April 2016 – Spending and monthly summary

This is my wet worth update and spending summary for April – this post follows on from my April income fund update. April was another strong month, helped by the market as my income was back to its normal levels.

My Score for April

Living Expenses $ 3,900
Security Ratio 8.4%
Expenses 52.8%
Savings 16.9%
Retirement (Taxable) 0%
Investments 30.3%
Wet Worth $ 135,961 (!)
Work Freedom Day 30-Oct-16
Emergency Fund 100.1%

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 $5,453.54 in April which means I overspent my budget by $1,428.54.

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 8.4% means that my dividend income paid just under a tenth of my living expenses this month, a significant, but expected, drop from last month’s 24.4%. The percentage is improved by either lowering my budget (which is constant at $3,900) or by earning more income. Dividend income decreased this month so the value decreased. I earned $337 in dividend income this month; by comparison March’s income was $965.

Living Expenses %

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

This month’s 52.8% is a return to normal levels after last month’s 49.2% because of the lower investment income. I save or invest any income that I don’t spend on living expenses so this result means that my Savings Rate this month was 47%; that’s nearly half of my income being saved. In 2015 I spent 53.6% of my income on expenses, so I’ve improved compared to last year.

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.

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), as well as $547 for my car payment (which is retired in May from my new car). I also added an extra $100 into my Emergency Fund plus $20 into my Cash buffer. The savings percentage returned to a more typical 16.9% of my month’s income compared to 19.8% last month.

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 30.3% 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 April 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 $8,553 in March to $135,961; another all-time high beating last month’s $127,407. 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.

Emergency Fund

I’m including my Emergency Fund (EF) funding in my score card this year. This value is the actual balance vs my target balance which is 10.0 times my living expenses (i.e. $39,000). The stock market helped my EF reach 100.1% funding this month, up from last months 99.2%, although I added $100 of VTSAX.

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 -$1,425 Cash for living expenses increased this month with higher medical, house and travel related costs.
Debt -$2,893 Debt decreased this month due to lower credit card charges in March.
Savings +$1,366 Savings increased with some help from my HSA account which increased by $300 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 +$351 My Emergency Fund consists the Total Stock Market fund (VTSAX). I added $100 and the market did the rest.
Portfolio +$5,369 My Income Fund had a solid month from new capital and capital growth. See my earlier post for details.
Total +$8,553 Total change in Wet Worth.

April 2016 Summary

A good month all in all. The cash in my living expense account is still trending down and I have some big purchases coming up which won’t help. I try to keep a minimum balance of five-month’s worth of expenses but it looks like I’ll drop below that in June and won’t recover until October.

I’ll be making some changes to how I use my Savings since my medical costs have been significantly higher than expected so far this year.

I also won’t be adding any money to my Emergency Fund in May; I’m only going to add to it whenever it’s below its target amount. That frees up some more money for re-investing.

Were your expenses / budget in April on track?

Quote of the Day

People rarely succeed unless they have fun in what they are doing.

9 thoughts on “April 2016 – Spending and monthly summary”

    1. Hi desidividend,
      I estimate net worth for myself but it’s almost a random number and I found myself playing around with the estimated values of my car & house to make the number look better. So Wet Worth for me is a much more useful number – it tells me exactly how far above debt I am because it doesn’t depend on any estimates. Even an estimated house price is really 6% too high because of the sales commission involved in selling it.
      Best wishes,

  1. Good month still even with the higher than normal expenses. I never got my HSA high enough at my previous employer to start investing with it. It is a good the government allowed investing (at least for people decent at investing). Maybe this is a test for the future social security/medicare.

  2. Looking good – an increase in wet worth and a solid savings month too. I just started tracking my expenses myself and do find that it’s quite hard to maintain a solid savings rate month to month – it’s definitely something i have to work on as expenses do tend to get away sometimes!

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