Budget Check & Cash Flow Update - August 2019

Budget Check & Cash Flow Update - August 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 August came in at $7,456.21.  The bulk of the income, ~90%, came from my day job, le sigh; although that should come as no surprise since we're still in the accumulation phase.  Approximately 5% came from dividends, 1% from interest on cash in my savings accounts and the remaining 4% from my side hustle.

Monthly Income Breakdown - August 2019

Total expenses for August were incredibly high at $6,077.59; however, I'm actually pretty dang excited about that.  As most of you know our main goal for 2019 is get rid of our non-mortgage debt, i.e. car loans, and in August we made extra payments of $2,075.  Sometime during September we will officially have one car loan paid off completely!  We also spent just under $400 for a mini-trip we're taking in mid-September for my cousin's wedding.

Core expenses came in at $3,480.06 although that too was overstated compared to "normal" since we spent nearly $700 on vet visits for our dog.  The prognosis isn't good, but he's still happy as ever and I'm sure even more so since we've started giving him "people" food.  

For the month we ended up with positive cash flow of $1,378.62 based off all income and all expenses.  So I'm pretty stoked about those kind of results considering we spent over $6k for the month.  Even if we just look at work income, but still look at all expenses, we had positive cash flow of $703.76.

Our savings rate from all income sources came to 18% while our savings rate from work income alone was 10%. 

Cash Flow Check In August 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 August totaled $385.32 and covered 11.1% of core expenses.  Non-Work Income totaled $674.86 and covered 19.4% of core expenses.  

Through the end of the August passive income has totaled $4,450.87 while non-work income has totaled $8,612.94.  Over the TTM passive income has averaged $599.18 per month with non-work income averaging $969.11 which cover 11% and 18% of core expenses, respectively.




Conclusion

We've nearly paid off one of the car loans and now that we're really starting to make some progress I can start to see the light at the end of the tunnel.  There's still just under $21k of outstanding balance on the other car loan so we've got our work cut out for us but we're making progress.

While I want to be 100% free of non-mortgage debt there's also the issue of wanting to build up our investments after a pretty long hiatus from consistent investing.  As long as cash flow remains strong, which I expect it to, then the rough plan is to transfer enough money for a small purchase to the brokerage account each month, so ~$1k, while also paying at least $1k extra on the remaining balance for my car loan.  

This plan might not be the most efficient with getting rid of our debt, but it's a tradeoff I'm willing to make.  If all goes to plan the car loan will be gone in ~14 months, but we'd also have an extra $14,000 either invested or sitting in cash waiting to be invested.  That also doesn't account for the fact that there should still be extra cash flow each month to be used for whichever one we want to prioritize at the time.

I also plan to look into changing our auto/home owners insurance to save at least $100 or so per month.  Every little bit helps, right?  And with mortgage rates moving lower I'm intrigued at the possibility of re-financing our mortgage to free up some more monthly cash flow.  

Make sure you sign up to receive new posts to your email so you don't miss anything.  And be sure to follow me on Twitter @JC_PIP to get up to the minute news of purchases for my portfolio or if you prefer Pinterest or Facebook I'm on there too.

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