Grab your fork! There’s pie! Well, an interesting pie chart (and explainer) of how one family’s income breaks down. Let’s dig in!
My husband likes to tease me that no one in my family can slice a pie. Instead of slicing all the way across the pie and cutting nice, even pieces, we tend to just eyeball the middle and cut each slice independently to suit the eater’s appetite. Our income is starting to resemble the pies on my family’s dinner table.
I thought it would be interesting to look at, percentage-wise, our family’s income.1 We’ve never had one single income or even two single incomes. Throughout our marriage our income has tended to be one large chunk and then a few smaller chunks. For the first nine years of our marriage, I made the majority of our income with my husband sometimes also earning a full time salary, sometimes making freelance money. We switched roles when I quit my full time job, and our family’s financial focus turned to our freelance business.
Grab your pie server and the good china; this is a proper southern dessert course, after all. Let’s dig in.
The largest slice of our income comes in the form of profit from our freelance graphic design business–62 percent in fact. We are lucky that we can keep overhead low. There is no inventory, few contractors, and no employees (except for us). It is this income that affords us the standard of living that our family enjoys. If this slice of income was an actual piece of pie it would be my mother-in-law’s chocolate chess pie. Ohhhhhh goodness, gracious I love that pie. I especially love how she makes three pies at one time. Like income, there can never be too much pie.
But 62 percent is a bit of an understatement. One of the 17 percent slices is the salary that our business pays my husband. I pulled it out separately because it is listed separately in our taxes. We tend to think of it a bit separately too. So in actuality our business generates 78 percent of our family’s income. This salary is a piece of key lime pie if I have ever seen one. Just like the sweet and sour deliciousness that is key lime pie, this 17 percent is a business expense and income for all us at the same time.
Another 17 percent of our income comes from rent. We do not own a separate rental property but instead rent out our main home on the weekends when we are out of town. It’s a nice little bonus that gives us extra cash when we need it. This income stream also gives us a cushion against leaner months since our main income is variable. I like to think of this slice as a big ol’ piece of chocolate walnut pie from the Horseshoe Restaurant in South Hill, Virginia. If I am renting my house for the weekend, I can probably found in South Hill. At the Horseshoe. Eating pie.
The final sliver of our pie might be compared to my Mama’s sweet potato pie. She got the recipe from my Daddy’s aunt, who got it from an even older woman who used to be a cook for Lunenburg County, Virginia schools. This recipe goes way back, just like our savings of years past, from which we are now earning income. This five percent of our income consists of interest and dividends paid on our investments.[^2] Well, mostly dividends as interest rates are disgustingly, horribly low.
A quick primer on dividends for those of you who only skimmed the chapter in Finance 101: When you own stocks and bonds you own a very small part of a company. When the company makes a profit, sometimes the leadership pays out a portion of that money to its owners (you) in the form of dividends. That’s different from interest, which is what a bank pays you to borrow your money. It’s also different from growth, which is when the price of an individual stock rises. You only make money from growth when you sell the stock.
Whew! OK, enough finance. For those of you still with me, this portion of our income coming from investments has grown over the years. And right now, it all gets invested into those accounts as more saving. So on days when I stress over not saving enough, I remind myself that we saved a full five percent of our income just by doing nothing last year. It feels like a technicality, but all money counts, right?
Having multiple income streams makes me feel more secure financially. If business slows or people stop renting from us, I know I have other sources of income that will give us a little something to keep the lights on (and pie in the fridge) until we can make up the difference. It does require energy and time to keep all the balls in the air, but it’s a nice challenge right now.
How about you? Do you have one single income stream?2 Or do you have more income streams than us? Do you slice pie like a boss too? Anyone else jonesing for some Proper Pie about now?
Photo by: Didriks