Budget Check & Cash Flow Update - February 2020
|Budget Check & Cash Flow Update - February 2020|
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.
When it comes to personal finance it's rather simple: income - expenses = savings and savings x investing x time = 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 February came in at $7,637.26 which is below, but in the ballpark of, the TTM average. The bulk of my income, ~92.4%, came from my day job, le sigh; although that should come as no surprise since we're still in the accumulation phase. Approximately 4.7% came from dividends, 0.5% from interest on cash in my savings accounts and 2.4% from my side hustle.
|Monthly Income Breakdown - February 2020|
Looking at just core expenses, February's total came to $3,194.80. While that's higher than I'd like it's still trending in the right direction coming in ~$400 lower than the TTM average.
For the month we ended up with a net positive cash flow of $3,200.96 when looking at all income sources. Based on just work income, but including all expenses, the net positive cash flow came to $2,624.10.
Our savings rate from all income sources came to 42% while our savings rate from work income alone was 37%.
|Cash Flow Check In February 2020|
*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 February 2020|
Non-Work Cash Flow
Passive income for February totaled $390.76 and covered 12% of core expenses. Non-Work Income totaled $576.86 and covered 18% of core expenses.
February was a solid, steady as she goes month. I'd have preferred to see some of the metrics come in better than they did, but I can't really complain.
With the on-going concerns surrounding COVID-19 and the possibility of a deep recession I feel it's prudent to prioritize cash savings over additional investment capital for the time being. We've got a good buffer already; however, when you add the fact that I work in the O&G industry and the very real possibility of a pending layoff extra cash won't hurt.
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What are you doing to improve your cash flow situation? Are you working on reducing expenses or increasing income? Any concerns regarding your work situation due to the corona virus slow down and possibly prolonged recession?