Finance

September 2016 Expenses

I’m going to preface this post by saying that September was a much better month than August. I went to the state fair (Food! And more food!), accepted a new (internal) position with my employer, and met up with friends for lunch and a visit to the Foshay observation deck. October is looking to be a great month too. Why? It’s my birthday! More to come on that later 🙂

On to the numbers…

Financial independence is really important to me and it’s currently my main financial goal. Like I mentioned in my August post, I’ve decided to increase my budget to allow for monthly spending of $1,667. This is still very reasonable, coming in at $20,000/year.

I’m sharing my monthly expenses to illustrate that it’s not difficult to have a great life while spending far less than the household average. I’m fully aware that I’m able to do this because my mortgage is paid off and I don’t have a car loan or credit card debt. It was a long journey to get here and now I’m reaping the benefits.

Although I use Mint and Personal Capital to keep an eye on all my accounts, I use Excel to track my expenses. I’ve found that this works best for me, since I can easily compare months and see a running total for the year for each category.

In early 2017 I’ll post my total spending in specific categories. In the meantime, if you have questions regarding how much I spend on groceries, my cell phone, etc., feel free to drop a note in the comments and I’ll happily provide those details.

Here are my September expenses:

I spent $443 on fixed costs (e.g. association fee, utilities, insurance, etc.). No surprises here. It was exactly what I was expecting, as fixed costs tend to be.

I spent $1,007 on variable costs (e.g. food, gas, house supplies, gifts/donations, etc.). I had a few expenses pop up: clothes for my interview, Amazon Prime renewal, and a furnace tune up. I also switched my cats to canned food. While I got a deal on my first order, the cost will be about $80 every four weeks going forward. Two cats on a wet food diet is not cheap!

Total spending for the month was $1,450. So far this year I’ve spent $15,139, with an average of $1,682/month, which has slightly exceeded my goal of monthly spending of $1,667 or less. All in all, a very reasonable month considering the few extra expenses.

Coming up in October, I’ll have an update on my diabetic cat and I’m celebrating my birthday month with various posts regarding how I feel about turning the big 4-0.

How did your September go? Any challenges?

Finance

Personal Finance Isn’t An All-Or-Nothing Proposition

I have to admit that one of my favorite things to do is read the comments for online posts and articles. Some people really hate the comments, but I find it interesting to hear all the different perspectives around the same post. There’s usually a wide range of opinions. Even though I know my thoughts on the post, it’s fun to read what other people think.

By far the best articles for comments are around bloggers who have already retired early (like this one, and this, and this). Aside from those, my favorite blogger website for reading comments is Mr. Money Mustache. If you are a finance blogger then you’re definitely familiar with him. If not, be sure to check out his website. He and his wife retired in their early 30’s BEFORE having a child. Impressive to say the least. For simplicity, I’ll be referencing MMM throughout this post, but please know that the idea I’m discussing applies to any blogger or personal finance article.

The reason why this is my favorite is because MMM takes a strong stance regarding ways to improve your finances and he’s very outspoken about it. Most of the comments are from people who wholeheartedly agree with him (and often defend him). But there are a few who disagree with MMM’s stance or question how viable it is.

What strikes me most about the comments that question MMM’s ways is that many seem to think that if you can’t adopt all the ideas, then it’s not worth making any change. Or if one idea isn’t practical then the entire idea is impossible. Maybe this is a reflection on each person’s individual outlook on life, or maybe we become jaded as we get older. Regardless of the reason why people feel this way, it’s important to remember:

Life isn’t an all or nothing proposition, so why do we treat our finances that way?

In no other facet of our lives would we have the perspective that if one aspect isn’t how we want it, we should give up altogether. For example, if your job responsibilities include a few items that you don’t care for, you probably won’t quit your job. Or if your kids aren’t turning out exactly how you want them to be, you wouldn’t give them up and quit parenting. So why do we treat our finances differently? Just because we can’t do something exactly how someone else has done things doesn’t mean we should give up on trying to better our situation.

I’m a by-the-books kind of person, in that I am fine working within a formula if it’s proven to work. After all, I’m not out to reinvent the wheel, so why not follow the path of someone who has already achieved what I’m currently striving for? But it seems like people new to the idea of early retirement, high savings rates, and frugality decide that it’s not worth trying if they can’t embrace the exact path that led someone else to that end result.

By all means, I’ll admit that MMM has some ideas/methods that may be hard to implement. For example, he suggests ditching the car and biking to work instead. That doesn’t work for me for two reasons: 1. I work 20 miles away from home (which MMM would take issue with anyway) and 2. I live in Minnesota, home of -20 degree (-40 degree wind chill) winters. It’s just not practical or safe. But this doesn’t mean that I don’t find other ideas from him that I can incorporate into my life and finances.

Instead, we should be adopting the ideas that work for our lifestyles. No one needs to live a life identical to MMM or any other blogger. We should be living the lives that best suit us instead. Rather than focus on an all or nothing route, we should be incorporating changes that improve our situation but still fall in line with our lifestyles. Over time, you can make more changes as your lifestyle evolves.

All I ask is that you read blog posts with an open mind. What one person is doing may not be suitable for you, but it doesn’t discredit the idea of early retirement or a high savings rate as a whole.  Please don’t treat your finances as an all or nothing proposition. Even small changes throughout time can make a huge difference.

Finance · Lifestyle

What’s Your Personality Type?

Last week, Business Insider published an article discussing how your Myers-Briggs Type Indicator influences your average pay. Intrigued? Take the quiz here if you don’t already know your type.

My results were: Introvert (50%), iNtuitive (9%), Thinking (22%), Judging (28%) = INTJ. In short, this means that I tend to be vision orientated, quietly innovative, insightful, conceptual, logical, seeking understanding, critical, decisive, independent, determined, and pursuing competence and improvement. Scary how accurate these tests are! I’d say it’s pretty well suited for my career in accounting.

So what does that mean for my earning potential? According to the chart, it looks pretty good. If only I was an ENTJ, though! They by far have the highest average pay, due to their extroverted nature.

 

I’d be interested to see these broken down into types of careers — I’d bet that there are people in accounting/finance making at least twice what they show for ENTJ, especially as they move up the corporate ladder. It would be fascinating to see how an ENTJ in that field compares to someone who is in a different profession.

How did you score on the quiz? Does the description match how you perceive yourself to be? How much weight do you put on the average pay chart?

Finance

August 2016 Expenses

Was August a tough month for anyone else? It seems like I was dealing with one thing after the other, both at work and at home. I’m glad it’s September so I can move on and start fresh. There are some great things on the horizon so I’m looking forward to what this month holds. Next month’s recap should be a lot brighter 🙂

On to the numbers…

Financial independence is really important to me and it’s currently my main financial goal. With that in mind, I aim to spend an average of $1,500 or less each month so I’m able to invest and save the remainder. This equates to $18,000/year in total spending.

I’m sharing my monthly expenses to illustrate that it’s not difficult to have a great life while spending far less than the household average. I’m fully aware that I’m able to do this because my mortgage is paid off and I don’t have a car loan or credit card debt. It was a long journey to get here and now I’m reaping the benefits.

Although I use Mint and Personal Capital to keep an eye on all my accounts, I use Excel to track my expenses. I’ve found that this works best for me, since I can easily compare months and see a running total for the year for each category.

In early 2017 I’ll post my total spending in specific categories. In the meantime, if you have questions regarding how much I spend on groceries, my cell phone, etc., feel free to drop a note in the comments and I’ll happily provide those details.

Here are my August expenses:

I spent $437 on fixed costs (e.g. association fee, utilities, insurance, etc.). No surprises here. It was exactly what I was expecting, as fixed costs tend to be.

I spent a whopping $1,964 on variable costs (e.g. food, gas, house supplies, gifts/donations, etc.). Yeah, this was completely unexpected and totally busted my budget for the year. My cat went in for a dental cleaning and ended up having 8 teeth pulled! It wasn’t cheap but his health is important so it had to be done. I spent over $1400 on the cats this month, when I was expecting to spend around $180. Outside of that, my expenses were mostly what I was expecting, although I did make a donation and buy a gift this month, which weren’t entirely planned.

Side Note: If I didn’t have the cats, my variable spending for the month would have been only $479. I see value in having my cats around, so this additional cost is worth it to me. If you are considering a pet, please take into account all possible expenses to ensure that you can truly afford it.

Total spending for the month was $2,401. So far this year I’ve spent $13,689, with an average of $1,711/month, which has exceeded my goal of monthly spending of $1,500 or less. I won’t hit my annual expenses goal of $18,000 due to all the vet bills this year. Hopefully there aren’t any more surprises so that I still come in at a very reasonable $20,000 in total expenses for the year.

With all the cat expenses this year, I’ve rethought my budget and will be adding $2,000 to the annual budget going forward. With both cats getting older, there’s a greater chance of large vet bills so it’s probably wise to factor that into my budget. Besides the additional vet visits, my cats will likely need to be switched to canned food going forward. Nothing cheap about that!

Best surprise this month? I met up with two friends at a Caribou Coffee and ordered a medium decaf. Since they didn’t have any already made, they didn’t charge me for it. They explained by saying that I shouldn’t have to wait 5 minutes for something they should already have on hand. It was only a couple of dollars, but a really nice gesture, which you don’t usually see at the larger chains. Thanks Caribou!

How did your August go? Any challenges?

Finance

July 2016 Expenses

July was a great month: I saw friends every weekend, did the Color Run 5k, saw The Secret Life of Pets, went to the arboretum for the first time, and met a friend’s newly adopted kitten. Needless to say, the month flew by. The summer goes by so fast. Can’t believe it’s already August!

On to the numbers…

Financial independence is really important to me and it’s currently my main financial goal. With that in mind, I aim to spend an average of $1,500 or less each month so I’m able to invest and save the remainder. This equates to $18,000/year in total spending.

I’m sharing my monthly expenses to illustrate that it’s not difficult to have a great life while spending far less than the household average. I’m fully aware that I’m able to do this because my mortgage is paid off and I don’t have a car loan or credit card debt. It was a long journey to get here and now I’m reaping the benefits.

Although I use Mint and Personal Capital to keep an eye on all my accounts, I use Excel to track my expenses. I’ve found that this works best for me, since I can easily compare months and see a running total for the year for each category.

Here are the details:

I spent $482 on fixed costs (e.g. association fee, utilities, insurance, etc.). No surprises here. It was exactly what I was expecting and finally returned to a normal level.

I spent $1,026 on variable costs (e.g. food, gas, house supplies, gifts/donations, etc.). This is a little higher than expected but there’s a good reason why, mentioned below.  My groceries also came in higher, as I try to eat more fresh food and develop a meal plan that reduces food waste.

My favorite purchase this month was a new laptop for my parents. They’d been using my old computer, now more than 10 years old, so my brother and I decided it was time for a new one. I bought it and my brother did all the configuration, since he’s our IT guy. It makes me happy that we can give this gift to our parents.

Total spending for the month was $1,508. So far this year I’ve spent $11,288, with an average of $1,613/month, which has exceeded my goal of monthly spending of $1,500 or less. This was expected, due to some annual costs being due during the first few months of the year, and my monthly expenses should remain at/below the $1,500 threshold for the rest of the year, with the average slowly coming back down as the year progresses.

For my long-term goals, I’m currently 46.7% of the way towards financial independence, but 41.2% of the way towards my more conservative early retirement goal.

How did your July go? Any challenges?

Finance

Best Way to Start? Baby Steps

Money is daunting to most people. There a few who are gifted to be able to understand — and be interested in — the mechanics of personal finance without trying. For the rest of us, it takes some effort to get our finances in order and to constantly work on keeping them that way. I’ve read so many personal finance books over the years that I lost track of just how many a long time ago.

Sometimes I feel like I cheated by starting a blog after all my debt was paid off. It paints an incomplete picture of my journey, and sometimes I worry that people with think that I never made mistakes or haven’t had to try very hard to get to this point. I won’t go into detail about all my debt, but will tell you that at one point I had credit card debt, a car loan, and a mortgage all at the same time. Of course I had very little, if anything, saved. After all, how can you save any money when it’s going towards debt and interest?

This post is to offer some hope if you’re in the same place I was. I’m proof that you can dig yourself out and turn things around without much effort. The key to doing so is baby steps so you don’t become overwhelmed. I’ve found that it’s much easier to focus on one goal at a time and then move on to the next one, rather than try to do everything at once. It’s all about the small victories to keep you motivated. Don’t compare yourself to anyone else. Just do the best you can.

Dave Ramsey talks about baby steps in his book, Total Money Makeover. If you haven’t read it, this is a great place to start. It’s readily available at the library and there are plenty of used copies being sold online. If you want to cut to the chase, the steps are listed on his website (free!) and you can see them here. I know some bloggers would disagree with some of the steps, but this is very similar to the route I took (minus the step about funding your kids’ college funds).

There is light at the end of the tunnel. Never give up. Today is the day that you start turning things around. Know that there’s an entire community of personal finance bloggers who are cheering you on 🙂

Finance · Lifestyle

Do Your Principles Get In The Way?

Today’s post isn’t so much about money as it is about how we tend to live our lives. I’ll tie in a financial reference but really wanted to write about this as a way to improve your life in another way.

Listen, I’m all for principles. And in an ideal world, everyone would live and interact with people in a respectful way and live each day with integrity. But it seems like we let principles get in the way of our happiness. Not sure what I mean? Here’s an example:

My commute is rather long, and with it being road construction season, it’s almost twice as long as it normally would be. This gives me a lot of time to reflect on various things, as well as observe human behavior. There’s something about Minnesota drivers that most people out-of-state don’t realize: we’re horrible at merging. The general nature of Minnesotans is to plan ahead. While this is a great quality to have, it creates confusion in construction zones, where one lane ends and the drivers need to merge into another lane.

If you live outside of Minnesota, the answer to this is obvious: zipper merge! However, it’s asking a lot of Minnesotans to do this. Most drivers know where they’re going and have already anticipated the lane ending so they’ve changed lanes at least a half mile before the lane actually ends. This causes some passive-aggressive driving, where those drivers will either start to drive in both lanes (!) or they refuse to let drivers in when the lane ends, which would be a proper zipper merge.

This behavior is fascinating to me for one simple reason: If these drivers would simply slow down to allow enough space for drivers to zipper merge, traffic would keep flowing. Instead, it causes more delays and close calls with near accidents. Better yet, all lanes should be used to reduce the slowdown in traffic even more.

Yes, ideally, drivers would all act in the way that you see fit. But this principle is getting in the way of traffic flowing in a normal manner, preventing people to get to their destination faster. This doesn’t just apply to merging, but also to any instance where someone needs to change lanes. I’ll never understand the people who don’t simply let them in. Even if you don’t agree in the way they’re going about it, keep traffic flowing by slowing down a little and just let them in.

While this may seem like a rant about driving, it’s just an illustration. Whenever we disagree with the way someone is doing something, and react in a way that is counterproductive to the best result, we’re letting our principles get in the way.

How can this relate to finances?

  • Do you resent the 1%? You should be trying to become of them instead. Or at least read this.
  • Think corporations are corrupt, preventing you from investing any money? Keep your investments basic and only invest in index funds, across the entire stock market.
  • Disagree with the tax code? Do some research to make it benefit you instead.

It’s important to have principles but don’t let them interfere with your happiness. Anytime you see yourself getting upset in your reaction to another person or event, ask yourself if your principles are getting in the way and find a more productive way to respond instead.

Remember: You can’t control another person’s behavior but you can control your reaction to it.

Finance · Lifestyle

Happy Now, Sad Later

I have a confession: I’m a hoarder. Are you like me? Does this sound familiar?

Here’s just one example of my hoarding tendencies:

Rather than accrue vacation and sick time, my employer doles out paid time off (PTO) once a year to each employee on his/her anniversary date. So every year, I look at my calendar and start by marking the days I definitely want to take off — my birthday, the day after Thanksgiving, time in December between Christmas and New Year’s, etc.

Back before my cat became diabetic, I was taking only one trip with friends each year. That requires just a few days of PTO, so I’d be left with huge chunks of time off that I didn’t know what to do with. My PTO renews in May so this has been on my mind a lot lately. And with my cat requiring so much care, I won’t be taking any trips this year. I’m just not comfortable leaving him in the care of someone else.

Do I risk it and take random days off over the summer, even though I don’t have specific plans? Or should I hold on to my PTO in case I need it in the late winter/early spring, before my PTO renews?

Inevitably, I end up using a sizable amount in March and April. This year that amounted to 7 days. I try to have at least 5 days banked in case of an emergency but somehow I managed to save even more days than usual.

There are usually days where it’s tempting to use a day of PTO as a mental health day (as my mom likes to say). When I think about doing so, the phrase, “Happy now, sad later” always comes to mind. It’ll make me happy in that moment but I’ll be sad later if I want to use my time off then. Hence, my hoarding tendencies. It’s a fight between instant and delayed gratification.

There are ways for hoarding to work in our favor, though. Money hoarded and invested can lead to a comfortable retirement, or even early retirement. For anyone who is interested in retirement, we have to fight the idea of being happy now (by spending all our money) to prevent being sad later (by working the rest of our lives) We know that there’s a much bigger reward awaiting us.

It took a long time for me to understand this concept, but now I’m happy to be a hoarder, by saving around 70% of my take home pay. This will allow me to retire around age 50, rather than waiting until 65 or 67. Hoarding isn’t all bad, right?

Do you have anything that you hoard to prevent “happy now, sad later?”

In case you’re wondering, I got that phrase from the TV show King of Queens. Doug was using two frosting packets on one Toaster Strudel and he said, “Happy now, sad later,” since one strudel in the box would end up without a frosting packet.

Finance

Saving is Exponential

I recently read Jim Collin’s new book, The Simple Path to Wealth, and there’s one section of the book that I wanted to write about because it’s something that very few people understand or even realize. Jim also writes about this idea on his website, and you can read about it here.

Saving is exponential for this reason: It’s the idea that every dollar we save earns more dollars, which in turn earns more, and so on and so forth. This is known as compounding. Most people see the negative side of this, through debt, where the interest owed keeps growing the longer the balance remains. Rather than let compounding work against you, why not take action to let it work for you?

I love this concept because it illustrates how your money works for you, rather than you working for money. This is an important concept to early retirement because the expectation is that, over time, the account balances will actually grow even though you’re withdrawing money from them. The key to this is to be flexible in your withdrawals, adjusting for market performance.

The concept of compounding is the reason why you should try to save as much money as you can. For every dollar you don’t spend, you can save it. In turn, that saved dollar will compound over time and eventually turn into $2, then $4, and so on. This is calculated using the Rule of 72. To determine how quickly your money will double, divide 72 by the interest rate/rate of return and that will calculate the number of years until your money is doubled. For instance, if the rate is 9%, it’ll take 8 years for your money to double. And that’s without adding another cent!

Because interest rates on savings accounts are so low — and actually negative when you factor in inflation and income tax — your best bet for a real rate of return is in the stock market. But you need to make sure that you don’t need that money for 5-10 years since the market fluctuates often (as we saw with Brexit). For short-term savings, a bank account is still your best bet since the importance lies in liquidity and not growth. Bond funds are your other option, if you’re absolutely determined to have the money invested in some form.

Compounding is a powerful force and benefits those who are young, with time on their side. As they say, the best time to start was yesterday and the next best time is today. Don’t waste any time in letting your money work for you.

Finance

June 2016 Expenses

It’s officially been one year since I started blogging! While I originally started this blog as a one-stop-shop for my friends who ask me questions about personal finance, I also found an incredibly welcoming community of bloggers. Every day I’m impressed with how encouraging and supportive other bloggers are. A special thanks to everyone who has ever commented on any of my posts. I hope that anyone who looks at this site finds value in it. If there are any topics you’d like me to write about, add a comment below and I’ll do my best.

This month I read The Simple Path to Wealth by Jim Collins. If you read other personal finance blogs, I’m sure you’ve seen a lot of reviews posted so I won’t go into detail about it here. I will say that the information is almost identical to what he has posted on his site but laid out much better. Unlike a lot of finance books, it’s easy to read, with many personal stories to help illustrate certain points. It’s the type of book I want to buy 20 copies of and pass out to all my friends.

Ok, let’s move on and talk money….

Financial independence is really important to me and it’s currently my main financial goal. With that in mind, I aim to spend an average of $1,500 or less each month so I’m able to invest and save the remainder. This equates to $18,000/year in total spending.

I’m sharing my monthly expenses to illustrate that it’s not difficult to have a great life while spending far less than the household average. I’m fully aware that I’m able to do this because my mortgage is paid off and I don’t have a car loan or credit card debt. It was a long journey to get here and now I’m reaping the benefits.

Although I use Mint and Personal Capital to keep an eye on all my accounts, I use Excel to track my expenses. I’ve found that this works best for me, since I can easily compare months and see a running total for the year for each category.

After an expensive first 5 months of the year, things are finally returning to normal. Here are the details:

I spent $421 on fixed costs (e.g. association fee, utilities, insurance, etc.). No surprises here. It was exactly what I was expecting and finally returned to a normal level.

I spent $851 on variable costs (e.g. food, gas, house supplies, gifts/donations, etc.). I bought more supplies for my diabetic cat and had my dryer vent cleaned by a professional. The vent goes up through the roof so it’s well worth the money to have someone climb onto my second story roof since I won’t do it myself. No other large expenses — it was a very quiet month.

The purchase that I’m most excited about? It was a fundraising campaign for one of my favorite indie bands so they can record their newest album. The hardest part is waiting a few more months to receive it. They’re super talented so be sure to check them out if you’re a music fan.

Total spending for the month was $1,297. So far this year I’ve spent $9,780, with an average of $1,630/month, which has exceeded my goal of monthly spending of $1,500 or less. This was expected, due to some annual costs being due during the first few months of the year, and my monthly expenses should remain below the $1,500 threshold for the rest of the year, with the average slowly coming back down as the year progresses.

For my long-term goals, I’m currently 43.8% of the way towards financial independence, but 38.7% of the way towards my more conservative early retirement goal. These are both up over last month, mainly due to my high savings rate. Overall, my rate of return for the month was about 2-3% across all my accounts.

Brexit had a lot of people worried, but the US markets bounced back within a week. It’s a good lesson in staying the course and paying little attention to events like this. I did take advantange of the markets being down over two business days to rebalance my accounts by reducing my bond holdings and increasing my equities. I wanted to buy more shares before the market went back up and I just squeaked by. The market rebounded much faster than I expected!

Keep in mind that you likely aren’t tapping into your investments anytime soon, and the number of shares you own remains the same. These are unrealized losses — they aren’t real unless you sell your shares while the market is down.

How did your June go? Any challenges?