Budget Check & Cash Flow Update - November 2019
|Budget Check & Cash Flow Update - November 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 November came in at $10,842.90 which is by far the highest level I've hit this year. Unfortunately, the bulk of the income, ~93.5%, came from my day job, le sigh; although that should come as no surprise since we're still in the accumulation phase. Approximately 3.2% came from dividends, 0.4% from interest on cash in my savings accounts and 3.0% from my side hustle.
|Monthly Income Breakdown - November 2019|
Core expenses came in at $2,701.73 which was our lowest mark of the year. The reconciliation between core and total expenses amounted to $850 of extra payments on the remaining car loan and $146.03 of expenses that if need be we could completely forego.
The combination of our best income for the year plus our lowest expenses for the year led to excellent positive cash flow. We had $7,145.14 net positive cash flow based on all income and all expenses. Looking at just work income, but including all expenses, we still managed positive cash flow of $6,434.15. Needless to say I'm pretty stoked!
Our savings rate from all income sources came to 66% while our savings rate from work income alone was 64%.
|Cash Flow Check In November 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 (4% post tax withholding) are not included in the above savings amount.
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.
|Net Work Cash Flow November 2019|
Non-Work Cash Flow
Passive income for November totaled $390.38 and covered 14.4% of core expenses. Non-Work Income totaled $710.99 and covered 26.3% of core expenses.
Through the end of the November passive income has totaled $6,433.96 while non-work income has totaled $12,448.13. Over the TTM passive income has averaged $624.70 per month with non-work income averaging $1,125.88 which cover 16% and 30% of core expenses, respectively.
November was a banner month for me with my best income and lowest expenses. That's always a great combination and led to some pretty good cash flow and savings rates. There's still room for improvement on the expense side and I reckon I can cut out another few hundred dollars just by shopping around for things like our car and home owners insurance.
Our focus is likely to shift some moving forward due to circumstances outside of our control. But such is life. We're still planning on making extra debt payments and hopefully we can still funnel some cash to the brokerage account each month, but the priority now is going to be stockpiling some cash. I'll hopefully get the chance to go into more detail about that over the coming weeks. Long story short though life happens and we just need to adapt.
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What are you doing to improve your cash flow situation? Are you working on reducing expenses or increasing income?