Wednesday, June 11, 2014

Income Update - May 2014

I'm a big proponent of tracking every single penny that comes into your hands 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 plain 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.

Surprisingly May saw my lowest expenses of the year so far.  Considering how much driving and eating out that I did I didn't expect that at all.  Although I did have about 5 days that didn't get tracked in my expenses because I was on vacation in Vegas.  Any expenses that are incurred during trips gets taken from my savings for trips and not accounted for in my regular monthly expenses.  It's all really a wash in the end but it works best for me to keep track of it this way.  Total expenses for the month came in at $2,529.12 which was $87 less than April's total and $129 less than my average monthly expenses for the year so far.  While I'd love to see this trend continue I don't expect to be able to make much more improvement but I'll do my best to get them lower.  My average monthly expenses this year is $2,632.50 which is well above my goal of $2,350 for the year.  I'm thinking I'll either stop reporting on that goal or change my goal higher to give me a more realistic goal to shoot for over the second half of the year.  Fuel and food expenses continue to be the largest expenses that I have outside of those related to our house and I expect fuel to probably remain elevated as the price of gas should start it's summer climb.

The really good news is that dividends were higher and expenses were much lower than recent months so my passive income coverage increased over 14% compared to February 2014.  I received $244.51 in dividends in May plus $3.03 in interest giving a total passive income of $247.54 which covered 9.79% of my expenses.  That's a solid increase from the 8.55% coverage in February.  As a dividend growth investor seeking financial independence I'm primarily concerned with the expense coverage that my dividends can provide and it's great to see them continuing to rise.  My FI Income, monthly income based on the 30 year US Treasury bond yield of 3.31% using my net worth excluding traditional retirement accounts, came in at $693.11.  This was a decline of around $30 from April but that was mainly thanks to a decline in the 30 year treasury yield from 3.46% down to 3.31%.  My FI Income for the month covered 28.21% of May's expenses.


*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 Income 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 $7,725.82
Expense Check $1,035.46
TOTAL $8,761.28


Monthly Expenses
Category Budgeted Amount Actual Amount Subtotal
Mortgage $911.84 $911.84
House Insurance $127.92 $127.92
Property Taxes $371.08 $371.08
Gas $175.00 $202.53
Car Insurance $163.25 $163.25
Groceries $200.00 $202.24
Restaurants $100.00 $127.54
Bars $0.00 $0.00
Debt Payment (Fridge) $300.00 $300.00
Cell Phone $10.81 $10.81
Gym Membership $40.00 $40.00
Miscellaneous $55.00 $71.91
Gifts* -- --
Car Maint./Repair* -- --
Trip* $0.00 $0.00
EXPENSES SUBTOTAL

$2,529.12
Emergency Fund -- --
Investing $6,306.38 $6,232.16
SAVINGS SUBTOTAL

$6,232.16
TOTAL $8,761.28
*Savings that is earmarked to be spent.  
**Expenses shown above are only expenses that I paid for.  My wife and I have split our expenses up due to my job having me out of town most of each month.  The current split is around 65/35.

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

Be sure to not miss out on any posts from Passive-Income-Pursuit and sign up to receive them by email.  If I can ever find the time each month them I'm also planning on getting a newsletter started.  There's just too much to write and not enough time.

How did you do on your budget for the month?  Is there anything you're going to focus more on in May?

14 comments:

  1. $6k for investing, wow, I wish!

    Great work!

    I just posted my dividend income update for May:
    http://www.myownadvisor.ca/may-2014-dividend-income-update/

    I budget by forecasting expenses each week. I can't be bothered calculating I spent an extra $1.57 this week on cheese for a sandwich.

    How on earth do you only pay $11 for a cell phone? Pay as you go?

    Mark

    ReplyDelete
    Replies
    1. Mark,

      I don't blame you about keeping tabs that closely. I don't either. I couldn't tell you what I spent my money on as far as groceries each month. Well I can tell you approximately what I spent it on but I just take the whole bill and throw it into my groceries category. Sometimes I'll buy non-grocery items and forget to break it out but I'm not too worried about that. I mainly just want to make sure I'm not way overspending compared to where I'd like to be for the different categories.

      I keep meaning to put a note in these posts. These are only expenses that I cover. I work out of town, A LOT, so it's much easier for my wife and I to keep separate finances. So we've split up the expenses that each of us covers. I cover a lot of the stuff for the house (mortgage, insurance, taxes...) and she covers the other shared expenses like the cell phone. The $11 is insurance for my phone because it gets beat up pretty badly since I work outside and am constantly having to move it and set it down. Although I've been pretty good with my cell phone so I might cancel that and save that $11 per month.

      Thanks for stopping by!

      Delete
  2. Congrats on a great month. And over $6000 invested is wonderful.

    ReplyDelete
    Replies
    1. DGJourney,

      Unfortunately Mr. Market hasn't given me an opportunity to get that all invested yet but it's set up to be invested whenever we get some better opportunities. The combination of a relatively high income and low expenses will do wonders for building up your investment portfolio.

      Thanks for stopping by!

      Delete
  3. Wow great amount saved. Keep up the good work! 6k a month is a very large total. With that amount saved you should reward yourselves with an extra 100-200 a month in entertainment. You deserve it!

    Good Day and Grind On!

    ReplyDelete
    Replies
    1. A-G,

      $6k is great but it fluctuates a lot. My income is quite variable as you'll see when I post about June's budget. As far as entertainment goes I don't want to budget for extra because I know I'll just spend it fairly mindlessly. I much prefer to just take it as the opportunities come because I have plenty of room in my budget to absorb expensive months for entertainment. It's not ideal for most people that faithfully budget but it works for me since there's some months where I don't spend a lot and others where I do.

      Thanks for stopping by!

      Delete
  4. Pursuit,

    Mighty impressive. $6k is the type of investment capital I can only dream of. Keep up the great work, my friend. I know you work hard for it, so enjoy it.

    Best wishes!

    ReplyDelete
    Replies
    1. DM,

      I hope to really be enjoying it here in a few more years! It really is great and I know I'm in a very great situation with a high income and relatively low expenses. So I just want to take advantage of it while I can.

      Thanks for stopping by!

      Delete
  5. Hi PIP,
    Great job on the income! I would suggest not moving your monthly goal upwards to make it easier to meet, it's still your goal even if it may take longer to get there. You'd reach it if you didn't have the fridge payment I think - will those payments be finished soon?
    All the best on your journey!

    ReplyDelete
    Replies
    1. Dividend Life,

      It's not so much to make it easier to meet it's more to make it a realistic goal that can be met. The fridge will be gone soon, actually it should be gone in August or September. I can't believe it's almost been a year. The only reason I haven't paid it off yet is that we got it at 0% interest for a year so I figured I can do much better than 0% in the market instead of paying it off quickly. Although I might go on and pay it off now that I realize how close we are. Plus there's not a whole lot of value in the markets so just getting it paid and done might be worth it. I've obviously got enough monthly cash flow to do it.

      Thanks for stopping by!

      Delete
  6. That is awesome PIP. $6000 invested is a great accomplishment. My average has been between 3-4000 and once I pay off some of my business loans i'll be closer to $5000 a month. Again congrats.

    ReplyDelete
    Replies
    1. StockFox,

      I just wish I could find some good opportunities to invest that $6k. No worries though as I'm slowly getting some capital to work and hopefully better values are coming in the future.

      Congrats on $3-4k average. That's a great chunk of change to save every month and the fact that you're investing it is even better. Keep up the good work!

      Thanks for stopping by!

      Delete
  7. Great income...and more importantly, even better savings rate! And once your frig is paid off, your savings rate will grow by another $300 a month. Way to go. Keep up the progress!

    Wishing you continued success in your journey to Financial Independence! AFFJ

    ReplyDelete
    Replies
    1. AFFJ,

      Savings are the real fuel for any investment strategy. Unfortunately we'll have some furniture to pay off as well so the $300 will be sticking around.

      Thanks for stopping by!

      Delete