Budget Check & Cash Flow Update - July 2019

Budget Check & Cash Flow Update - July 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 July came in at $8,637.58.  The bulk of the income, ~95%, continued to come from my day job, le sigh; although that should come as no surprise since we're still in the accumulation phase.  The remaining 5% came primarily from dividends in my taxable accounts as well as interest received on cash in my savings account.

Monthly Income Breakdown - July 2019

Total expenses were higher than I'd like at *GASP* $5,216.11, although I'm not worried about that at all.  We spent an extra $1,700 on extra debt payments and another $350 on our trip to Corpus Christi earlier this month.  Core expenses came in at $3,022.06 for July which was slightly lower than our normal core expense range.  So overall it was a pretty good month with slightly lower than normal core expenses and an extra $1,700 in debt payments.

For the month we ended up with solid positive cash flow of $3,421.47 and that includes making the extra debt payments.  So I'm pretty happy with how July turned out.

Our savings rate from all income sources came to 40% while our savings rate from work income alone was 36%. 

Cash Flow Check In July 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 July totaled $386.72 and covered 12.8% of core expenses.  Non-Work Income totaled $446.48 and covered 14.8% of core expenses.  

Through the end of the July passive income has totaled $4,065.55 while non-work income has totaled $7,938.08.  Over the TTM passive income has averaged $589.29 per month with non-work income averaging $939.09 which cover 11% and 17% of core expenses, respectively.

Conclusion

Things are getting back on track and we're moving forward with our plan to get rid of the non-mortgage debt.  We still have ~$24.2k of outstanding balance; however, my wife's car loan is finally under $3k.  Debt reduction is likely to be a bit "slower" than we're capable of in August, but should ramp up starting in September when my wife starts receiving paychecks again.  

While I want to get rid of the debt, I also want to continue building up our investment accounts.  I was originally leaning towards full on debt reduction; however, I've since started leaning more towards aggressive debt reduction with at least some savings being funneled to the brokerage account each month.  I think that will be the best route going forward, at least for a little bit, to allow us to keep building up our passive income with ~$1k being sent to the brokerage account each month and the remainder being used for debt reduction.  It might add a few more months to the debt pay down process, but that's something I'm willing to live with for the time being.

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