1. Portfolio Value and Net Worth as it stood at the end of the previous month
2. Income, Expenses and Savings achieved for the previous month
3. My Investing Choice for the previous month's savings
This post covers point 2 above: Income, Expenses and Savings achieved.
Income - Feb 2016
I work as a freelancer (in project management within the I.T. industry). This involves carrying out contracts for my customers which tend on average to range from 3 to 12 months in duration. I operate through a Limited Company and invoice my clients on a monthly basis, who then send payment to the Limited Company's business bank account usually 1 month after being invoiced. I then receive a monthly salary from the business account, supplemented by dividends based on current profits.
At present the only other regular income streams I have are interest on my current account (the Santander 1|2|3 Account) and cash back for certain* direct debit payments made from that account. I'm particularly keen to find and experiment with new sources of income this year, so hopefully I'll have more to report on this in the coming months.
In January I sold my flat which had been vacant for some time and I'd been paying all the utility bills. The power company sent me a refund in February for the amount I'd overpaid by at the point of the account closure, so I've classed this as income.
Looking at my FIRE Targets for 2016, I'd specified a personal income target of £3,332 per month. I'm not kidding! I can't quite believe it, but I've pretty much hit that target on the nose for this month and I have to say I'm delighted with that.
* The Santander 1|2|3 account offers 3% AER (variable) interest when the balance on the account is above £3,000 (on balances up to £20,000) as well as cash back for selected monthly direct debits (1% for water, council tax and Santander mortgage; 2% for gas & electricity; 3% for mobile, phone, tv & broadband). More details and the terms and conditions about the product are available on the Santander website. This is not a referral or affiliate link, this is provided purely for information purposes only.
Expenses - Feb 2016
Just taking a look at the list a few thoughts spring to mind:
- No council tax this month. This is because the direct debit scheme calculates over 10 months not 12, with no payments in February and March
- One of my two cats was ill requiring 3 trips to the vets resulting in a spend of £202.42 ouch! Luckily I have a Savings Stash which paid for this (see below) and he's now fully recovered, poor thing
- Holidays & Trips - I really enjoy reading the Financially Free By 40 site. Huw who writes the blog arranges 3 weekend meet-ups a year for like minded UK individuals and calls these "FIRE Escapes". I decided to go along to the next one for 1 night hence the £32. I've also got a friend's 30th weekend coming up in April which needed to be paid for this month. I've helped arrange some of the transport for this and one of the ladies is paying me her train cost in March (£27.10) so I'll see this returned as income next month!
- It's really important to me to send birthday & anniversary cards/gifts. It's something that I've always done and am hoping I'll be able to continue doing while still being able to achieve my desired savings rate. This year I decided to get REALLY organised and make a list of all the cards I need for the rest of the year and buy them all in one go to take advantage of multi-buy savings. I spent £53.38 on this which felt like a lot of money for cards, but this would have cost a lot more if I bought cards on an ad hoc basis throughout the year
- I've enlisted a conveyancer for my house sale (which unfortunately is stalled at present, more on that in an upcoming post), and this required a £50 payment for initial costs
- The majority of my spending is paid using my cash-back credit cards, hence it's really easy for me to work out my expenses at the end of each month. However I do still like to make sure I always have a small amount of cash in my purse (normally £10 or less) and I don't always remember to note down what this gets spent on. I will try to be better at this in future months, but £40 doesn't feel too bad - I suspect I probably bought dinner one night with some of it!
For many years I've had a system where I put aside an amount of money each month to cover future bills and expenses (to help prevent nasty surprises further down the line which could risk putting me in debt). The expenses highlighted in yellow fall under the categories covered by my "Savings Stash", whereas the rest of the expenses are simply covered by my monthly income. The totals for this break-down as follows:
Savings - Feb 2016
If I take the expenses paid for by my monthly income and subtract these from my income for the month I can see what I've got left to move into my Savings Stash and Freedom Kitty:
As you can see the overall percentage of my income I've been able to save this month is 49.24%. However, the percentage I've been able to save into my Freedom Kitty is sitting at 31.46%. It's really the Freedom Kitty percentage which is the important one, because money in the Savings Stash is just to cover expenses spread throughout this year rather than for future use.
My 2016 FIRE Target was to achieve a monthly average of £1,000 into my Freedom Kitty, so I've had a good month toward this with £1048.22 allocated.
Since I've mentioned my Savings Stash, I thought it may be of interest to include details of this each month:
This may seem like quite a large pot of emergency reserves to be holding, however as a Company Director I have to complete a Self Assessment tax return each year and I'm holding the money I anticipate I'll need for paying my taxes in my Savings Stash. The Savings Stash also covers expenditures such as large car expenses, vet bills, Christmas, Birthdays, insurance as well as some savings for holidays and a new car.
So that's about it for my first month of sharing income, expenses and savings achieved. I hope it's been interesting for you, it's taken me a while to consolidate the information but I've found it a really worthwhile exercise and hopefully it will be quicker to put together next month. Thanks for reading and for all your comments to date, it's really encouraging to hear your feedback.
Do you hold an "emergency reserve" to fund future large bills and unexpected outgoings? If yes, I'm interested in your views on what you think is a reasonable size "reserve" in order to feel comfortable...