Global Cash Flow
Q: We rarely receive reliable information regarding an individual guarantor's living expense. Is there a best practice that you see for estimating living expenses?
A: There is no best practice that we've discovered in extensive searches. Living expenses vary greatly by individual. But one thing to keep in mind is that today's personal savings rate is around 13.5%, which is the highest it's been in several years. That means that 13.5% of disposable income – on average – is available for discretionary spending or investment. Or, to look at this differently, 86.5% of disposable income goes for living expenses, insurance, personal debt service, local, state, and federal taxes, and so on.
But, again, an estimate of living expenses is very tricky since they can vary so much by individual and his or her personal needs and preferences.
Course overview: Global Cash Flow