Budget Check & Cash Flow Update - February 2018

Budget Check & Cash Flow Update - February 2018

The saying goes that cash is king.  While that's true, a more accurate saying when it comes to finances is that cash FLOW is king.  Whether you're retired, still working or just starting out the only way you can improve your financial house is to have positive cash flow.  

If you're in the in the accumulation phase then that positive cash flow allows you to save and invest to build up your future cash flow.  If you're already retired, or FIREd, then congratulations because I'm sure your cash flow is well above what you need.


One of our big goals for 2018 is to focus on our monthly spending.  The last few years have been a big transition for us, so we'd been quite lax, errr....lazy, in regards to our spending once we got back to a 2 income household.  Reducing expenses is an immediate boost to our cash flow which in turn will allow us to pay down our debt and eventually get back to investing on a regular basis to build up our passive cash flow via dividend growth investing.

Budget Check

Well so far so good with the inaugural Budget Check.  Total income for the month amounted to $10,588.69 with total expenses coming in at $3,582.11.  That leaves just over $7,000 of net savings and puts the savings rate at 66%.  Not bad if I do say so myself.  Especially since there was an unexpected $800 bill to fix the fuel pump on my car.

Income was overstated a bit for February as I was owed extra income that was earned throughout 2017 and was finally paid out.  That was ~$2,100 of pre-tax income which would have come out to ~$1,260 post tax income that was overstated for February compared to where it is likely to be going forward.  

Budget Check February 2018

A few notes about the budget check.  All income is only income that I receive and does not include my wife's income likewise for the expenses.  We've found it's easiest for us to just keep separate accounts since I'm gone most of the time for work.  Also, pre-tax withholding for the 401k (I currently withhold 6% in order to get the full 5% employer match) and the ESPP through my employer (8% post tax withholding) are not included in the above savings amount.  

Non-Work Cash Flow

Each month I like to examine the state of our non-work cash flow.  Since our goal is to become financially independent the monthly cash flow has to come from somewhere in order to cover our expenses.  

Truly passive income, dividends and interest, totaled $284.79 during February which was about a $21 increase from November 2017.  *Dividends are from my taxable accounts only.  

Based on February's spending the passive income for February covered 8.0% of expenses.

Thus far in 2018 I've totaled $563.80 from income outside of a traditional day job.

Conclusion

There's still a lot of work to be done the rest of this year especially with regards to reducing our debt.  However, February was a positive sign of what could potentially happen over the coming months.  I know there's around $24k of debt that needs to be paid off and my hope is that by the middle of the year it's pretty much entirely wiped out.

While February was a good start with a huge amount of positive cash flow, we're not quite ready to take that cash and throw it at the debt.  I want to build up a small cash buffer first and of course we need to take care of taxes, we should get a refund but it's better to have the cash on hand and not need it than need it and not have it, so until April this cash will just sit on the sidelines. 

Some low hanging fruit for reducing expenses is our homeowners and car insurance.  Those two combine for over $500 per month and with just a little preliminary price checking it looks like we can save anywhere from 10-40% while having even more coverage than we currently do.  

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How is your monthly cash flow situation?  Do you have any expenses that you could easily cut down such as your car or homeowners insurance?