Andy Hough

March was a decent month on my progress towards financial independence. My SWR went down to 54.50% from 62.54% the month before. My goal is to get my SWR down to 4% at which point I’ll consider myself financially independent. I’m seeing big declines in my SWR right now because I’m saving over half of my income and I’m reducing my monthly 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 using my monthly expenses starting in November 2012 to set the average so every low month of expenses makes a big change in the average right now. The big drops in my SWR will slow down once my trailing 12 months average is closer to my current monthly average.

My goal is to save 50% of my income each month and I met that goal in March. I made $3935.19 and managed to save $2350. That amounted to a 59.71% savings rate. My savings should have been better in March. I actually ended up with more cash on hand than I intended. That surplus will be invested this month. My full-time job ends this month but I get two full paychecks. My goal is to save 75% of my income this month so I can get ahead on my 50% savings for the year goal. That way if I have a couple months with a less than 50% savings rate after the end of my job I’ll still be on track.

The 4% SWR translates into having 25x your annual expenses in savings or 300 months of expenses in savings. I have 22.01 months of living expenses saved now. I should have over two years of living expenses saved by the end of the month. It is nice seeing my SWR go down in big chunks each month and my months of living expenses saved go up each month. That is why I’m working the crazy hours right now, so I can reap the reward in the future.

Here is a breakdown of my income for March.

My income was great in March although it was down slightly from February.  I expect my income will be about the same this month.  My full time job is ending but I will still get two full paychecks. Next month is when I will have a challenge to keep the income level up.  I doubt I’ll be able to keep my income at this level but if I’m able to keep it high enough to save 50% of my income that will be good enough.

I plan to work on increasing my online income and do more mystery shopping once my job ends.  The mystery shopping will be guaranteed extra money although not a lot of money.  The online income has potential to be much more but I can never be sure if my efforts will actually result in increased income.  I will still have my part time job so if I can make a decent amount from my passive income and my alternative income I should still make enough to save 50% of my income.

Here is a breakdown of my expenses for March.

My March Expenses were up from February but they are still reasonable.  I did manage to keep the monthly total under $1000 although it was closer than I’d prefer.

Food was the only category I feel like I spent too much on.  I would be okay with the total if it was for healthy food purchases.  Since it was mainly for fast food, soda, sweet tea, and junk food I need to do better.

I expect my expenses will be about the same this month. There probably won’t be much change to my expenses until this summer.  To meet my goal of keeping expenses  under minimum wage I just need to keep my spending under $1274 a month.  That should be easy unless I get crazy on spending money on traveling later this year.  My stretch goal of keeping spending under $1000 a month appears to be easily attainable at this point as well.