Budget Check & Cash Flow Update - January 2019

Budget Check & Cash Flow Update - January 2019

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 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.


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 2019 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

Total income for January got off to a really strong start in January with total income coming in at $9,715.49.  The bulk of that, roughly 82%, came from my day job with the balance made up of interest, dividends, pre-tax blogging and other.  In most months other is $0; however, for January there was a big cash back payout from one of my credit cards.

Monthly Income Breakdown - January 2019

Unfortunately I couldn't take full advantage of that income with expenses being well above normal.  Total expenses for January came in at $10,367.01.  What?!?!?$?!#?  Before you crucify me give me a chance to explain.  

In December or January each year we end up having to pay our property taxes and unfortunately in Texas property taxes are quite high to make up for the lack of a state income tax.  Property taxes alone accounted for 63% of our spending in January.  Since we don't amortize that cost that means that the other months report lower than "average" expenses and then whatever month we pay our property taxes reports much higher than "average" expenses.

Even backing out the property taxes still puts our expenses for the month at $3,814.31.  Now you can crucify me!  That's much higher than "normal" and we're adjusting to the addition of the new car payment as well as the higher gas and insurance costs that come with it.  Although we will be shopping around for new home owners and auto insurance later this year.

That puts the net cash flow for January at a negative $651.52 and the savings rate at -7%.  

Cash Flow Check In January 2019

*A few notes about the cash flow check in.  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.  I break our non-work cash flow into 2 categories: (1) Passive Income - dividends and interest (2) Non-Work Income - all income from outside of my day job.

Passive income for January totaled $371.97 for January and covered 3.6% of core expenses.  Non-Work Income totaled $592.27 and covered 5.7% of core expenses.

Conclusion

Last year saw a bunch of changes and other needs for our cash that didn't allow us to make as much progress as I would have liked throughout the year.  However, with a new year under way that brings new opportunities to make improvements.  Reducing our expenses is going to be our main focus for the year which will be accomplished by (1) paying off my wife's car loan and (2) by looking for ways to save whether that's cutting back on some things or searching for new and cheaper alternatives.

Despite the negative cash flow for September I'm still quite please with how January turned out.  A negative $600 cash flow isn't that bad considering we had to pay over $6,500 to the tax man.

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Has your monthly cash flow situation improved throughout the year, backtracked or held steady?