 am

I have an idea of what our monthly totals are, and sometimes it scares me. Not really!! I just wish our monthly totals were a wee bit lower!

Evan March 8, 2012 - 1:42 pm

Is there anything you can optimize?

BrokeElizabeth March 8, 2012 - 10:36 am

I think my monthly nut is around £600… it’s hard to tell because I paid for my accommodation in one go at the beginning of the year.

Evan March 8, 2012 - 1:43 pm

Accommodation? Does that mean housing expenses over in the UK?

BrokeElizabeth March 20, 2012 - 1:27 pm

Yup… sorry I didn’t see this until now :).

eemusings March 9, 2012 - 5:15 am

Y’know, I never actually sat down and calculated our basic monthly expenses until late 2010. I knew what we spent on a weekly basis, because that’s how I budget, but that’s not quite the same thing.

Basics run around $2500 a month for us, with nearly half of that being rent.

Evan March 13, 2012 - 8:28 am

Is that in US or NZD?

Emily March 10, 2012 - 6:24 pm

The “monthly nut” corresponds fairly well to my “emergency budget” – if we lost our incomes, what would we still spend money on? For me and my husband together it’s $1700/month, 60% of which is rent.

Evan March 13, 2012 - 8:31 am

Wow…you guys only spend another $700 per month beyond rent on fixed costs like cars, cell phones, etc?

PB March 14, 2012 - 10:18 am

This is an interesting way of looking at things. I’ll have to adjust my budget so this type of thinking. I think the only flex we have in our budget is shopping (slooooowly making wardrobe more professional), groceries (we tend to buy high quality, and eating out (a weakness for us all, I’m guessing).

Leah March 24, 2012 - 2:27 am

It’s interesting that I came across this because just yesterday, out of curiosity, I tried calculating this for myself.

I live on my own, no car, and, not counting retirement savings (a hefty chunk of my salary, automatically deducted), my fixed costs were around $1,100. Depressingly, that pretty much wipes out one of the month’s paycheques. Somehow, the other one always seems to disappear as well…

KB February 15, 2017 - 11:43 am

When calculating quarterly or annual expenses, do you just divide into monthly?

Evan February 15, 2017 - 1:26 pm

Love that this post is still getting comments! Yes, I usually do just because it is easier for me to keep everything equal, however, that is just me.


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