Here’s my wet worth update and spending summary for March – this post follows on from my March income fund update. March was another great month with yet more unexpected income from a tax refund and a second work bonus because my colleague and I filed a Patent application.
My company pays one installment for the patent filing, a second if the application is accepted and a third payment if the invention is used. So that’s exciting but it’ll be back to regular paychecks for the rest of the year unless I can invent something else!
My Score for March
|Living Expenses $||3,900|
|Wet Worth $||127,407 (!)|
|Work Freedom Day||30-Oct-16 (!)|
I’ve normalized the values here to exclude the additional income that I received as I prefer to look at the underlying trend for a better comparison. The additional income I received went straight into Savings and Investing.
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 $3,184.93 in March which means I underspent my budget by $715.07, I’m still slightly down on the year overall because of the deficits in January and February.
This is the percentage of my monthly living expenses budget that my dividend income would pay for this month.
This month’s ratio of 24.4% means that my dividend income paid almost one quarter of my living expenses this month, an improvement from last month’s 9.7% . The percentage is improved by either lowering my budget (which is constant at $3,900) or by earning more income. Dividend income increased this month so the value improved, although this number is expected to be much better since it’s the last month in the quarter. I earned $965 in dividend income this month; February’s income was $379.
Living Expenses %
The percentage of net income that’s spent on living expenses. Lower numbers are better here.
This month’s 49.2% is a big improvement on last month’s 55.0% because of the higher dividend income and a slightly higher salary. This is a great result and marks the first time that I’ve dropped below 50% in March! And because every cent apart from Living Expenses goes into Savings and Investments, that means my Savings Rate this month was 50.8%. Not my all-time record, but certainly a record for March.
From this result, I’m hopeful that I can beat the 50% figure in June, September and December.
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. However, it’s looking likely that I’ll need to increase my Budget a little in June.
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), as well as $547 for my car payment. I also added an extra $100 into my Emergency Fund plus $20 into my Cash buffer. The savings percentage increased to 19.8% of my month’s income compared to 16.9% last month.
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.
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 31.0% of my income, although I made some additional contributions on top of that from the additional income this month.
I’ve written about my portfolio income and gains in March 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 $21,180 in March to $127,407, passing the $125,000 milestone. Much of this is from capital gains and it’s just as likely to go down next month, but it’s still reason to celebrate! 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 has moved forward to 30 October 2016, an increase of nearly a week! I’m hoping my estimates are accurate as I’d hate to see this number move back into November, but it’s certainly a move in the right direction!
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.
I’m including my Emergency Fund (EF) funding in my score card this year. This value is the actual balance vs my target balance and it’s still a little under-funded at 99.2% although that’s after increasing my target amount from 9.6x to 10.0 times my living expenses (i.e. $39,000). The increase is mostly from capital gains on the fund which did well in March; I added $200 and the market added $1,773. Of course the market may take those gains back tomorrow.
Sometime next year I plan to start phasing out my EF, either including it into my Savings to pay off the mortgage or else into my income Fund to generate more cash-flow. I’ve not made a final decision on this yet though.
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 a small increase this month. The change in Wet Worth is caused by
|Cash||+$770||Cash for living expenses increased this month due to a fairly normal month with no major expenses.|
|Debt||-$1,067||Debt decreased less this month due to a higher credit card balance, but it’s still headed in the right direction.|
|Savings||+$4,203||Savings increased an atypical amount again, due to the stock market and the additional income I saved this month. My HSA account helped too as that increased by $700 all on its own (it’s invested in Total Stock Market). My longer-term savings are in the Vanguard Wellington (VWELX) fund which increased in value too.|
|Emergency Fund||+$1,973||My Emergency Fund consists the Total Stock Market fund (VTSMX). The investments did well this month adding most of the increase.|
|Portfolio||+$15,302||My Income Fund had a great month from new capital and capital growth. The underlying investments increased in value this month by 4.54%. See my earlier post for details.|
|Total||+$21,180||Total change in Wet Worth.|
March 2016 Summary
So a great month with thanks to the stock market, the IRS and the additional income that I received. My living expense Cash reserves went up this month but are going to be sharply down next month due to some additional medical and house expenses that were charged on my Credit Card but won’t be paid until next month.
Quote of the Day
Reduce your plan to writing. The moment you complete this, you will have definitely given concrete form to the intangible desire.