Budget Check & Cash Flow Update - April 2018

Budget Check & Cash Flow Update - April 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.


April has turned into a really busy month for me and unfortunately that means that writing has taken a hit.  Luckily things should start easing up a bit with work soon and I will hopefully get to start writing on a more regular basis.  

We've been fairly lax in regards to our budgeting, but the time is right to really get things moving forward.  One of our big goals for 2018 is to focus on our monthly spending.  When it comes to personal finance it's rather simple income - expenses = savings and savings x investing = financial independence.  There's obviously two main levers there and while we'd all like to increase our income, many times reducing expenses is some of the low hanging fruit that you can go after to increase your savings.

Budget Check

April saw a nice uptick on the income side of the equation with a total of $8,289.67 for the month.  Even better is that doesn't include the fairly hefty refund check we received from our taxes.  Our expenses were down for the month by around 11% to $3,088.59, although that was primarily due to the one-off travel expenses incurred in March.

With an increase in income and decrease in expenses that means that the savings rate bumped higher for April.  Based on total income (pre & post tax work income, taxable dividends, interest) we had a solid 63% savings rate during April.  Based on work income alone the savings rate was still a solid 61%.

Budget Check April 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 $316.63 during April which was about a $37 increase from January.  *Dividends are from my taxable accounts only.  

Based on April's spending the passive income for April covered 10% of expenses.

Thus far in 2018 I've totaled $1,914.73 from income outside a traditional day job.

Conclusion

Things are really starting to take hold and our plans are working out, for once...or for now.  Now that taxes are out of the way it's time to build up the savings account to have some cash set aside for emergencies and our planned family vacation in July.  Once we get to about $10k of cash plus the cash for the vacation it'll be time to switch to aggressive debt reduction.

If everything goes absolutely perfect there's an outside chance that we can be rid of the non-mortgage debt near the end of Q3, although if we can be rid of it by the end of 2018 I'll be just has happy.  There's 2 main debts, my wife's car and our air conditioner for the house and getting rid of those 2 debts will free up around $850 of monthly cash flow.  So needless to say I'm pretty stoked that we'll be getting that reduced soon.

There's still plenty of room for improvement to reduce expenses which will make the math look even better.  Food expenses continue to be higher than I'd like, but that is improving as I've started cooking a lot more while at work.  The other low hanging fruit is our insurance which I hope to take care of the next time I'm home.

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How is your monthly cash flow situation?  What are you doing to increase your savings?  Focusing more on increasing income or reducing your expenses?