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?