Budget Check & Cash Flow Update - May 2019

Budget Check & Cash Flow Update - May 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 May came in at $8,097.07 and didn't include any one-time extraneous inflows such as April's tax refund.  The bulk of the income, ~94%, continued to come from my day job; although that should come as no surprise since we're still in the accumulation phase.  The remaining 6% came primarily from dividends in my taxable accounts, my blogging/writing and interest received on cash in my savings account.

Monthly Income Breakdown - May 2019

As usual, total expenses were higher than I'd like at $3,963.69.  Although that did include a hefty restaurant bill due to us trying to survive with a 1 month old as well as a nearly $400 bill for getting our daughters' lip and tongue ties cleared up.  Core expenses came to $3,429.81 for May.

Overall May was a great month for cash flow with a total positive cash flow of $4,133.38.  Our savings rate from all income sources was 51% and from work income alone it was 48%.  

Cash Flow Check In May 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 from taxable accounts and interest, and (2) Non-Work Income - all income from outside of my day job.

Passive income for May totaled $381.54 and covered 11% of core expenses.  Non-Work Income totaled $521.02 and covered 15% of core expenses.  

Through the end of the May passive income has totaled $2,548.06 while non-work income has totaled $6,360.83.  Over the TTM passive income has averaged $573.91 per month with non-work income averaging $932.58 which cover 10% and 17% of core expenses, respectively.

Conclusion

Now that I'm back to work and will have more income rolling in each month I'm looking forward to taking a chunk of our savings to reduce our debt load.  First up will be the loan on my wife's car which has ~$4,800 left so that should be gone in July once my regular paychecks start rolling in.  I'm a bit undecided on the plan moving forward from that because we should have ~$20k in cash in the savings account after paying off my wife's car.  I'm a bit hesitant to take away too much of our liquid cash to pay down debt so we might lean towards just using excess monthly cash flow to reduce debt.  Whichever way we decide to go I won't really complain as long as we're moving forward.

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What are you doing to improve your cash flow situation?  Are you working on reducing expenses or increasing income?