Each month I’d like to share our expense report to keep us on track to reach our financial goals. This summer we spent quite a bit more than I had planned and I’d like to focus back in on savings toward early retirement/financial independence (FI).
I’ve posted before about paying off our mortgage in the process of reaching our FI goal. I’ve gone back and forth with how that may specifically happen, so, for now, our choice has been to save up the additional funds to pay off the mortgage and decide in a few years when we reach that goal how we want to handle it. In the meantime, I am paying a little extra monthly to the mortgage because I like even numbers.
While we work off of a general zero-based budget, it’s more of a guide and we just simply track our expenses and save about 48% of our income. My goal is to get up to saving around 60% of our income.
We’ve lived with turbulent careers the past decade, so our goal is always to live off of one salary, in case we end up without steady income at some point. This coming year is a huge year for savings, and come next summer I will breathe a sigh of (some) relief.
NOT A BUDGET… BUT A GUIDE
While we have a simple zero-based budget, we don’t operate with every category of our lives budgeted and tracked. That would take way too much time, and I’d rather spend that time on other passions, like writing to you, or playing with my kids at the park.
With our simple budget, I list our income, our expenses, and the rest of what is left over goes into various savings or investments. We basically save every dollar we don’t spend. Simple, right?
The less we spend on things we don’t need to impress people we don’t care about, the more we have for our future independence.
With our plan, I am able to forecast each month how much we’ll be putting away ahead of time. I use a software based money management system, Money Dance. I know it’s very 1990’s, but I like not having to pay a subscription fee for a basic checkbook tracking software. There is a host of resources available to track all sorts of online happenings, but I find a simple register or spreadsheet works fine.
I automatically have the software run the numbers 2-3 weeks in advance so I know exactly when we get paid where every dollar will go. That is zero-based budgeting. Every dollar has a home.
WHAT ABOUT SUMMERS?
In the summer, we don’t get paid, so I run the numbers for the entire two months of summer in advance of those months. This way I know if we’re heading into danger zones when spending or if we have extra to play with toward the end of the summer.
Our savings rate has increased over the years, even as our incomes have decreased. We have cut back on all expenses to live a more frugal lifestyle without cable, cell phone plans, nor fancy cars tied to loans.
For food, we budget far below most, at $75-$125 per week for 4 people, which also covers clothing and small items we pick-up along with food shopping like toiletries. This allows us over time to increase our savings rate without inflating our lifestyle when those few and far between small raises eventually come along.
Currently, we are saving 8% of our paychecks for summer expenses. After that, we save 35% of our income for emergencies and 13% goes into retirement aside from our pension contributions which are 7.2% of our pre-tax income.
EXCLUDE SIDE INCOME
Since I only run the numbers on our full-time positions, our savings rate is higher as we bring in additional income from side jobs. We both work part-time at local colleges/universities and we pick up odd jobs wherever we can. Chris has been great at getting side gigs, while I’ve spent more time with the Monkey and Crab in the past few years.
With our side income, we generally make a rule that we get to keep some of that for fun money and hobbies. This way, we have extra funds from our creative work we can use for expensive toys without hindering our main financial goals. Oftentimes, I use that additional income to pad my retirement while Chris might choose to buy a new gadget to enhance his podcast.
I am the saver, Chris is the spender. We switch roles from time to time (I love kitchen gadgets! and he loves to be our contractor) but overall, we balance each other nicely when it comes to our joint financial goals.
September was a pricey month for us, but we’re starting to get back on track. Here’s how it broke down for the month:
|Mortgage/Taxes/Ins||$1,800.00||Next month, this will increase to $2,000. Our mortgage company requires escrow for things like taxes and insurance. I like to round-up to the nearest hundred or thousand when paying. It’s just fun with round numbers, and we pay a little extra off in the process.|
|Electric||$234.22||Our electric bill skyrocketed this month! We are on a much higher budget plan as of August, going forth at $85, as this switched places with the gas bill. We’ve been using tons of power tools and we definitely used our a/c more often this summer. We have plans for the coming year to lower this.|
|Natural Gas||$0.00||We didn’t have a gas bill, and won’t for two months or more, as we overpaid on our budget plan this past year and it will be reduced going forward. Our bill will be dropped from $85 to $65, which is great! I look forward to keeping it low, as this is a smaller gas bill than we had in the townhouse ($65) which was a few hundred feet smaller than our current home.|
|Internet||$64.90||I’m not thrilled about this increasing $10 in the past month, so we’re researching other options, but they appear to be rather limited.|
|Water Bill||$41.17||About our average water bill with two kids, cloth diapers, and loads of laundry.|
|Cash Allowances||$400||We both take out $100 per paycheck (x 2 paychecks = $200 x 2 people = $400) to use as allowance for gas to get to work or take-out dinners. Usually, I tend to have more leftover than Chris, as he will use his for gas and snacks, and I, with a shorter commute use up about $40 a month for gas and the balance goes to our occasional take-out or dinners out.|
|Auto Insurance||$0.00||We only pay insurance 9 months out of the calendar year and then have a few months to save for the next year. Our plan doesn’t save us any money paying up front, so that is why I don’t pay it in advance. This month, we had no bill, and will not until November again.|
|Children||$72.40||We started our Christmas shopping early and bought the Crab his own water bottle.|
|Food||$556.85||I went above and beyond this month purchasing pea protein in bulk, as well as charcoal powder and fresh green loose leaf tea. Averages out to $139 per week.|
|Donations||$24.00||I purchased an item from Monkey’s school fundraiser.|
|Gifts||$30.96||Gifts for my nieces and nephews for the holiday season. Once I’m done crocheting, their gifts will be complete!|
|Water Filtration||$299.04||We decided to buy a water filtration system for under the sink. So, you’re welcome when you come to visit and drink our fresh spring-like water.|
|Ear Plugs & Train Tickets||$58.34||I purchased a set of ear plugs to turn down the volume when I’m home with the boys for $5.34. We spent $53.00 on train tickets to NYC for our 9th wedding anniversary.|
|Total Spent||$3,581.88||This was a pretty high-cost month for us overall. I’m hoping to decrease this next month!|
What bills you won’t see on this expense report:
We got rid of costly cell phone plans about 8 1/2 years ago, right after my Dad had passed away. It was touch and go for awhile, but we have saved an estimated $10,000 by doing this. Our cell phones cost us roughly $100 per year to keep, as we use Tracfone and buy minutes or time once per year.
Similarly, we don’t have a house phone. Both of us use a Google Voice number for our cell phones which we send to our devices (mine: iPod 6th gen, Chris: iPad mini 1st gen) and we communicate using voice over IP on our computers.
We cut our cable plan over 7 years ago, saving over $8,000 by now and we use the internet to stream online content. Our favorites these days are I Like to Make Stuff, The One Pot Chef, and Nerdy Nummies.
This month we also purchased wedding anniversary gifts, of which we used our own fun money for and won’t appear above. Chris got a new hybrid bicycle which he’s been using to ride to the grocery store and I got a new Camelbak water hydration pack for long runs!
I believe that covers it. Future expense reports won’t be as detailed, but this should give you a good idea of how we spend our money and what choices we’ve made to save.
Take a good look at your finances. You might find you’re wasting money (which equals your time at work) on items you’ll quickly forget in a short period thereafter. My clothes buying ban has proven it’s worth this past year, with one month left to go to complete it, I will most likely keep going!