Budget Check & Cash Flow Update - December 2019

Budget | Cash Flow | Personal Finance
Budget Check & Cash Flow Update - December 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 December came in at $6,491.09 which was well offer my average throughout the year although I wouldn't have wanted it any other way.  The main reason income was down was that I was off for a good portion of the month.  The bulk of my income, ~77.5%, came from my day job, le sigh; although that should come as no surprise since we're still in the accumulation phase.  Approximately 17.5% came from dividends, 0.6% from interest on cash in my savings accounts and 3.4% from my side hustle and the remaining 1.0% was cash back from my credit card spending.
Budget | Income | Passive Income
Monthly Income Breakdown - December 2019
Total expenses for December came in at $11,106.22.  WTF!  Before you get upset let me explain.  December brought about our property tax payment and instead of amortizing that throughout the year in our expenses I just make the bulk payment so expenses were way higher than normal with that $6,400 property tax bill.

We also paid an extra $850 on our remaining car loan which brought the balance down to $17.5k.  There was also an additional $740 spent on Christmas gifts and other various expenses that could be cut out if need be.

All told core expenses came in at $9,517.61 for December.  

We ended up with a net negative cash flow of $4,615.13 based on all income sources.  Looking at just work income, but including all expenses, the net drag grew to $6,071.64.

Our savings rate from all income sources came to -71% while our savings rate from work income alone was -121%.  Yikes!  However, that will be remedied in January.
Budget | Cash Flow | Savings
Cash Flow Check In December 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.
Income | Expenses | Cash Flow | Savings | Financial Independence | Personal Finance
Net Work Cash Flow December 2019

Overall we've done quite well on our Net Work Cash Flow although December was obviously a poor month due the property tax payment.  December's net work cash flow came in at -$4,483.03 and our 6-month moving average is $3,520.86.

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 December totaled $1,169.93 and covered 12.3% of core expenses.  Non-Work Income totaled $1,456.51 and covered 15.3% of core expenses.  

Through the end of December passive income has totaled $7,603.89 while non-work income has totaled $13,904.64.  Over the TTM passive income has averaged $633.66 per month with non-work income averaging $1,158.72 which cover 17% and 31% of core expenses, respectively.


December obviously wasn't a great month although that was largely due to the higher than "normal" expenses due to the property tax payment.  Excluding that our core expenses crept back higher to $3,120 but were still in the ball park of where they've been on a regular basis.

I believe there's still plenty of fat to cut from my spending mainly in the food and insurance areas.  

Our focus is likely to shift again in 2020, but it will be for the better.  It might mean less investable cash, but the improvements to just about everything else will far outweigh that setback.  For the time being stockpiling cash will move to the top of our priority list, but we'll still likely invest a little bit here and there each month.

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