October 2015 – Spending and monthly summary

Here’s my wet worth update and summary for October 2015 – this post follows on from my October income summary.

My Score for October

Living Expenses $ 3,850
Security Ratio 8.9 %
Expenses 53.1 %
Investments 30.2 %
Savings 16.7 %
Retirement 0
Wet Worth $ 86,438
Work Freedom Day 8-Nov-15

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. $3,850 is the amount from my current Budget 3.5.

I spent a total of $4,643.98 in October which means I overspent my budget by $793.98. The overspend was expected and planned as it resulted from the annual house insurance premium.

Security Ratio

This is the percentage of my monthly living expenses budget that my dividend income would pay for this month.

This month’s ratio of 8.9% means that my dividend income paid just under 9% of my living expenses this month; this is a more typical level for the first two months in a quarter. Last month I earned $919 in dividend income; this month was $343.

Living Expenses %

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

This month’s 53.1% is also back to a more normal level after last month’s 50.4%. October’s result actually beats all first quarter months this year: July was 53.4%, April was 53.6% and January was 55.6%, so it’s good to see a decline over time showing my progress.

Any change in this number is caused by a change in either income or budget; since my budget is constant that means my overall income was lower this month.

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.

Looking over the last several months and I’m achieving a ratio that’s 4% better compared to the corresponding month last year.

Savings %

The percentage of net income spent on savings.

I put aside $530 every month for mid and long term goals (any large expense or purchase due a year or more in the future), as well as $547 for my car payment and added an extra $100 into my Emergency Fund plus $30 into my Cash buffer. This month, the savings amount was $1,207.25 or 16.7% of my month’s income.

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 current income portfolio. This month it was 30.2% of my income.

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

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 retirement account asset allocation here if you’re having trouble sleeping. It’s a simple low-cost index investing strategy using 401k and IRA accounts.

Wet Worth $

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

My Wet Worth increased $16,030.87 in October to $86,438. 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 my current projections my Work Freedom Day remains at 8 November 2015. It’s a nice feeling to be on paid holiday from work and know that my dividends could be paying the bills this month on top of that.

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.

There’s quite a jump this month. The change in Wet Worth is caused by

Cash -$37 Cash for living expenses decreased a little this month. Although I was about $700 over budget this month, I didn’t transfer some of my planned investment money over from Cash to Investments so that skewed the numbers a little. This wasn’t intentional; I was just late getting the bank transfer going.
Debt $2,151 Debt decreased this month mostly from lower credit card charges. Our mortgage principal continues to drop about $375 a month which helps too.
Savings $1,889 Although I put aside $530 I managed to gain $1,889 in my Savings, what kind of Enron math is that? My Savings includes two investment accounts which increased in value. I use the Vanguard Wellington fund for some of my long-term savings and that fund increased $1,345 all on its own.
Emergency Fund $883 My Emergency Fund consists of cash, a stock fund (VTSMX) and a short term bond fund (VBIRX). I added $100 to the stock fund in my Emergency Fund, but ultimately any increase is dependent on the investment values.
Portfolio $11,136 My overall income portfolio increased in value this month. See my earlier post for details.
Total $16,031 Total change in Wet Worth.

October 2015 Summary

So a great month all in all although primarily driven by the stock market. While the increase in wet worth is nice, the cash flow and living expenses are much more important numbers and those are coming along nicely.


Quote of the Day

You always do what you want to do. This is true with every act. You may say that you had to do something, or that you were forced to, but actually, whatever you do, you do by choice. Only you have the power to choose for yourself.

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