Monday, August 5, 2013

Income Update - July 2013

Keeping track of your expenses is step one for anyone trying to improve their financial situation.  After you get a better idea of what you're spending money on, then you can look for ways to save money by smarter decisions or completely stopping spending on areas that aren't really adding any value to your life.  This is why I like to keep track of all of my expenses to help keep myself accountable and looking to see what areas I'm just doing poor in.  Of course this isn't for everyone but I do recommend that for at least a few months every year you go through this process to try and look for better uses of your money like paying down debt or investing for your future; whether that's early retirement or a more traditional one.

My minimum expenses for July came in at $1,454.40 which was my highest for the year so far.  Hopefully this isn't a trend in the making since June was my previous high.  This raised my average minimum expenses from $1,387.13 to $1,396.74.  Ouch, I'm getting awfully close to that less than $1,400 per month average I set as a goal for the year, but I'm still coming in under that for now.  Luckily, my total expenses didn't increase as much and came in at $1,597.98.  This increased my average monthly expenses for 2013 to $1,552.14.  I'm going to really buckle down in August to try and get my expenses back under better control.  A lot of the increase has been due to gas prices rising and my job requiring me to drive a lot of miles.  My minimum expenses goal will have to be revised since my wife and I are in the middle of purchasing a house which will bring added expenses.

As mentioned in my July dividend update, I received $96.80 in dividends last month.  Adding in the $2.45 in interest income and my total potential retirement income for July was $99.25.  A far cry from June's $439.84.  My expense coverage ratio just from dividends and interest was still a solid 6.82% for a month with higher than normal expenses and relatively low dividend payouts.  This was higher than April 2013's coverage of 5.24% and July 2012's covereage of 1.64%, so I'm quite pleased.  My FI income, monthly income based on the 30 year US Treasury bond using my net worth excluding traditional retirement accounts, came in at $508.59 which covered 34.97% of my minimum expenses from July.  The increase was due to a very solid net worth increase which I'll post about later and another increase in the 30 year US Treasury yield to 3.64%.

*Minimum Expenses are only the expenses related to rent, utilities, car, food, minimum payment on debt and other necessities. In other words, the required amount of replacement income I would need for financial independence.
*Total Expenses are the total monthly outflow of money.
*Potential Retirement Income is income received from dividends, interest, cash back from credit card purchases and any other source of income not related to my job.
*FI is my liquid net worth invested at the 30 year treasury bond yield at the end of each month divided by 12 to get monthly income.

Monthly Income
Category Amount
Paycheck $5,513.16
Expense Check $1,870.48
TOTAL $7,383.64

Monthly Expenses
Category Budgeted Amount Actual Amount Subtotal
Rent $480.00 $480.00
Utilities $221.50 $193.07
Gas $150.00 $143.44
Car Insurance $95.00 $95.00
Groceries $200.00 $220.42
Restaurants $125.00 $124.86
Entertainment $0.00 $27.50
Cell Phone $100.00 $97.61
Other $10.83 $10.83
Miscellaneous $55.00 $105.25
Gifts $0.00 $0.00
Trip $235.00 $235.00
Roth IRA $0.00 $0.00
Emergency Fund $65.00 $4.35
Gifts $75.00 $75.00
FI savings $5,471.31 $5,471.31
Car Maint/Repair $100.00 $100.00
TOTAL $7,383.64

I've updated my Progress page to reflect July's changes.

How did you do on your budget for the month?  Is there anything you're going to focus more on in August due to July's spending?


  1. We all have months like've got the discipline to right the ship. :)

    Good luck!

    1. My Own Advisor,

      I'm not overly concerned about it but I do want to get the expenses more in line with previous months. I think it's a combination of gas prices rising and in general more temptations for money during the summer months. Plus it doesn't help that I didn't really track my spending as close as I usually do and was relying on mental accounting. I usually input all my expenses in every 2-3 days but the last two months it's been about every 2 weeks. Oops.

      Thanks for stopping by!

  2. Pursuit,

    Another fantastic month!

    I wouldn't beat yourself up too much on the expenses. You're still living extremely frugally, and saving an extremely large amount of your income every month. That ability is going to be the primary driver behind your ability to reach financial independence at a young age. You're doing great.

    Best wishes!

    1. DM,

      In the grand scheme of things it's not like June and July was way overspending. I still saved over 75% both months. I'm trying to take advantage of the high income and low expenses now while I can and put as much money into investments as I can. Kids and a house will definitely increase the expenses. We're leaning towards a 15 year mortgage rather than a 30 year so our payments will be higher. All in all our mortgage, insurance, taxes and utilities will come in somewhere around $2,200 which is much higher than the ~$1600 we have right now combined. Although that is overestimating our insurance and taxes, or at least I hope it's overestimating them.

      Thanks for stopping by!

  3. When you're saving up for your home, what type of account do you put the cash into? I keep mulling the question over in my head and I keep thinking when I do the same, I'd just pull out the cash from my 401k or IRA contributions, but that seems counter productive, but I don't want tens of thousands of dollars just sitting in a savings account somewhere!

    1. KTG,

      I'm not really sure what I would do when saving up for a home. This is a horrible environment for savers that need to protect principal. I would probably just go with one of the higher yielding online banks although high yield is debatable when you're only getting 1%. Another option would be short-term bonds if you can actually purchase the bonds individually, I'd probably stick with Treasuries or the bluest of the blue chips since the principal is essentially guaranteed. I'd stay away from bond funds though because there's too many other factors that can lead to a loss of principal when you don't own the individual bonds.

      Our situation just kind of worked out nicely and it allowed us to move forward with the purchase. I hadn't sold any of my ESPP shares of HAL so I was able to kill two birds with one stone and diversify away from my employer and lock in nice gains to build up the down-payment. If I didn't have the ESPP shares I probably would have sold off some other shares and we wouldn't be purchasing the house until late this year or sometime next year. We didn't really go about this the traditional way of saving up for the down-payment but my wife really started getting the "what's next?" feeling of being an adult. So the house purchase came quicker than expected. Although if the cash wasn't there we would not be moving forward with the purchase.

      Thanks for stopping by!

  4. Hey PIP,

    Are all of your expenses like rent split 50/50 and here you only illustrate half of them? I keep going over your numbers each month thinking WTF, how is this guy nailing it so well. BTW, been following you and DM for quite a while now....good reading in both cases.


    1. KM,

      Yeah my wife and I split the home expenses 50/50, mainly because I'm gone so much from work plus I'm a more natural saver. We split the rent and utilities/cable bills so the total cost is double but that's the actual amount that I spend each month. Every calculation here is due to my income/expenses and assets/liabilities so it's at least pure in the fact that it's only accounting for changes due to my income. Although if I were home the food costs would go down more because we could have better synergies and cooking for 2 is much more economical than cooking for one.

      With my current job requiring me to be out of town I think my expenses actually wouldn't change much were I single. I'd probably just not rent an apartment or anything, throw some cash at my buddies when I'm in town for letting me crash and save the difference. Although I wouldn't change anything at all.

      DM was a big inspiration for me. As I mentioned earlier I'm a natural saver so the budgeting side is pretty easy. But DM really turned me on to the idea of investing in dividend growth stocks and I couldn't be more pleased with the outcome. Who doesn't like getting paid and getting annual increases and you never once had to step into their office? That's what I call having your money work for you.

      Thanks for stopping by!

    2. One more thing, it also doesn't hurt that I live in a fairly low cost of living state of Texas. I'm sure you could easily double my expenses if I lived in a higher cost area.

    3. That makes a lot more sense, I just couldn't get rent at $480/month. Low cost of living would help me but here in Australia high incomes go hand in hand with high costs. It is much more about trying to find the perfect balance. We scored lucky and are renting at $350 a week but the rest of our bills are coming in pretty close to yours. We also have pretty high taxes. My average weekly tax bill is $1200 but we are saving hard and looking at tax minimisation strategies to help on this front. My income is similar to yours but my wife doesn't have anywhere near the income generating capacity that I have. We are a team though and are saving for FI together, we also moved to an regional area to increase my income capacity, we were much more balanced before for age/experience. Aside from a car payment (which I am rapidly trying to get rid off) and expenses run at about $3000/month for both of us. We are about even stevens for now.....may I suggest a race to the FI finish line???

    4. KM,

      It always helps to get the full picture if you're looking at anyone else's finances. Every situation is going to be completely different so without the full picture the comparison just doesn't hold it's ground. I don't know how some people can live in high cost of living areas if they aren't making a high income. The average rent in New York City just topped $3,000 per month. That's absolutely crazy. You'd have to gross about $45k each year just to pay for rent, and I'm guessing we'd all like to eat, have some fun, and at least have utilities for that crazy rent.

      It's going to be interesting to see how our taxes work out this year. There's going to be some big changes with the house purchase and then all of the ESPP shares that I've sold. I've got it figured out so far with the ESPP shares, but I need to look more into how the house is going to change things.

      I have no problem racing you to the FI finish line! Sounds great. And whoever comes in 2nd is still going to be winning.

      Thanks for stopping by!