Graphs I like: Income vs. Outgoings

One thing that the Gentleman loves and always has is a good graph!  
If a picture says a thousand words, then a graph says a thousand data points!  A good graph can summarise a lot of thought and allow you to understand something that is truly complex with just a few lines.

One of the things that I do for fun is play with my Expenses spreadsheet and look at how the many numbers for the many months on multiple tabs all interact with one another.  I’m a numbers guy and I like it.  If you can’t measure it, you can’t manage it (as someone once said). 

Image result for wilkins micawber

And Financial Independence is above all a numbers game – just listen to wise-old Wilkins Micawber (find out more here):

Annual income twenty pounds, annual expenditure nineteen, nineteen and six, result happiness.  Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

Wilkins Micawber from David Copperfield by Charles Dickens

None of that should come as a surprise – to sum it up neatly you could say you should Live Below Your Means – LBYM.  So the two sides of the equation are Income and Expenditure.  For those who are seeking FI, the equations looks a little like this:

Income less Expenditure = Savings;

Savings —> Investments

Investments —> Dividends

Income = Salary + Dividends

and when: Income > Expenditure = FI

The goal should be to continuously earn more than you spend, save the difference and build up dividends – but try sticking to that when you are living the in real world.  You might need to save money in ISAs and then sell them to buy a house to live in.  You might start ploughing money into P2P investments but when bad debts mount you switch into Bitcoin or you (like me) build up your SIPP meaning your retirement looks rosy but you are left starved of funds in the here and now.  Things like income tax, pensions, company share schemes, life-changes, job changes, stock options & bonuses at work (if you’re lucky), tax reliefs, CGT and a range of other factors to consider.  It all gets a bit complex and as H. L. Menken said:

For every complex problem there is an answer that is clear, simple, and wrong

What’s important is to LBYM – the rest will take care of itself.  But to monitor your performance, one measure that I find useful is the Income/Outgoings Chart.  The red line is a straight line between income and outgoings.  Stay on the left/upper side and you are in clover.  Stray to the right or lower side and you’ll end up taking out payday loans to pay for your PCP Audi A3!

My income/outgoings chart (last 5 years + until 2022)

Above is a what I’ve been up to for the last 5 years in terms of spending (blue) and future predicted spending (green).  The line matches each month to the next and provides a Micawber’s Path to prosperity/penury.   What you can see is that our outgoings have been consistent around £3,300 to £5,000 per month.  That’s far from frugal and it’s a bit embarrassing to be honest.  However, I can look at that spending and see that as our family income rose, our outgoings didn’t – so not much sign of lifestyle inflation – which is good.

In fact on the topic of lifestyle inflation; since we settled down (bought our house, did it up, had the Little Gentleman and and Little Lady and paid for the childcare) we have spent a whole lot less on travel, eating & drinking out, having fun and enjoying ourselves!  Who would have thought that kids can save you money? Our lowest spending coincided with our first child being a few months old.  No childcare costs, no travel and although we had a dip in income (due to the Lady’s maternity pay dropping to the statutory rate) we were at our healthiest in terms of spending / income = savings rate.

So, where is this story going GFF?  Well, our plan to FIRE involves planning to have no formal income in the future and as you can see from the green future line it means that we slip below the red line with spending at an estimated £2,200 per month (£26,400/annum).  But this for income from salaries alone.  Let’s see how things look like with dividends added in.  (Please note, this is for dividends/interest on FIRE assets only and not Pension/SIPP dividends or “imputed rent” from our house.

My income/outgoings chart with dividends (last 5 years + until 2022)

What’s immediately obvious is that with dividends, our family income is higher and at no point have we been under the red line – which is good.  So, we’ve always been living within my means.  The chart does not include any capital gains from investments.  What is clear is that in a FIRE scenario, as things look like now, our FIRE Income should be sufficient to almost have our income = outgoings (keeping Micawber happy).  Our FIRE budget of £2,200 a month is generous I think.  

It’s worth mentioning that £2,200 per month is a lot less than we spend at the moment.  So, the mystery of how we can go from spending around £3,400 per month to £1,200 less is a story for another day.  That £1,200 is the cost of work – and it includes everything from the cost of a £6 tie I bought for a meeting that I never wore to the nanny.

For other members of the FI community, how does your Income/Outgoings chart look? Are you able to show how you’ve become more frugal over time or to earn more?  I see the need for a nanny a trade-off for having a better paid job – but maybe you can show something different.  I’d love to see what you’ve got.

Thanks, GFF


  1. I would love to share my chart but sadly I don’t track my numbers in that detail. What I do though is to automate so when pay rises come along I just up my savings so I know our lifestyle isn’t inflating.

    More usefully perhaps I am fully on board with the idea of having staff (which a Gentleman like yourself will appreciate!). We had a nanny when the kids were younger but now babysitters are all we need. However we also have a cleaner, gardener, and window cleaner. When we need jobs done around the house we get a handy(wo)man. I think that if you can trade money for time that is a transaction that suits all parties.

    I don’t see it as the trade off for a better paid job (although that helps to pay for it). I’m sure that both my wife and I work less hours now than we did in our 20s but we are paid more as have more responsibility. Instead it’s about valuing our leisure hours more and being happy to pay to have more of them.


    1. funny you mention staff (or the help as some people call them). When looking for houses where we live, I was dead-set against having a garden. Not only would it have added maybe £40k on to the value/cost of our house, it would have required a lot of work – especially on the few sunny/warm days of the Scottish summer! I see it as a double saving.
      I value our free time too much to get my fingers too green. 🙂


  2. “Our FIRE budget of £2,200 a month is generous I think.” Oh bless you!

    We are retired and can comfortably jog along on £2,000 in a normal month. Alas, that’s on an idiosyncratic definition of “normal”. Life has proved to be full of abnormal months. The car dies. Unpredicted dentistry. BOMAD extends a loan to bridge a liquidity gap in the budget of the younger generation brought about by the need for unexpected and expensive emergency house repairs. Some of my favourite old clothes have worn so thin that they’ve ripped. An entirely unanticipated Xmas appears above the financial horizon (Why don’t They advertise the date of Xmas every year?)

    The biggest expenditures are the result, I think, of underspending on the house and garden when we were just too busy to look after either properly. These things catch up with you in the end. It’s true that BOMAD always gets paid back in the end but the repaid money will probably find something else demanding its services.

    It’s the sheer ruddy uncertainty that causes problems. This chap is good on the subject.


    1. £2,200 is based on a budget of what we’ve spent in the past and assuming a few things about the future. I think that we’ll come under that but my wife would much rather not live in poverty – so it’s a theoretical compromise. Thanks fro the the link by the way – always good to use someone else’s experience


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