January was quite the month! We overspent our budget but these expenses were planned.
The largest expenses were a quarterly trip to Costco and a mini-vacation to Pagosa Springs.
The Costco trip costs, on average, $500-$600 every three months. I stock up on items like dried goods, oils, butter, bacon, dog food, and toilet paper. I make a list, and I stick to it! I also eat like this while I am there. This might explain the weight gain.
Locally, I buy fresh food, like vegetables, fruit and meat, at the grocery store to supplement the Costco supplies. I follow a weekly meal plan and closely adhere to a pre-made list.
A planned vacation hit the expense report this month. It has become a yearly tradition to end our Christmas vacation with a trip to my favorite place on Earth, Pagosa Springs. I wrote about a previous trip here.
This time Mr. TJL and a friend surprised me for my birthday by sporting some smokin’ hot gold speedos. It took a good weekend and kicked it up to super awesome fantastic!
I promise no pictures to protect the guilty (although I know you are dying to see them and, truth be told, I am dying to share them!). So here is a photo of a storm trooper drag queen?
The Expense Report!
In the tables, I produce a monthly and year-to-date summary of expenses, the monthly spending average, and the budget. I keep track of progress and spending behavior. It is much easier to detect any problem areas by keeping careful track of where the money is going.
Summary of January 2018 spending
Green highlighted fields indicate income. We have four sources of regular income; salary and related benefits, rental income, interest and dividends and Mr. TJL’s business income.
Orange highlighted fields indicate expense and are denoted as a negative value in parentheses. Our regular expenses are categorized by monthly expenses and yearly expenses. The combination are our total operating expenses. Additional expenses are paycheck deductions of charitable contributions, health insurance and income taxes.
Blue highlighted fields are our investment and savings contribution.
The bottom line is the balance.
Our monthly budget is tabulated in the far right column.
We “overspent” by ~$666 for in January, but we planned the expenditures. Other months, we will see less spending; it will all even out.
In January, we realized a savings rate of 64%! Take a good look at that number. It means that even though we spent $1, 250 over our monthly budget, we still saved 64% of our net income.
This is the kind of flexibility that comes with cutting core expenses. Even this month, I decreased our garbage bill by switching providers. This switch alone will save me $120 this year, with absolutely no change in my quality of life.
Once I made the decision to stop throwing away my money, everything has become less stressful. Even if I never fully retire, the FIRE path has truly changed my life.
The Jolly Ledger’s Income Statement
I prefer to manage our finances like a business so I track all sources of income and expense. Below are the details for the monthly summary.
2018 FIRE Progress
I am on-track to retire in three years at age 45. To visualize my progress, I chart my expenses versus my passive income. Passive income is calculated as 4%, the safe withdrawal rate, of my investment balance including holdings in 401k, traditional IRA, Roth IRA, and brokerage accounts.
Due to the contributions and earnings on our investments, our passive income is $1,779 (as of 1/1/2018) per month. In retirement, we expect to withdraw $2,733* per month.
Expenses tabulated in the chart combine the household operating expenses and health insurance with the business expenses, so it does not reveal our true cost of living, which is budgeted at $3000 per month. I am hoping that this level of spending becomes our “norm”.
*Total retirement spending is expected to be $40,000 per year. We will receive $7,200 per year in rental income. Our investments will have to provide us with the remaining $32,800, hence $2,733 per month. If Mr. TJL’s art business provides any income, we will be able to withdraw less, but we are conservatively planning as if we will not make any active income in retirement.