A break-even point will let you rest easy

A month off each year to learn something. I’m factoring this into my life’s equation from now on.

It’s daunting, but doable. To figure out how I can afford it, I need to know my financial break-even point.

Why? Because it’s a very basic, but fundamental figure that we should carry around in our heads. Knowing it – knowing what it costs to live – gives us freedom.


Here goes: there are potentially 21.75 days when we earn every month. That’s if we take two days off a week and no holidays. (365-104) divided by 12 months. (104 is the number of weekend days over a year).

This means that 261 days a year are earning days. I don’t know about you, but this number seems both small and huge – so few days to make money to cover commitments for the year, but also way too many. I want time off every now and then.

To do this, I must work out how much money I need to bring in a day to cover the outgoings of my current life. If I make less than that amount, then I must work on generating additional revenue or cut back on spending.

When I do this I include all my spending, such as savings for education and retirement.

This is especially important for me, as I plan not to be working for money throughout the year. Plus I only earn when I work – there’s no benevolent multinational corporation that will keep the funds rolling in while I sleep – so I must be on top of what I can and cannot afford to do.

And I want to do so much – not only spending a month a year learning, but a few weeks travelling too.

To help make this happen I must know my financial break-even figure for a month, a day and an hour. This is important stuff.

If you don’t know how much it costs to live, how can you challenge yourself and hold yourself accountable? How do you know if your ambitions are reasonable?

Here’s some basic maths to get you started figuring this out for yourself. You should do it even if you get a monthly salary and have a rolling contract.

Let’s pluck a figure out of the air:

Say my life costs me Dh50,000 a month all-in: school, rent, insurance, food, car, savings, you name it.

I would need to earn Dh2,304 a day for 21.75 days every month – or for 261 days a year – to break even. This translates to Dh329 an hour if I set aside seven hours of every day as earning hours. I find this sort of exercise to be very sobering and empowering. It gives a sense of worth – not just in terms of what to aim for as an hourly rate, but also whether things, purchases are worth however many hours of your earning life they equal.

(Dh50,000 x 12 months = Dh600,000 in outgoings. Divide this by 261 earning days and you get Dh2,304.)

But this means I have to work every week of the year if this is all I earn on average. So to be able to take time off, or to have extra money to invest for example, this figure must rise.

To be realistic, the number of working days should come down. Say we decide on taking three weeks off a year and we’re unable to earn for a week, maybe because of illness – a total of four non-earning weeks a year. If we’re to stay with the balanced life approach of having a two-day weekend, then the potential working days comes down to 241. If outgoings stay the same as above, then the daily break-even goes up to Dh2,496.

This is an especially vital exercise for the self-employed. It means we can have worry-free time off because not earning for a certain time is built into our target.

We each have different dreams and aims. Why don’t you spend some time going over your life sums and figuring out whether you can afford how you live or how much time you can afford to take off without earning a penny?

Information is scary. Information is power. I know how much more I need to earn or how much less I need to spend, to get to my balance of learning, living and leisure. A month of kung fu in China, anyone?

Nima Abu Wardeh is the founder of the personal finance website cashy.me. You can reach her at nima@cashy.me

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