Expense/Income Tracking

February was a great month on my progress towards financial independence. My SWR went down to 62.54% from 80.47% the month down. 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 managed to crush that goal in February. I made $4499.91 and managed to save $3400. That amounted to a 75.55% savings rate. I’m not going to be able to match that this month since I have a $1500 tax bill but I’m still aiming to save 50% of my income. My full-time job ends on April 15th which will make it much harder to maintain my 50% savings rate. I do have a three week job lined up to start as soon as my full-time job ends. It doesn’t pay as well as my current job but I should still have a chance at saving 50% if I manage to sell a few things from my apartment as well.

The 4% SWR translates into having 25x your annual expenses in savings or 300 months of expenses in savings. I have 19.18 months of living expenses saved now. I managed to save almost 5 months of living expenses last month. I won’t be able to do that again this month but I’m sure I’ll add at least another month of living expenses. Seeing my SWR go down every month and my months of living expenses saved go up every month is keeping me motivated.

Here is a breakdown of my income for February.

My income was great in February. That wasn’t surprising since it was the first month that I had two paychecks for complete pay periods for my full time job. My online income was better than I expected, but it seems to vary a lot.  I expect my online income to be much less in March. I had the $350 in medical study income which helped a bit.

It will be difficult to match this total in March. I will have five paychecks this month, since there are five Fridays, which will help some.  My part time job will be the one that pays three times rather than my full time job so the extra paycheck won’t make that big of a difference.  I have been trying harder to work overtime at my full time job, but since I’m already working 65 hours a week between my two jobs I don’t usually feel like working any extra hours.  I’m thinking I  should make close to $4000 in March and be able to keep my expenses under $1000 which will still be a pretty good month.

Here is a breakdown of my expenses for February.

My February Expenses were up slightly from my January expenses but I’m still quite happy with the total.

The slight increase was mainly due to having a trip to southern Missouri which increased my gas expense and paying a $50 installation fee for internet. Yes, I have succumbed to lifestyle inflation and gotten internet in my home and will be paying $15.96 a month for that luxury.  Valentine’s Day and my girlfriend’s birthday were both in February too.  Even though my girlfriend knows I’m frugal, it seemed smart to spend at least a little money for those occasions. 🙂

I did manage to bring my food budget under $100.  That probably sounds good to most people, but there is actually room for improvement there.  I barely made a dent in the food in my refrigerator.  Most of my food expense was for fast food, sodas and sweet tea, and junk food.  There were only four days during the month that I didn’t spend any money on fast food/junk food/sodas, sweet tea.  I’m going to start making my own sweet tea and make more of an effort to eat the food I already have rather than buy junk food and fast food.  If I do that I should be able to get my food expenditure down to $50 for the month.

My health category was a little lower in February because I switched health insurance providers and didn’t have any insurance coverage for eight days.  I got away with that but it would have really sucked if I had gotten injured or ill that week. I probably won’t do that again.

I expect the rest of my expenses will be roughly the same in March. Keeping my expenses below the level of a minimum wage income, which is about $1274 a month has been pretty easy so far.  It looks like I should be able to keep my annual expenses below $12,000.  There will be some traveling before the year is over though which could increase my spending a bit. I’m off to a good start for the year and hope to keep it going.

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.