Wednesday, August 6, 2014

Income Update - July 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.

July ended up being a much better month for my budget than I expected.  Expenses came in at their lowest amount so far this year which is great I had been averaging almost $300 more than my goal.  Total expenses for the month came in at $2,511.09 which was a nice move down after they jumped back up during June.  I'm glad that expenses came back under control this month although I don't expect to be able to cut too much more from them as long as the debt payment (refrigerator/furniture) is still there.  Grocery and restaurant spending both came in above budget but the good news is that they were at fairly manageable levels.  I was only a combined $30 over budget on those two which are typically the two areas I'm in the red on each month.  I still need to work on getting these lower for financial and health reasons.  Convenience foods are expensive for both the budget and the body.  My average monthly expenses declined from $2,638.12 to $2,619.97.  A nice $20 improvement.

Well, July is a slower dividend payment month so my passive income coverage dropped back down from June's level.  I received $208.80 in dividends and another $4.98 in interest giving a monthly expense coverage of 8.79%.  That's a slight increase from April 2014's 8.53% coverage thanks mainly to lower expenses and a slightly higher dividend income.  If you count all non-day job income then my potential retirement income was actually $569.20 thanks to $355.42 in online income.  That gives a 23.40% expense coverage.  As a dividend growth investor seeking financial independence, I'm primarily concerned with the dividend/interest expense coverage so there's still a lot of work to do on that front.

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 $701.96.  That was about a $16 decrease from the end of June which is completely due to a falling net worth as you'll see when that post comes in the next few days.  My FI Income for July covered 28.86% of my expenses which is a slight increase though thanks to lower 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 $6,834.82
Expense Check $1,390.58
TOTAL $8,225.40


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 $178.19
Car Insurance $163.25 $163.25
Groceries $200.00 $221.10
Restaurants $100.00 $108.31
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 $78.59
Gifts* -- --
Car Maint./Repair* -- --
Trip* $0.00 $0.00
EXPENSES SUBTOTAL

$2,511.09
Emergency Fund -- --
Investing $5,770.50 $5,714.31
SAVINGS SUBTOTAL

$5,714.31
TOTAL $8,225.40
*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.

Overall I'm pretty happy with the way the month turned out and now I just need to build on the progress from July and keep it rolling through the rest of the year.

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

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

12 comments:

  1. That is some good income coming in. looking over expense look pretty good. How many times a week u go to the gym? I cut the gym out of y expenses but I buy drop in packs which save me quite a bit of money since i only go like once a week.

    ReplyDelete
    Replies
    1. A-G,

      The income sure is nice but it unfortunately comes with the caveat that I work away from home a lot. But I can deal with it for a few years if it means that I can drastically speed up the FI process.

      Right now I'm not going because the closest one is about 45 min from where I'm working. Normally I'm about 15 min away and I end up going 3-4 times per week. 2 at a minimum. So it works out pretty good to have the membership as opposed to the drop in fee.

      Thanks for stopping by!

      Delete
  2. JC,

    Another awesome month. A savings rate of 70% is just fantastic. That income is mighty impressive!!

    Just another great month for you, and that's really what it's all about: consistency.

    Best wishes!

    ReplyDelete
    Replies
    1. DM,

      The 70% savings rate was great and you won't hear me complain about my income. Hopefully in another month or two I can go and take a test and get a raise that should get me another $1-2k before taxes each month.

      Consistency is definitely the name of the game.

      Thanks for stopping by!

      Delete
  3. Looking good. 70% saving rate is pretty damn impressive!

    ReplyDelete
    Replies
    1. Tawcan,

      I just hope to keep this up for another 1-2 years and then I'll probably be considering a career change. I should be able to get pretty close to $10k in dividends by then which would be a great base.

      Thanks for stopping by!

      Delete
  4. You are really on your way to financial freedom with your high income, high savings rate and fast deployment of your money into income producing assets.

    I have seen very few people with high incomes like you, who are also aware that a small leak can sink a boat. That daily Starbucks coffee can really add up to thousands of dollars per years.

    Good luck in your income investing journey!

    Best Regards,

    Dividend Growth Investor

    ReplyDelete
    Replies
    1. DGI,

      I see my high income as a tool. I can use that tool to either buy all sorts of fancy things that I don't really want or I can use it to eventually buy my freedom. I think the choice is pretty easy.

      It doesn't take much to throw a budget out of whack. I have no problem with people buying Starbucks daily, as an owner I encourage it!!!, but the spending needs to be done consciously. Mental accounting has brought down plenty of household budgets.

      Thanks for stopping by!

      Delete
  5. PIP,

    Super solid month on all fronts. You are in rarefied air with that 70% savings rate and your grocery bill is amazing. Do you grow your own vegetables?

    MDP

    ReplyDelete
    Replies
    1. MDP,

      The 70% savings rate is nice because it really helps to juice the investment capital. Eventually I want to grow my own vegetables but for now we just don't have the space to commit to it. I'm trying to figure out what to do next year to hopefully give us a better chance at getting some decent yields from the plants. Keep in mind that the grocery bill is essentially for one person for 75% of each month. To me it seems high but I think that's because I know we did a lot better before when I was home all the time. Combined we probably average about $300 per month.

      Thanks for stopping by!

      Delete
  6. Wow. You put me to shame. I have about the same income, but not nearly a 70% savings rate. My dividend portfolio is much smaller, but I do have a rental property that is netting a nice monthly income.

    Thanks for the inspiration. My wife and I need to start working on paring down our expenses and putting more toward retirement.

    ReplyDelete
    Replies
    1. Greg,

      One thing to remember is that our life circumstances are most likely different. We currently don't have any children and they are expensive as I'm sure you know.

      I'm sure you're liking that rental property. The cash flow is usually much better with rentals thanks to the leverage. I keep wanting to go that route but it's quite difficult trying to coordinate all of this without being present for a lot of things. Especially since it'd be our first rental property.

      I think we all need to work on cutting our expenses a bit. There's still probably $100-200 of excess in my spending that I would love to convert into further investment capital.

      Thanks for stopping by!

      Delete