For a long time, money was simple. I’d just save a portion of my paycheck and spend the rest. This was before I paid for my own health insurance, had a pension plan, or invested my money.
Now that I’m older, my finances have gotten a lot more complicated, which left me wondering, do I actually know where my money goes each month?
In order to make sense of how my money flows in and out of my life, I created a money map.
Here it is:
In this post, I’ll share exactly what a money map is, the benefits of having one, and how to create one.
Let’s get into it!
What is a Money Map?
A money map is a visual representation of how money flows in and out of your life. It documents your income sources, expenses, savings and investments.
Creating a money map gives you a complete picture of your financial situation, making it easier to set financial goals and allocate your resources strategically.
How to Create a Money Map (Step-By-Step Guide)
Now, for the fun part – how to create your own money map!
To create a money map, you can use a budgeting app, spreadsheet, or even pen and paper. I chose to create mine using Canva, a super simple and FREE online graphic design tool.
Regardless of the method you choose, the key is to regularly update and review your money map to ensure it accurately reflects your current financial situation.
Okay, let’s get into the steps.
1. Start With Your Income
First, you’ll want to illustrate your sources of income. For many of us, this is just our salary, but that may not be the case for you.
Let’s say you have several jobs, a side hustle, or you own a space that you rent out. You’ll want to account for all of these income sources in this first step.
The beauty of a money map is that you can make it as detailed as you’d like. You can choose to simply write out the source of income, or you can calculate what percentage it accounts for in your income or list it by the dollar amount.
For instance, let’s say you make $1,500 renting out an apartment building and $6,000 a month from your 9 to 5 job. You can either write these out as the dollar amount or the percentage of your total income (which should amount to 100%).
In this example, the rent you earn would account for 20% of your total income, and your salary would be 80% of your total income. I arrived at this percentage by using the following equation: (1500 * 100) / 7500 = 20. If you’re not super math-y, you can also click here for an online percentage calculator that’ll do the work for you!
2. Factor in Automatic Deductions
Next, you’ll want to factor in any automatic deductions that come out of your paycheck before it hits your checking account. These automatic deductions can include things like taxes, health insurance, 401(k) or pension plan contributions, and Health Savings Account (HSA). Again, you can simply list these deductions, write out the dollar amount, or calculate the percentage they represent of your total salary.
The most useful part of this step for me was figuring out which tax bracket I was in (I had no idea!). Turns out 22% of my income goes to taxes. Click here for an online tax bracket calculator (if you scroll down, there are also charts that tell you what your tax bracket is based on income).
Below is the breakdown for all of my automatic deductions. In the end, 68.18% of my income lands in my checking account.
3. Add in Spending
The next step is to break down your spending, i.e., where your money goes after it’s deposited into your checking account.
In my case, my money either goes into savings or living expenses. With my income, I’m able to save $1,000 per month, and the remainder of my paycheck is allocated to my living expenses. The $1,000 represents 22.8% of my post-tax income, which means that I allocate 45.38% of my post-tax income to living expenses. You may be thinking, “Wait a second. These two percentages don’t add up to 100%.” You’d be right! Instead, it reflects the percentage of money that ends up in your checking account after automatic deductions (which was 68.18% in my case).
4. Breakdown Savings (& Living Expenses if You’d Like)
From there, you’ll want to break down your savings accounts further. You can also choose to break down your living expenses to showcase exactly how much you spend on things like food, transportation, clothing, and non-essentials. This breakdown can serve as a type of budget. In my case, I chose to keep my money map simple, so I only broke down my savings.
I have two savings accounts – a Roth IRA and a brokerage account.
A Roth IRA is a type of individual retirement account that has tax benefits, and a brokerage account is simply a personal investment account (click here to learn how to start investing if you’re scared of losing money!).
Before I start investing in my brokerage account, I max out my annual Roth IRA contribution, which was $6,500 in 2023 and will be $7,000 in 2024. This $7,000 equates to 13.3% of my post-tax income.
Since I save $1,000 a month (or $12,000 a year), this means that I have $5,000 a year to put into my brokerage account (after I max out my Roth IRA), which is 9.5% of my post-tax income.
If you have additional savings or investment goals, such as a house down payment or saving for your future children’s college education make sure to include these too!
5. Illustrate Your Emergency Fund
The reason I invest is because I have an emergency fund saved up. It’s crucial to have that safety net before investing. After all, the only real way to lose money investing is to pull out your money when stock prices are down. The goal is to invest your money and forget about it. You don’t want to need that money to pay for an emergency.
If you also have an emergency fund saved up, you’ll want to illustrate it in your money map. Since you’re not actively adding money to it, you want it to be separate from your money map flow chart. I placed mine off to the side and added a cute coin graphic to make it stand out.
I like to keep $10,000 in my emergency fund at all times, which is around 5 months’ worth of basic living expenses. Since I’m all about making my money work for me, I keep this chunk of cash in a high-yield savings account, specificallyMarcus by Goldman Sachs online savings account.
Currently, this account earns a 4.50% annual percentage yield (APY), meaning that I earn $37.50 each month (or $450 per year) just for keeping my money there! This rate is guaranteed, and I literally do NOTHING. If you’re interested in opening a high-yield savings account through Marcus by Goldman Sachs, feel free to use myreferral codeto earn an extra 1.00% APY for the first 3 months. So instead of earning 4.50%, you will earn 5.50%!
After I’ve accumulated a decent amount of interest, I’ll transfer this cash into my brokerage account.
If you have an emergency fund that you’re currently funneling money into, be sure to illustrate it in the step above (coming out of your savings).
Why Money Mapping is Useful
And that’s all she wrote! If you were following along, you’ve now created a money map!
Besides the fact that creating a money map meant that you were able to get creative and design or draw something fun to look at, there are plenty of other reasons why money mapping is useful.
By breaking down your income, expenses, savings, and investments, a money map allows you to see the bigger picture of your financial situation. This can reveal gaps or areas that might need attention.
For instance, let’s say you start filling in numbers and realize that you don’t actually know where part of your income is going each month. Recognizing this is the first step to coming up with a solution.
In my case, I discovered that my savings were going into one account – a Chase Savings account that was earning 0.01% interest. As I looked at other people’s money maps for inspiration, I realized that there was SO MUCH more that I could be doing with this money. I could be putting it to work!
Money mapping was what kickstarted my investing journey and the reason why I opened up a high-yield savings account for my emergency fund. I hope that creating a money map can help you get a handle on your finances too!
