First, I want to prove to the world that it’s possible to become financially independent at a relatively young age even if you don’t make a lot of money. I don’t make a six-figure income. I never have and I probably never will. But it’s not necessary. Oftentimes, people focus on income too much. Expenses are just as important, because if you make $200,000 per year, but spend $190,000 of it, you’ll never become financially independent. Conversely, bringing home $40,000, and learning to get by on half of it means you’ll likely be able to retire if you want to within 15 years or so. Making less means you have less to save, but spending less means you need less to retire off of.
The second reason I do this is because I want this to be a live look at one man’s journey. You can find countless books by financially successful people, but often it’s long after they’ve completed their trek to significant wealth that they’re then telling you how they did it. It’s easy to postulate. It’s much more difficult to actually show the whole process in action, for better or worse.
And finally, knowing that every dollar I spend is going to be published for the world to see serves as reinforcement to stay frugal. There’s been more than one occasion where I decided against a particular expense after realizing I might be a bit embarrassed to write about it.
So each month I will post my income and expenses for the previous month. I track every dollar in and out, so what you see is exactly what I earned and spent (rounded to the nearest dollar).
|Income From December 2014:|
|Expenses From December 2014:|
|Rent & Utilities||$528|
The sixth full month of writing full-time is now behind me and things continue to look wonderful. I generated less online income throughout December than I was able to over the last couple of months, but it still represents a huge success in my mind. This income will obviously oscillate a bit from month to month, which depends on a lot of factors like blog traffic, advertising income, and freelance writing. However, this was still an incredible result. I appreciate everyone’s readership and support immensely.
Dividend income this month was huge yet again. I always look forward to December’s dividends. It’s usually one of the larger months in terms of dividend income and it’s a great way to finish off the year. I was especially grateful for these dividends because expenses were so high, as discussed below.
Other income represents cash back rewards from one of my credit cards. I don’t spend much but I do enjoy playing the points game as much as reasonably possible in order to generate a little extra income. This was like a dividend all in itself.
*The Everything Else category includes expenses I don’t have a regular budget for. I spent a lot more in this category than normal, which was both good news and bad news. The bad news is that the money’s spent. The good news, however, is that the $439 I spent represents two round-trip, fully-paid tickets to the annual Berkshire Hathaway Inc. (BRK.B) shareholders’ meeting in May in Omaha, Nebraska. Claudia and I will be going to the meeting this year as a quasi-honeymoon. I consider that a strong score to land two tickets for that low of a price. Even better, the flight is direct. No layovers!
So there’s not really anything frugaltastic about this month’s expense report. It’s almost shocking how much money I spent. There were some minor victories, however. Fuel was kept to a minimum. Other than a day trip to Tampa, we stayed very local this month.
I also made some key changes in the budget to lower expenses moving forward into 2015. First, I downgraded my hosting. I’ve been monitoring my traffic over the last six months or so and it appears that other than very occasional spikes in traffic, the blog could handle a platform with less resources. So I saved a bit of money there. It’s likely that I’ll have to upgrade again at some point in the future, but I’ll continue to monitor traffic and enjoy the cheaper expense in the meanwhile.
I also signed up for a cheaper HDHP that was available on the exchange. It’s a bronze package with a $6,350 deductible.
This will also be the last month that I recognize any expenses related to the amortization of my Toyota Corolla. I have now completely realized all expenses relating to the purchase of the car that was completed in December 2013.
So what went wrong this month? Other than the plane tickets, I spent money on gifts. I pitched in 50% on a PS4 for Claudia’s son. I also purchased a gift certificate that’s good for a day package at a local spa here in Sarasota for Claudia. She doesn’t really do anything for herself ever, so this will be a nice afternoon break all for her whenever she’s ready. The rest of the spending in this category was actually also related to travel. I didn’t travel up to Michigan for Christmas this year, which was the first year in my life I wasn’t up there for the holiday. But I did offer my oldest sister a unique proposition. I told her if she wanted to come down and visit us for the holiday, I’d pitch in for the plane ticket. She scheduled a flight (using the same discount carrier I used for the tickets to Omaha) and I’m paying for part of the flight. This is a win-win. She gets a nice little winter break, some sunshine, and gets to hang out with her big brother. And I get to see her while I’m able to skip the travel, the snow, and drama. I don’t know how you go wrong with that arrangement!
Claudia actually ended up getting me a really great gift. I’ve notoriously resisted cooking, as I generally find it about as enjoyable as poking myself in the eye. However, since I’ve been at home a lot more, I’ve slowly worked my way into the kitchen to spend time with her as she cooks. I now act as her sous chef, where I help cut meat and/or vegetables, measure items, help with stirring, etc. So in honor of this radical shift, she got me my own little apron complete with customized “Dividend Mantra” embroidery.
Most other expenses were mostly in line. Core spending was actually pretty solid if you back out the $1,000+ I spent on gifts and plane tickets.
I managed to save 19.5% of my net income this month. That’s obviously a big disappointment for someone who routinely aims for and attains a 50% savings rate. But it’s just one of those things. The good news is that I feel really good about the spending this month. The flight to the BRK meeting is booked and paid for, I gave some great gifts that weren’t over the top or particularly expensive, and made some key changes to spending that will hopefully allow me to get back on track in 2015. This month would have perhaps been a bigger disappointment if I wasn’t already on track to miss my mark for the year.
One of my goals is to save 50% of my net income throughout 2014, averaged monthly. So far, I’ve hit rates of:
I finished the year with an average net savings rate of 44.3%. It’s disappointing to miss my goal by such a wide margin, which is the first time I haven’t saved 50% of my net income since 2009. But I honestly have no regrets about the events that led to this. If I would have stayed on at the car dealership, I’m positive I would have easily exceeded 50%. But the trade-off was so completely and absolutely worth it. And I think there’s a good chance that one day I’ll be able to fully replace my old day-job income via writing. We’ll see!
I’m looking forward to getting back on track for 2015, however. The lower hosting costs, cheaper healthcare plan, and elimination of the auto expense will make a huge difference in my ability to register a high savings rate once again. January will likely be a little expensive in the food category, as I’ll be hosting my sister and her husband for a week. And I expect some higher costs relating to the Omaha trip. We haven’t booked our hotel yet, so that will be another expense to realize at some point within the next few months. Lastly, I’ll likely owe a hefty sum for taxes in February or March, as my quarterly estimated taxes last year were nowhere near enough to cover my online income, as the income increased dramatically and somewhat unexpectedly in the second half of the year. But I suspect the second half of 2015 will be a huge tailwind for the savings rate.
What was your savings like in December? Did you come under budget? Excited for saving more money in 2015?
Thanks for reading.
Photo Credit: Stuart Miles/FreeDigitalPhotos.net