One purpose of this blog is to document my progress as I work towards financial independence and share what I’ve learned in the process of gaining control of my finances.
While I’ve been using a budget (shoutout to You Need A Budget!) for over two years now, 2016 was the first year I tracked every purchase. What I ended up with was a great deal of insight into what I spent money on, when I spent more, and how seemingly small purchases really do add up over the course of a year. It also helped me have a clearer look back at the previous year and think about whether or not my spending really aligned with what I value in life. Finally, it gave me a lot to think about going into 2017 – progress I’d made and what progress I want to make and things I’d like to do differently.
Starting this month I’ve decided to post a monthly financial update. I’m not going to list every spending category but instead focus on the percentages of my income dedicated to Expenses, Savings, and Debt. I’ve organized my budget and my finance tracking like this for a while now and for me it’s the easiest way to see where my income is going. It also works for the times I go back and forth on including debt repayments as part of my savings rate or leaving them separate. After spending most of my twenties working to pay off student loans I have a good feeling the second those suckas are paid off they’ll become transfers to a savings account or something. At the end of the day I’m really just focused on keeping my expenses around or under half my income.
- Values are post-tax. I’ve gone back in and added health insurance and 401k contributions.
- Under Savings I have a section labeled “Carryover”. I use YNAB, a zero-based budgeting program, which means that even if I allocate all my income it doesn’t necessarily get spent. YNAB also encourages you to save for big expenses throughout the year and eventually live on last months income. It’s short-term savings that I plan on spending so I feel like a separate section under Savings is the best place for it.
Monthly Expenses – 45.09%
Save/Invest – 45.41%
Savings – 10.17%
Invest – 20.09%
Carryover – 15.16%
Student Loan – 9.49%
January was a 3-paycheck month with the last payday occurring on the 31st which means 3 health insurance deductions in January but I’ve allocated that income for February (these numbers are based off 2 paychecks). 401k contributions show up a few days after payday so those will post in February as well.
This year I’m making a better effort to allocate income each month for big purchases like vacations and some car maintenance I’ll have to do this year. I’m also going to be more diligent about tracking credit card rewards and credits.
At the moment I only have a few goals for 2017, and I’ll admit they’re not too flashy. As I mentioned in this post about deciding between debt and investing, after my heavily planned budget the rest depends on how I’m feeling month to month. As long as my living expenses stay at my desired proportion of my income I’m pretty flexible with the rest. That said I do have a few things floating around that I want see happen:
- Max out IRA for 2016. 2 years ago I rolled over an old 401k into Vanguard and contributed the full amount for 2015. While I’ll fulfill my contributions for 2016 in the next month or so, I would like to get in the habit of doing it throughout the year instead of waiting until it’s almost tax time to make a final decision.
- Net Worth Zero by the end of Q1 2017. Savings rate and Net Worth are probably the two numbers I think about the most. For the last decade of my life I’ve had a negative Net Worth. By the end of March I plan to be worth $0 and will turn my attention to become debt free once and for all.
- Keep living expenses for the year under 50%. Stretch goal is 35%. For reference I make a bit under the U.S. Median Household Income (about $52k/year in 2016). I plan to do this by putting more effort into increasing income and being efficient with my time when it comes to cutting expenses.
I hope you find these updates interesting. While I spend a lot of time talking about ideas and concepts in personal finance, at the end of the day I’m just a guy on the road to FI (and also a rhyme machine, it seems) who’s trying to make smart money decisions and connect with others.
Thanks for reading!
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