Expense/Income Tracking

January’s safe withdrawal rate was 80.47%. This was a big improvement from 104.5% in January. The way I am determining my SWR is by tracking my trailing 12 months expenses divided by the amount of my investments. Since I don’t think the preceding 12 months accurately reflect my expenses going forward I am using my monthly expenses starting in November 2012 to set the average. The much lower expenses in January made a big difference in my average monthly expense total. Once the average monthly expense total is smoothed out I should see a slow decline in the SWR every month.

I did manage to save some money in January. I saved $1500 of the $2694.87 I made for a savings rate of 55.67%. That is pretty good, but I expect to do even better this month. Since I want to save 50% of my income this year and my full time job ends in April I need to be saving an even larger percentage of my current income to meet my goal.

The common rule is that you need to get your safe withdrawal rate down to 4% in order to be able to safely retire. My goal is to eventually get my SWR down to 4%, at which point I will consider myself financially independent. The 4% SWR translates into having 25x your annual expenses in savings. That would be 300 months of expenses in savings. I have 14.91 months of living expenses saved now. I should be able to add another month’s of living expenses to my savings this month. Seeing my SWR go down every month and my months of living expenses saved go up every month should keep me motivated.

Here is a breakdown of my income for January.

My income was up quite a bit in January.  That isn’t too surprising since I started a new full-time job that pays more than I’ve ever made before. Plus, I still worked my part-time job.  The job income should be quite a bit more this month since I will have two complete pay period checks this month.  In January the first check from my full-time job was for just three days.

My other sources of income were pretty poor.  I have cut way back on mystery shopping since it isn’t really worth my time now that I’m working at my jobs so much.  I’d like the online income to be higher, but it will probably remain low for the next few months.  When my full-time job is finished I’ll work on increasing my online income again.

My $2694 income was quite a bit higher than my $822 in expenses so I can’t complain.  February should be even better.

Here is a breakdown of my expenses for January.

I’m pleased with the total of my January expenses. One of my goals for the year is to keep my expenses below the level of a minimum wage income, which would be about $1274 a month.  I managed to do that and even managed to keep my expenses well under my stretch goal of $1000.

My food expense were still higher than I would prefer. This is because I had fast food almost every single day. Fast food made up over $100 of the food total.  My goal for February is to keep my fast food spending under $25 for the month. That should result in an overall lower food bill.  If I have to spend a little extra to get healthy food that I actually want to eat though, I will do that.

Transportation was where I enjoyed my biggest savings.  I went from over $800 last month to under $100 this month. I only had to fill up my car a couple of times and I didn’t have to spend any money on maintenance, insurance, or taxes so it was a very cheap month.  Gas prices are going up and I have to make a trip to SW Missouri and back this month so I won’t be able to keep my transportation expenses as low in February. They still shouldn’t be much over $100 though.

Entertainment was also very cheap. I used a free movie gift card for a couple of trips to the movies and other than that I mostly enjoyed free entertainment.

All the other categories were about the same as the month before and will probably be about the same this month. It is a short month so maybe I can get my expenses under $800 this month.

My December 2012 safe withdrawal rate was 104.5%. That is obviously not a safe withdrawal rate at all and is quite a bit worse than my SWR in November of 86.22%. There were two reasons for SWR being much worse for December.

The first reason is that my expenses in December were too high at $1580.99 for the month. In order to reduce my SWR I need to reduce my living expenses. The way I am determining my SWR is by tracking my trailing 12 months expenses divided by the amount of my investments. Since I don’t think the preceding 12 months accurately reflect my expenses going forward I am just using November and December’s expenses to determine my average monthly expenses for now. With only two months making the average, one bad month throws off the average quite a bit. January should be a low expense month and skew the average downward.

The other reason my SWR is worse is because I saved very little money in December. I managed to put $65 into my IRA. In order to reduce my SWR I need to increase the amount I put in my investments. Starting this month I have a goal of saving 50% of my income. It looks like I will achieve that goal this month and that will help lower my SWR.

The common rule is that you need to get your safe withdrawal rate down to 4% in order to be able to safely retire. I am setting that as my goal. I have a long way to go, but starting this month I expect to see significant progress in reducing my safe withdrawal rate.

Here is a breakdown of my income for December.

My income was down quite a bit in December.  This wasn’t surprising since I no longer had income from my attorney job and my new job didn’t start until this month.  My income was at least slightly larger than my expenses.  My income should increase this month since I have started my new, better-paying job.  I’m not sure how the paydays will fall for the new job, but I think I will only get one check and that it will be for less than a full pay period.  February will be the first month that I will have two paychecks from new job reflected in monthly income statement.  That will allow me to start the year with a growing income trend at least.

I was hoping to start working another new job at a CPA firm this month.  Unfortunately, since the job I just started and the other job I was going to start are both in the tax preparation field I will not be allowed to take the CPA firm job.  I will still be working 65 1/4 hours a week between the two jobs I do have.  Perhaps, the third job would have been too much.

My sources of passive and alternative income didn’t add up to much, but every little bit helps.  I  managed to get a total of $97.57 in cash back this month.  Most of that was from buying my new car with my credit card.  I did get a little bit from Mr. Rebates as well.  I’ll be getting more from Mr. Rebates next month since my referrals did more shopping than usual in December.  I’m hoping to max my cash back this year.  If you sign up for Mr. Rebates it can help max your cash back also.