Jake Burhans explains a finance framework with three parts: active income, passive income, and your expense ratio. He targets spending just 30% of income, leaving 70% for savings and investments. On $10,000 monthly income, that means spending $3,000 and keeping $7,000.
So finances is composed of your active income, your passive income, and your profit margin, right? That's gonna be my earned income, all my passive income, and my profit margin being if I make $1,000 a year or $1,000 a month, I want to spend $30 a month, right? So I want my profit margin to be 70% or my expense ratio, right, is only 30%. So I want to keep that low. I think for me personally, I want my expense ratio to be at like 30%. So if I'm making $10,000 a month, I only want to be spending like $3,000, right? It gives you a lot of disposable income. Uh, one, for me personally, I just want like the safety blanket, like the peace of mind, and two, for just the investments. So the finance, um, point of the triangle is active, passive, and this disposable income essentially.
