Budget Check & Cash Flow Update - September 2019
|Budget Check & Cash Flow Update - September 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.
Total income for September came in at $7,747.89. The bulk of the income, ~83%, came from my day job, le sigh; although that should come as no surprise since we're still in the accumulation phase. Approximately 14% came from dividends, 0.5% from interest on cash in my savings accounts, 1% from cash back from my credit card and the remaining 2% from my side hustle.
|Monthly Income Breakdown - September 2019|
Core expenses came in at $3,019.55 which thankfully came in below our average of the last few months. The reconciliation between core and total expenses amounted to $925 of extra payments on the remaining car loan and $54.11 of expenses that I don't consider core because in a worst case scenario we could cut it out.
For the month we ended up with positive cash flow of $3,749.23 based off all income and all expenses. So I'm pretty stoked about those kind of results considering we spent nearly $4k for the month. Even if we just look at work income, but still look at all expenses, we had positive cash flow of $2,412.54.
Our savings rate from all income sources came to 48% while our savings rate from work income alone was 38%.
|Cash Flow Check In September 2019|
Net Work Cash Flow
While my net cash flow from above includes all income and all expenses, I wanted to get a more granular look at the cash flow that is available each month. So I started calculating my Net Work Cash Flow which is calculated at post-tax income only from my work and core expenses.
The above might be the true cash flow each month; however, it's not really representative of our "free cash flow" each month. The idea is that all other income sources outside of work income are already going directly into savings or investing or in the case of dividends remaining in the brokerage account. On the expense side the majority of our expenses fall into the core side and most of the other expenses are extra debt payments rather than further discretionary spending.
Moving forward, I believe this gives a better idea of our cash flow each month that can/will be used for debt reduction, saving and investing.
Overall we've done quite well on our Net Work Cash Flow with our 6-month moving average at $3,356.59. September's NWCF came in right around that level at $3,391.65.
Non-Work Cash Flow
Passive income for September totaled $1,157.37 and covered 38.3% of core expenses. Non-Work Income totaled $1,336.69 and covered 19.4% of core expenses.
Through the end of the September passive income has totaled $5,608.24 while non-work income has totaled $9,949.63. Over the TTM passive income has averaged $608.25 per month with non-work income averaging $993.13 which cover 16% and 25% of core expenses, respectively.
In terms of cash flow for the month you won't hear me complaining, at least not too much, about how September turned out. What I'm most excited about though is that one car loan is officially gone. Although we still have just under $20k remaining on the other note.
I want to be aggressive with debt reduction; however, my main focus is going to be building up cash and our investment accounts. The rough plan moving forward is to use ~$1k per month toward debt reduction with the remaining cash flow going to the savings and investment accounts. I believe that will strike a good balance between freeing up cash flow as well as improving our passive income.
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What are you doing to improve your cash flow situation? Are you working on reducing expenses or increasing income?