Following on from my last catch-up post which covered my Portfolio Value and Net Worth from April to June, it's time to give a run down on how I've been tracking for my Income, Expenses and Savings rate. I like to track these to keep me on target for achieving my second goal for 2016 which includes the pursuit of Financial Independence.
Income - Apr to Jun 2016
In May I closed my Santander 1|2|3 account and opened a First Direct current account. This means "bye bye" to interest and cashback on direct debits, but "hello" to a nice introductory bonus from First Direct for switching. Since we opened a joint account too we got an introductory bonus for that as well - happy days. The reason for switching was because we've taken out an offset mortgage with First Direct and I wanted to have the money in my current account offsetting the mortgage (TheBF has his current account offsetting against the mortgage in the same way).
I also received some income from the profits on the sale of my house in May, which has gone straight into my Savings Stash to help cover future expenses.
I had more business expenses refunded this month, for business insurance purchased (£327.95). I also transferred funds from Paypal into my current account during June for eBay sales which I made earlier in the year.
My monthly income target (as noted in my FIRE Targets for 2016) is set at £3,332 per month, so I've continued to achieve that through April, May and June. BIG TICK!
Expenses - Apr to Jun 2016
Apologies for the tiny font size in this insert, it's the largest I could make the text while still fitting the whole table in!
Key points of note:
Household expenses were dramatically less in June because we moved house at the end of May and so I had less utility bills for my old house, and not all bills had started for the new one. Things will start to get back to normal in July
My car insurance was due in April which came out of my Savings Stash, but due to the house move I then had to pay more when I changed my registered address. Strangely the insurance is more expensive at our new house than at my old house which was on a busy road near a roundabout
I had some rare spending on clothes in June because I started playing badminton again and realised that I needed new kit to wear (my old sports clothes were long gone)
In April I went to the hairdressers to get my hair coloured and re-styled. Since it's quite expensive at my current salon, I only go about 3 times a year and I save up for it in my Savings Stash. I may try to find a cheaper salon in the coming year
Now that we're in our new house we've had some office and bedroom furniture to purchase. TheBF works from home so it's important that we have an office that he can work from. I have a personal aspiration to start working from home permanently within the next couple of years so I wanted to make sure that I also had a nice desk to base myself at. I used my Savings Stash to cover my portion of this one-off expense, and we're both very happy with the end results
I've begun experimenting with income generating activities since my time off earlier this year. These have involved a certain amount of investment up-front to get me going. The two I've tried so far are Kindle publishing and Matched Betting
SAVINGS STASH VERSUS MONTHLY INCOME
Here's the split of how my expenses were covered from my Savings Stash (highlighted in yellow above) and from my monthly income:
Savings - Apr to Jun 2016
Subtracting my expenses (excluding expenses covered by the Savings Stash) from my income for each month I can see what I've got left to save into my Savings Stash and Freedom Kitty:
So my overall percentages of income saved each month are 48.73%, 64.22% and 77.39% respectively.
In terms of my savings rates into my Freedom Kitty (which will fund me in the 7 years between becoming financially independent at age 50 and being able to withdraw my personal pension at age 57), this is where I feel there is room for the most improvement. April and May were particularly low at 12.93% and 10.51% respectively, I think this is due in large part to going through the house move process where we spent more money on eating out for convenience, as well as various house related expenses.
My 2016 monthly target for savings into my Freedom Kitty is £1,000 per month. I'm pleased that I managed to exceed this target in June, but my monthly average to-date is £839.27 so I have some catching up to do if I'm to successfully meet this target for the year.
My Savings Stash usage looks like this for the 3 months:
So that's a pretty big catch-up, and I think this particular post has taken me the longest to write of all the posts I've done so far! I'm pleased to have done it though because I would like a history of my progress to look back on, as far as I'm concerned it's time well spent.
Do you track income, expenses and savings? If yes, how's it going for the year?
Each month I publish the following regular progress updates toward achieving my second goal for 2016 which includes the pursuit of Financial Independence:
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 - Mar 2016
This is likely to be the last month I'll benefit from cashback for my direct debits from the Santander 1|2|3 account* (£12.10), because I'm changing banks in order that money in my current account can be offset against our new mortgage as we move house.
It's another nice month for interest at £37.53 which is due to the fact that I had the profit from my flat sale sat in my account until it was transferred to my ISA.
Income was further supplemented by an expense that I'd previously forgotten to withdraw from my Company account to cover costs associated with office working from home (£208). I also sold my fitbit on Ebay in February and withdrew the money from my Paypal account in March.
My monthly income target (as noted in my FIRE Targets for 2016) is set at £3,332 per month, which I've easily managed to achieve with £256.30 to spare - mostly thanks to the business expense repayment.
* 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 - Mar 2016
Points of note this month:
No council tax again because it's paid over 10 months rather than 12 by direct debit (not sure why, Councils seem to work it out this way for some reason)
I needed to pay the garage to fix and replace some of the wheel bolts on my car this month - I discovered they'd gone bad when I took my car to have the tyre replaced due to a flat a couple of months ago, this is exactly the sort of thing my Savings Stash is for (phew!)
My grocery bill was about £100 more in March than I spent in February, I need to keep an eye on this moving forward - it would be nice to try to keep this cost down a bit if I can. Part of the reason for the extra cost was because I hosted a Ladies Dinner and Film evening at mine, this is a monthly thing I do with 4 of my family/friends, so every 5-6 months it's my turn to host
March was a busier month for me entertainment wise, we took Mum out for a nice Mother's Day lunch, I had a trip to Cardiff visiting a friend and I went out for St. Patrick's Day with friends
My Savings Stash covers birthday and Easter expenses. I also used it to get a certificate for my gas appliances which I needed for my house sale
My cash spend was the same as last month at £40
SAVINGS STASH VERSUS MONTHLY INCOME
Here's the split of how my expenses were covered from my Savings Stash (highlighted in yellow above) and from my monthly income:
Savings - Mar 2016
Subtracting my March expenses (excluding expenses covered by the Savings Stash) from my income for the month I can see what I've got left to save into my Savings Stash and Freedom Kitty:
The overall percentage of my income I've been able to save is 50.01%, that feels like a pretty solid savings rate again this month.
As I mentioned last month, the savings rate I'm really interested in is the amount going into the Freedom Kitty which is what will fund me in the 7 years between becoming financially independent at age 50 and being able to withdraw my personal pension at age 57. At 26.47% the Freedom Kitty rate is lower than I achieved last month (31.46%), but I'm not going to worry about it too much because I was only £50 short of my £1,000monthly target for savings into my Freedom Kitty.
My Savings Stash usage looks like this for the month:
As well as the usual money in and out, I decided to shift some of my emergency funds from the Savings Stash to my Freedom Kitty so that I could take full advantage of my ISA allowance for the 2015/2016 tax year, you can see this reflected in the table as the £1,123 out.
Well, after my second month of tracking my income, expenses and savings rate I'm feeling pretty pleased with how things are going. On the whole I think I've managed to keep my expenses reasonably low (low for my normal spend rate anyway) and now that I have made a plan for how to get to FI it's really nice to document how I'm getting on with achieving it on this blog.
Did you have any last minute dashes to shift money around for the tax year end? Did you fill your ISA allowance? This is the very first year I've ever filled my ISA allowance and I have to say, it feels good!
Each month I will be publishing the following regular progress updates toward achieving my second goal for 2016 which includes the pursuit of Financial Independence:
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!
SAVINGS STASH
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...
