Friday, September 6, 2013

Income Update - August 2013

Well the satellite that we use at work has been messing up all week so I haven't been able to get any posts up this and haven't commented much.  Fear not though, I have a new satellite, actually it's our third one, so I can get back on track.  I'm a big proponent of tracking every single penny that comes into your life if you're really wanting to make a change to your finances.  Mental accounting is too difficult to keep track of and the mundane everyday expenses get forgotten.  Once you keep a detailed history you can see that you're really spending $400 per month on restaurants or $100 on coffee or whatever little expenses that are fine by themselves but add up quickly to destroy a budget.  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.  If you want to improve your finances, then please track everything for a 3 month span and then take action to make positive changes.

My minimum expenses for August came in at $1,489.46 which was my highest for the year so far.  Not exactly a good trend that I have going as July set my previous high for the year.  Luckily it's not expenses just creeping up but is more due to reasons I can't really control.  My average minimum expenses for the first 4 months of the year were $1,370.09 and are at $1,446.57 for the last four months.  Almost all of the difference is made up due to increased car expenses, which are almost completely attributed to rising gas prices coupled with driving more.  At least there's an explanation for the increase, although the only real way for me to decrease gas expenses is to not work, which that doesn't make sense.  August raised my average minimum expenses from $1,396.74 to $1,408.33.  Well, I'm now over my less than $1,400 per month average I set as a goal for the year, but as I mentioned above it's largely out of my hands as I can't set the price for a gallon of gas.  Luckily, my total expenses didn't increase as much and came in at $1,620.28.  This increased my average monthly expenses for 2013 to $1,560.66.  It's pretty good to see that while my expenses have increased over the year, my total expenses are keeping steady with my required expenses as far as the increase goes so it's not that I've been having random purchases creeping into my budget.  Going forward my minimum expenses goal will have to be revised since my wife and I are closing on our house on Monday, which will bring added expenses.

As mentioned in my August dividend update,  I received $174.32 in dividends last month.  Adding in the $5.11 in interest income and my total potential retirement income for August was $179.43.  My expense coverage ratio just from dividends and interest was great at 12.05% of my minimum expenses.  This was higher than May 2013's coverage of 6.55% and August 2012's coverage of 1.34%, so I'm quite pleased.  August was my first non-March, June, September, December month to cross the 10% threshold for my potential retirement income.  My FI income, monthly income based on the 30 year US Treasury bond of 3.70% using my net worth excluding traditional retirement accounts, came in at $539.29 which covered 36.21% of my minimum expenses from August.


*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 $9,450.68
Expense Check $1,897.95
TOTAL $11,348.63


Monthly Expenses
Category Budgeted Amount Actual Amount Subtotal
Rent $480.00 $480.00
Utilities $221.50 $166.84
Gas $175.00 $206.90
Car Insurance $95.00 $95.00
Groceries $200.00 $219.71
Restaurants $125.00 $71.97
Entertainment $0.00 $0.00
Cell Phone $100.00 $97.59
Other $62.28 $62.28
Miscellaneous $55.00 $119.99
Gifts $0.00 $0.00
EXPENSES SUBTOTAL $1,520.28
SAVINGS
Trip $0.00 $0.00
Roth IRA $0.00 $0.00
Emergency Fund $0.00 $0.00
Gifts $75.00 $75.00
House $9,659.85 $9,659.85
Car Maint/Repair $100.00 $100.00
SAVINGS SUBTOTAL $9,828.35
TOTAL $11,348.63

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

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

12 comments:

  1. Fantastic month for income eh PIP?? From your graph that looks to be your highest ever? 85%+ savings rate months are incredible. You're killing it at the moment. Is a more fuel efficient vehicle an option or it is a thirsty work truck? also, I am guessing the more you drive for work the more you get on the expense cheque side?

    We (the wife and I) had an incredible month last month, over $24,000 in combined income and $19,000 in savings. Months like this just put a huge smile on my face. We did get a tax return of $6,000 but that has been used wisely and I expect our expenses to gradually trend down now. We had lots of one off purchases over the last two months and those will not be repeated.

    Good luck with the new house, restraint is difficult when you have 100 little jobs to do and each of them costing dollars and time.

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    Replies
    1. KM,

      It was my highest month ever and it was very much welcomed. I actually drive a Honda Civic so there's not much else I can do without forking over more money to try and get a hybrid or something of that nature which just doesn't make sense right now. And my gas expenses still aren't that bad at around $200 for an expensive month. I think it's highly related to the higher gas prices for the summer months plus we're drilling wells faster in the area that I'm in so I'm driving back and forth between the house and work more often. I'm averaging about 2.5 roundtrips per month right now whereas earlier this year it was about 1-1.5. At around 300 miles one way that's a big difference, but as you mention it does mean more on my expense checks which are tax free. It costs me about $0.10 per mi in fuel but I get reimbursed $0.565 per mi so I'm coming out way ahead.

      That's amazing that y'all brought in $24k in one month. I could only dream of that. With my wife being a teacher I don't expect to see any months like that in our future, but one can hope. Congrats on a great month yourself and having the discipline to save $19k rather than spend it.

      The house is going to be a big change. No more calling the landlord for fixes around the house, that's all on us now.

      Delete
    2. I think you should really reduce your expenses to accommodate for mileage, consider net income after cost from your expense cheque??? Your FI income would stretch further and be more accurate (just my perspective though). With my wife's work travel I discount that off our basic expenses because if she were not working we would not have those expenses. If we were both not working we would definitely only have one vehicle which would mean only half the expenses but just like you she makes a net benefit for the vehicle/per diem which helps us along our journey.

      This month was a annual high as we got our tax returns. Our flat income would have been $17,500 without the tax return and it was a five week month which means five wage payments for me instead of four which happens four times a year. However, the biggest thing for us is investing this extra income to earn it's own income for life. It will be interesting to see how the rest of the year shapes up.

      Delete
    3. KM,

      I agree that the most accurate way would be to back out my work related travel expenses, but to me it's all a wash because I imagine a good portion of them would still be there if I was FI. Plus mine is just fuel and not lodging or plane tickets.

      Thanks for stopping by!

      Delete
  2. Great update. Saving 10k per month is just incredible... I tip my hat to you :)

    ReplyDelete
    Replies
    1. Dividend Dream,

      This month was a bit of an anomaly as I had my highest monthly income ever but I try to turn as much of that income into investable capital as I can.

      Thanks for stopping by!

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  3. Wow...crazy savings rate!

    We're lucky if we can save $500 per month. We're trying to kill the mortgage more aggressively. I guess if you include that, that means we're "saving" close to $1,500 per month.

    Seriously, keep up the phenomenal work.

    Mark

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    Replies
    1. MOA,

      I'm just trying to take advantage of the opportunity while I have it. Being married w/o kids can lead to great things if you actually manage your finances. $500 is still a solid amount and more than most people are saving.

      Thanks for stopping by!

      Delete
  4. Nice work!. I love checking in for the savings rate updates each month. Happy to see you killed it again this month. 85%!! You're putting all of us to shame :)

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    Replies
    1. Integrator,

      You're still way ahead of me on the dividend income so you have nothing to worry about. I'm curious to see how my expenses are going to look now with the new house and all the added expenses. They're going to rise pretty significantly for the first year or so but then will start to drop down, not quite to current levels though.

      Thanks for stopping by!

      Delete
  5. Do you save for Healthcare? If not how will you handle a health emergency in your family?

    ReplyDelete
    Replies
    1. Anon,

      I do save for healthcare but I use my emergency fund to cover my deductible in case it's needed and the coverage is provided through my employer. All expenses here are based off after tax income that hits my checking account and the healthcare premiums are taken out pre-tax so I don't account for them here.

      Thanks for stopping by!

      Delete