June 2016 – Spending and monthly summary

This is my wet worth update and monthly summary for June. This post follows on from my June income fund update. Yep, June; not July or August as that’s how far behind I am. Time to connect the Flux Capacitor, speed up to 88mph and dial back time to a few months ago…

My Score for June

Living Expenses $3,900
Security Ratio 13.8%
Expenses 46.1%
Savings 14.7%
Retirement (Taxable) 0%
Investments 39.2%
Wet Worth $143,371
Work Freedom Day 29-Oct-16
Emergency Fund 102.4%

Living Expenses

This is my fixed monthly budget for living expenses and it includes both essential (e.g. groceries, mortgage, insurance), and non-essential (e.g. music, travel) purchases. $3,900 is the amount from my current Budget 4.0.

I spent a total of $7019.39 in May which means I overspent my budget by $3,119.39. The spending was planned as it includes the tickets for my July trip and some music concerts; however these purchases are pretty much my yearly budget for those categories in one fell swoop.

Security Ratio

This is the percentage of my monthly living expenses budget that current dividend income pays.

I’ve changed how I calculate this value; it’s no longer tied to the actual dividend income per month. Instead I’m automatically withdrawing a flat monthly amount of cash from my Income Fund that’s fueled by dividend payments. The current amount is $540 a month which is 13.8% of my current $3,900 monthly budget.

I’ll change this amount once or twice a year as dividend income increases. $540 a month is $6,480 a year; that’s about 80% of the total dividends I’m projecting to receive this year as I want to build a small cash buffer for smoother cash flow.

Living Expenses %

The percentage of net income that’s spent on living expenses. Lower numbers are better here.

This month’s 46.1% is an improvement over last month’s 52.4% due to the higher June dividend payments. I save or invest any income that I don’t spend on Living Expenses so my Savings Rate this month was 53.9%; that’s more than half of my income being saved. In June 2015 I spent 49.7% of my income on expenses, so I’ve improved compared to last year too.

Any change in this number is caused by a change in either income or budget similar to the Security Ratio although this calculation takes total income into account and not just dividends.

The chart above shows the trend in my Living Expenses % since the start of 2014. For the first part of 2014 I was paying two mortgages. In June 2014, I introduced Budget 1.0 after selling my first house and I made some minor tweaks in Budget 2.0 from October onwards. In January I started Budget 3.0 which I updated to Budget 3.5 in July.

Budget 4.0 started this January and is an increased amount compared to last year which will negatively affect results this year. The average percentage value should decrease over time because salary and investment income should increase faster than living expenses.

The Living Expenses % metric and the Work Freedom Day metric (see below) are both good incentives to avoid increasing the budget since both numbers are impacted by a higher budget.

Savings %

The percentage of net income spent on Savings.

I’m putting aside $560 every month for mid and long term goals (any large expense or purchase due a year or more in the future) and I’m continuing to save my old car payment amount of $540. I also added $100 to my Emergency Fund and continued to add $20 into my Cash buffer. The savings percentage was 14.7% of my month’s income compared to 15.3% last month because of higher income – in terms of amount saved, it increased this year.

I’m going to be increasing my Savings amount starting next month and I’m also changing how I use my Savings account so there’ll be a post about that soon.

Retirement %

This would represent the percentage of any post-tax contributions from net income towards my retirement accounts, but I don’t have any plans to do so at the moment. You can read about my target retirement account asset allocation here if you’re having trouble sleeping. It’s a simple low-cost index investing strategy using tax-advantaged accounts.

Investment %

The percentage of net income that I invest.

Any spare money left over after savings, retirement and living expenses are paid goes into my Income Fund. This month it was 39.2% of my income.

I’ve written about my portfolio income and gains in June in a separate post, so I won’t repeat all of that here again.

Wet Worth $

My liquid assets minus all debt (excluding retirement and assets).

My Wet Worth increased $8,378 in June from $134,993 to to $143,371; a new record high! There’s a more detailed breakdown of this amount further below.

Work Freedom Day

The day in the year that my dividend income could pay for the rest of the year’s expenses.

Based on current projections and including the last dividend amounts, my Work Freedom Day remains at 29 October 2016.

Note that based on my $3,900 budget, one Work Freedom Day requires about $128 of dividend income which in turn requires about $4,000 of capital. For the whole year that means about $1.6 million at a 3% yield.

Emergency Fund

This value is the actual balance of my Emergency Fund vs my target balance which is 10 times my living expenses (i.e. $39,000). The stock market increased my EF funding level to 102.4% this month, up from last months 101.9%; my $100 contribution was about half of the increase.

Wet Worth detail

I’m showing my Wet Worth in this post – this is the cost of my liquid assets minus debt, I exclude assets and retirement accounts from this number. I prefer this over Net Worth since the equity in large assets (house, car) and retirement funds is hard to get at and not always predictable. I find this is a more honest view of where I’m at on my journey.

The change in Wet Worth is caused by

Cash -$3,203 Cash for living expenses decreased this month due to a higher credit card payment.
Debt +$4,914 Debt decreased this month as I paid off May’s credit card bill.
Savings +$1,210 My longer-term savings in the Vanguard Wellington (VWELX) fund and my HSA account increased this month, in addition to my cash savings.
Emergency Fund +$199 My Emergency Fund consists of the Total Stock Market fund (VTSAX). I added $100 in new money.
Portfolio +$5,257 My Income Fund had a solid month from new capital and capital growth. See my earlier post for details.
Total +$8,378 Total change in Wet Worth.

June 2016 Summary

My Cash accounts took a hit this month as the May charges on my credit card from my UK trip in July and music concerts were paid. But we did get to watch one of those concerts; Bare Naked Ladies, which was a great show.

But overall, it was a good increase for wet worth. Looking forward, Cash is going to be depleted further in August and I’m revising my Savings strategy to help mitigate that. In hindsight I think I need more of a split between ‘monthly expenses’ and large / infrequent yearly expenses.

I’m sorry for the gap in the posts; I’ve been busy with travel and work and some health issues. And for some reason, as time goes by I feel more and more resistance to actually catch up.

I hope you continue to have a great summer and I look forward to catching up on reading some of your recent blog posts!


Quote of the Day

Don’t be afraid to give your best to what seemingly are small jobs. Every time you conquer one it makes you that much stronger. If you do the little jobs well, the big ones tend to take care of themselves.

6 thoughts on “June 2016 – Spending and monthly summary”

  1. Quit a bit above budget this month but as long as you cover it up in the next few months and hit your budget on an annual basis then you’re good to go. I just had the opposite issue when a third paycheck this month really spiked my savings rate as my expenses remained static but will likely experience what you did next month as my expenses are likely to spike due to some one time expenses.

    Good increase in wet worth though!

    1. Hi TimeInTheMarket,
      Yes my budget is playing catch up at the moment unfortunately, so I’ve been making some adjustments to use more of my Savings that I’ll write about shortly. I’ve had some unexpected medical expenses this year and insurance premiums just seem to keep rising!
      Hope you had a great month!
      Best wishes,
      -DL

  2. DivLife,

    Sick decreases in living expenses year… over year… over year. This is awesome. Even though you took a harder punch this month, all is good. Your savings, investing etc.. are there and you have another 6 months to talk to us about! Pumped to read.

    -Lanny

    1. Hi Lanny,
      I’ve been fighting to keep my budget at the same level this year as last year which helps improve the living expense numbers. But the pressure’s starting to show and I think I’ll have to increase it next year. Hopefully higher dividend income will offset some of the increased living expenses though.
      Thanks for stopping by – I always appreciate your support 🙂
      Best wishes,
      -DL

  3. Nice job DL, there are lots of good increases and decreases where they matter 🙂 I hope you had(?) a great trip to the UK.

    It’s awesome seeing how much your ‘wet worth’ has increased since the start of the year, you’re making huge headwinds. And like DD said, great job increasing your living expenses % each year, that is definitely helping and you’re reaping the rewards 🙂

    Tristan

    1. Hi Tristan,
      We had a great trip back to the UK to visit my parents – it was just after the Brexit vote so an interesting time to visit. We also took a side trip to Barcelona in Spain for a night.
      So far this year my wet worth has increased 4 out of 6 months; although as the investments grow the results depend quite more and more on the stock market. I hope the rest of the year goes the same way but monthly income is my real metric.
      Best wishes,
      -DL

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