May was not a very good month on my progress towards financial independence. I was hoping that I could still decrease my safe withdrawal rate slightly every month even without my tax job income, but my SWR actually got worse, it went up to 55.15% from 49.50% the month before. The high expenses for May sent my average monthly expenses quite a bit higher and thus made my SWR worse. The small amount of savings I managed for the month wasn’t nearly enough to offset the increase in my average monthly expenses. I’m determining my SWR by tracking my trailing 12 months of 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 so having a high expense month makes a big change in the average right now. Unfortunately, June will also increase my average monthly expenses. Starting in July I should start knocking the expenses back down again.
My goal is to save 50% of my income each month and I didn’t come close to meeting that goal in May. I made $1462.34 and managed to save $200. That amounted to a 13.67% savings rate. My May expenses were actually higher than my May income so managing to save any money was good. The only reason I was able to save a little was because I had extra money from the month before that had not yet been allocated to savings. Unless I get an unexpected windfall I won’t be saving any money this month since I had another large car repair and will only make a small income.
The 4% SWR translates into having 25x your annual expenses in savings or 300 months of expenses in savings. I have 21.75 months of living expenses saved now. It was a little over 24 months of expenses the month before. I don’t like going backwards on this goal but I will most likely go backwards on this goal again in June. I should start making a little forward progress in July. I won’t be able to make substantial progress though, until I return from my hike and find a new job.