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 potential income to save, but spending less means you need less passive income 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 February 2015:|
|Expenses From February 2015:|
|Rent & Utilities||$534|
This was my lowest month for online net income in some time, but it’s still fantastic, in my view. Earning a pretty modest living while pursuing my passion for writing and inspiring is just a dream come true. Truly. If you’re looking to know how I earn an income online, I shared that last year. Other than increased freelance writing, it’s still accurate and relevant today. I’m deducting quite a bit more for quarterly estimated taxes this year, so that’s constraining net online income. But this is still more than enough for me to get by on, save, and also achieve my goal of $36,000 in net online income this year. Thank you all for your continued support!
Dividend income was of course once again wonderful. Whereas online income is something that requires constant input on my part, the dividends just roll in regardless. If I decide to sleep in until noon and watch movies all day I still collect my dividend income. Gotta love that. What’s even better is that between all the companies that sent me dividends and all the individual sources of online income, I received income from 18 different sources this month. Better than one single paycheck, that’s for sure.
*The Everything Else category includes expenses I don’t have a regular budget for. I spent the $28 on an oil change for my Toyota Corolla. I learned that the tires are dry rotting and need to be replaced soon. In addition, my insurance needs to be renewed. Combined, these would cost me more than $1,000. But why would I spend all that money on a convenience I don’t really need? Freeing myself from the car and its associated expenses will give me freedom to spend less and enjoy life more. So I’ll not only save $1,000, but I’ll also collect the cash that’s locked up in a metal box that sits in a parking space. Double score!
There’s really not much else to report on or explain this month. This is really kind of a baseline month for me. The $200 amortization of the engagement ring will be over in a couple of months, so that’ll drop the baseline even further. But personal expenses in the mid-$1,500-per-month range is a good long-term target for me. And there’s the aforementioned dropping of the car, which will likely reduce my monthly outlay even more.
However, one area of spending I may actually increase in the near term is food. I spend a lot of time at home right now. Don’t get me wrong, it’s wonderful to wake up when I want, stroll over to the kitchen to get breakfast, and then sit down and start working in the comfort of my own living room. However, it’s also nice to get out, enjoy the beautiful Florida sunshine, and be a part of society at times (even with all of society’s drawbacks). I may be a hardcore introvert, but staying home 99% of the time gets old. And I find myself opening up more and actually looking forward to being more social. So I may start writing from mobile locations more and more, which will require the token purchase of food/coffee to use a facility’s Wi-Fi if/when I’m not going to the library.
The blog cost me $0 this month. I was experiencing some hosting issues for the last few months and I received a credit for my troubles. I also had a credit on file for my emailing service, so what you see is all personal expenses this month.
I managed to save 46.4% of my net income this month. That’s really a great result for me. Expenses were mostly kept in check and income across the board was pretty strong. A slight uptick in dividend income and perhaps just a little more online income would get me over 50%, which is what I’m always aiming for. But 46% is still quite wonderful. I’ll gladly take it.
One of my goals is to save 50% of my net income throughout 2015, averaged monthly. So far, I’ve hit rates of:
So I’m at an average of 43.7% for the year thus far. That’s obviously below my goal, but I knew 50% was going to be a tough stretch for me. This month was really a good gauge for my potential right now, which means the climb up to 50% might be beyond my reach. However, I do have some tailwinds working in my favor including the sale of my car (which will provide temporary income and a permanent reduction of expenses) and the potential for more dividend income over the second half of the year. Nevertheless, saving 44% of my net income while really living my dream is just incredible. I’d rather save 20% of my net income and love every single day than save 80% and be miserable. That’s just my take on it. I’m still going to give the 50% goal my all, but missing it won’t really negatively impact my life in any meaningful way.
The next couple of months are going to be particularly tough for the budget. I know March will be absolutely brutal. I’ve already got my taxes just about all finished and it looks like I’m going to owe about $4,500 or so in taxes (due to chronic underpayment last year for estimated taxes on online income). That counts federal and, much to my chagrin, state income taxes. I spent a few months living in Michigan last summer and I owe $500 for the privilege. Reminds me why I don’t live in a state with income taxes! April and May will also be expensive with a wedding and a trip to Omaha to attend the Berkshire Hathaway annual meeting for shareholders. A lot of fun stuff, but fun stuff sometimes costs money. However, I think the summer and fall will be particularly strong for savings. Let’s see how it goes!
How was February for you? Save as much as you wanted? On track for your savings this year?
Thanks for reading.
Photo Credit: bplanet/FreeDigitalPhotos.net