Wednesday, April 8, 2015

Income Update - March 2015

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.

March was much better than February, although that was mainly thanks to the fact that I actually had income coming in again.  It's amazing how your budget looks a lot better with an income as opposed to just expenses.  I had been on FMLA to be with my son but in February it was time to head back to work.

Total expenses for March came in at $2,866.88.  We spent way too much on restaurants this past month but it's one of our few "getaways" from the hospital so I'm okay with splurging a bit on that.  Ideally we wouldn't but it's pretty difficult unless we want to eat sandwiches for every meal.  Eventually this will normalize and I expect to get it down during April but it will still be higher than where I'd like.  Pretty much every variable expense came in over budget which really put a dent in the savings for March.  We're still trying to get used to how to budget on my salary alone but this month was a bit of an aberration because the income was lighter than it will normally be since I had very few days at work on the paycheck and didn't receive any expense checks which normally amount to about $1k per month.

Dividends and interest income perked up as it usually does at the end of the quarter.  Dividends came in at $751.84 with interest adding another $1.84.  Total passive income for the month came to $753.68 and covered 26.29% of our expenses for March.  There's still a long way to go to reach 100%+ coverage but I'm working on it slowly but surely.  As a dividend growth investor seeking financial independence, my goal is to eventually have enough dividend income coming in on a monthly basis to cover all of my expenses and allow me to consider early retirement.  So it's great to see that the long-term trend is higher.

My FI Income, monthly income based on the 30 year US Treasury bond yield of 2.54% using my net worth excluding traditional retirement accounts, came in at $587.54.  That's about a $10 decrease from February 2015 mainly thanks to the decline in the yield.  FI income covered 20.49% of March'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 $3,614.75
Expense Check $0.00
TOTAL $3,614.75


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 $196.74
Car Insurance $224.84 $224.84
Groceries $200.00 $311.85
Restaurants $100.00 $682.61
Bars $0.00 $0.00
Debt Payment (Fridge) $0.00 $0.00
Cell Phone $0.00 $0.00
Gym Membership $40.00 $40.00
Miscellaneous $55.00 $218.31
Gifts* -- --
Car Maint./Repair* -- --
Trip* -- --
EXPENSES SUBTOTAL

$3,085.19
Emergency Fund $1,409.07 $529.56
Investing -- --
SAVINGS SUBTOTAL

$529.56
TOTAL $3,614.75
*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.
***Expenses shown are all expenses except for charges that are explicitly medical related, i.e. doctor/hospital bills.

It wasn't a great month for budgeting but we're still adjusting to higher expenses.  And I'll gladly take a month of higher expenses but still be able to add to my savings by a decent amount.  Expenses will probably remain elevated throughout the rest of the year, but once I get back into a routine with work the income side of the equation will start to grow and give an even larger cushion.  I expect stock purchases to be a bit light over the next month or two while I build up the emergency fund but starting around the middle of the year I should be able to get back to investing aggressively in excellent companies.

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

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How did you do on your budget for the month?  Were you successful with your budgeting goals through the first quarter?

23 comments:

  1. Hey JC. Not a bad month. Hope you and the families doing well. No rush bud. Take care of that family first. Once every thing is cool, we know you'll do it up. Take care of yourself.

    ReplyDelete
    Replies
    1. Dividend Hustler,

      I'll take a month where I didn't track expenses and we still were able to throw some money into savings. Especially with how expensive of a month it was.

      Things are still relatively unstable with Luke and we have no idea what's going to happen. They decided that his pulmonary hypertension was better after starting him on the new drug but he's still not where he needs to be so the plan is to increase the dose. Hopefully it works and he continues to make a little bit of progress, but it definitely seems like 1 step forward, 2 steps back for the last few weeks. Although that's SOP for the NICU.

      Thanks for stopping by!

      Delete
  2. I noticed that you stopped selling options.
    Any chance you can post an article about the reasons behind that decision?

    ReplyDelete
    Replies
    1. daat99,

      The only reason I stopped selling options is because of capital restraints. The second half of last year was crazy and we needed to hold on to a bit more cash than usual. I normally try and run my options fairly conservatively, especially the naked puts, so I tried to make sure I had plenty of capital on hand in case I needed it. Once things settle down and we get into a "new normal" with our finances my plan is to start selling options again. Mainly naked puts and probably some buy-writes as well.

      Thanks for stopping by!

      Delete
    2. I hear you on capital constraints. I'm still writing options but doing fewer contracts during a lean period.

      I use an "anti-budget". I deduct a fixed amount from brokerage each month, making sure to reserve a portion for savings (pay myself first). I can spend the deduction any way I want without bothering to track my pennies. No stress and it works for me.

      Delete
    3. FV,

      If only I had enough capital to cover all of my ideas. Then I'd be set! I really want to get back to options selling because it's a great source of added income. And even better is if it's done conservatively enough you'll be "stuck" owning excellent DGI companies.

      My income is so variable from month to month that it makes it difficult to have a set savings and then feel free to spend the rest kind of budget, or anti-budget. My main concern is that my normal expenses get covered every single month and then after that I plow the rest into savings/investments. I'll be glad when I get back in the groove regarding my income/expenses.

      Thanks for stopping by!

      Delete
  3. Wishing you all the best during these tough times. Hope things get better soon!

    ReplyDelete
    Replies
    1. FI,

      It's definitely been a challenging 4-6 months but hopefully things will start trending better for Luke.

      The financial matters will take care of themselves over time. There's just a lot of moving parts right now.

      Thanks for stopping by!

      Delete
  4. Thank you for your explanation.

    ReplyDelete
  5. PIP,

    All things considered, it looks like a pretty good month to me. Best wishes in the second quarter of this year!

    MDP

    ReplyDelete
    Replies
    1. MDP,

      I'll definitely take a "bad" month like this where I still get to add to my savings.

      Thanks for stopping by!

      Delete
  6. JC,

    One of the best things about living below your means and appreciating frugality is that when the income inevitably takes a hit from one of life's unexpected curve balls, you're well prepared. You can take a hit to income because of the large gap between income and expenses, plus you have huge liquid assets to rely on.

    Hope all is well with the family. Great month, all considered.

    Best regards!

    ReplyDelete
    Replies
    1. DM,

      I couldn't agree more. If you're constantly pushing your budget to its limits or even running a deficit you'll be in for a rude awakening when the income eventually changes. All the more reason to be used to living on a lower income than what you earn so you have a built in buffer.

      Things are still very up in the air with Luke but so much of it is out of our hands which is the most frustrating part.

      Thanks for stopping by!

      Delete
  7. Hi JC,

    I think you are doing excellent! As I live a "normal" life with all the costs that follows there aren't much to invest at the end of the month - but this article inspired me to start tracking my expenses to see where I can save some extra for dividend investing.


    ReplyDelete
    Replies
    1. Sigma,

      I'm glad that it's helping to motivate you to spend less than you earn and then invest the difference. It will do wonders for you over the long haul.

      Thanks for stopping by!

      Delete
  8. I really hope for your family to get some better times. That really what matters the most. Don't feel guilty for these restaurant bills, I would have surely done the same! I'm actually surprised you still manage to save more than $500 on such a tough month! You're doing great, keep it up man!

    Cheers!

    Mike

    ReplyDelete
    Replies
    1. DivGuy,

      Me too. We could really use just a stable week for Luke because things have been very up and down over the last month or so. Obviously I'd like the restaurant bills to be lower, but I'm not stressing about them at all because it's the nature of the beast when you spend just about every free minute at the hospital. I'm just glad that I was still able to pull in some savings this month which is fantastic.

      Thanks for stopping by!

      Delete
  9. That's great you covered almost 30% of expenses and that your back to making steady income. March is usually an up month for many dividend investors. Good luck in APril.

    ReplyDelete
    Replies
    1. EL,

      The passive income is creeping up, although slower than I'd like. I'm pretty happy with the 26% coverage considering that expenses were through the roof for the month. Expenses should drift lower over the coming months, but unfortunately I know they'll spike higher around the middle of the year while we adjust to living on just my income.

      Thanks for stopping by!

      Delete
  10. JC,

    Please know we're all thinking about your family and sending positive vibes of support. These finances, income and savings were very admirable over the month and I'm glad to hear you're comfortable with all that taking a back seat to these extreme real life situations and I'm praying for you guys every day. One more day till the weekend and getting to be with the little guy again.

    ReplyDelete
    Replies
    1. Ryan,

      Thanks so much because he needs as much support/thoughts/prayers as he can get.

      I'll take a month where I still spend less than I brought in from my day job anytime. Especially considering expenses were so high. Obviously that's not my main priority right now but there's still more that can be done on that front.

      Thanks for stopping by!

      Delete
  11. PIP

    What a great passive income!! Keep the snowball rolling.

    ReplyDelete