My savings rate and expenses – May update

Health expenses are really easy to underestimate and I think that’s one of the biggest worries I’ll have whenever I actually make the decision to quit the work force.

It’s not just the insurance premiums that will be a bother but also the deductibles you have to meet before coverage kicks in. Both are sure to rise quite a bit by the time I’m ready to retire and losing those employer contributions towards my premiums will certainly send my healthcare related expenses soaring.

The problem with healthcare expenses is that they’re so difficult to predict. I can tell what my premiums will be for this year and I can tell what my maximum out of pocket expenses will be for the year but predicting actual costs which will likely fall between that premium only and premium + out of pocket max level is a total crap shoot.

I can’t even began to think about where to start figuring out what sort of premiums I’ll be looking at by the time I’m 40+ and whether or not I’ll even be able to get insurance at that point.

The timing of the payments is another question mark as well making it difficult to accurately budget for them on a month to month basis. I had some health care bills in May for doctor visits that happened months ago and my fiancee has some bills still coming in for an accident that happened ages ago.

I’m not sure exactly what I’m trying to say here besides healthcare kinda sucks and is the biggest question mark in early retirement for me.

My main annoyance with healthcare when you have a high deductible plan is that it’s really hard to gauge the actual costs of something when you visit a doctor or have some tests done especially since you often get billed multiple times for one visit. I’ve had situations where I’ve had a test done and gotten three bills for it, the test, the doctor who administered the test and then the reading of the test. I work in insurance and I’m still confused or annoyed by half the stuff that I see on my insurance bill.

I’m lucky enough to have the extra cash to cover my deductibles whenever I need to have something done or when I want to visit a doctor but I feel for those who are struggling to get by and can’t even afford to use their benefits because they have a massive deductible they have to hit.

I guess one positive thing from my perspective about having SOME expenses any given year is that it gives a more realistic picture of what my budget will actually be when I retire. I can easily see a 10k bump in yearly expenses after retirement for a single person if one doesn’t properly account for the premium and deductibles and has some new medical problems. Even now with my medical premiums being partially covered by my employer, I can still be dealing with a 5k bill for premiums and deductibles once the year is done.

The best I can do at this point is max out my HSA, take care of myself and get as prepared as I can be for whatever comes around when I’m ready to quit work. Hopefully my fiancee(wife at that point) will still want to work and I can jump on her insurance plan! It’s always better to get some form of subsidization than pay full boat.

If anything this year made me realize that I probably need to up my expected costs for healthcare quite a bit in my retirement plan.

If you read my last update, you know that April for me was a mediocre savings month as I had some travel costs for my awesome trip to Nasvhille and May is no different but it’s healthcare costs that are the culprit this month! It’s not a surprise as I knew they were coming having visited some doctors in the past few months but the surprise was the actual cost of the trips.

I hadn’t planned on all these medical expenses when I set my goals for the year so I’ll probably be lagging a bit in those areas but it is a good wake up call to have early in the retirement planning years versus realizing it much later when it’s harder to adjust for it.

Let’s take a look at the gross income breakdown for May.

gross income savings rate

April was mediocre and May is even worse! I saved 19.4% of my gross income this month with most of my money going out the door in the form of higher expenses.

In fact, I think this was the highest expense month I’ve had since I started tracking this metric. It wasn’t all medical costs but they certainly played a big part in that.

Adding my employer contributions to the 19.4% savings rate bumps it up to 24.36%.

This is below my target but it’s still nice to be able to save money during a month where my expenses increased due to healthcare costs.

Let’s take a look at my savings rate.

savings rate

The savings rate for the month of May was 26.6%.

That regular savings rate jumps to 33.3% with employer contributions. I know that the savings rate month to month will fluctuate quite a bit but two months below 30% in a row will make it hard for me to hit my goals for the year.

Let’s take a look at my expenses.

expenses, tracking expenses

As usual, rent is the biggest expense but the aforementioned healthcare costs jump into 2nd place with a bang.

This was due to three separate bills for some doctor visits and tests. I think I’ll probably have some more expenses before the year is out so it’s likely that there’ll be some overhang here for a while from that area. Insurance certainly does make it more bearable but it’s still quite an impact on the savings rate. I do deal with some chronic medical conditions that will require testing and visits every so often and that’s likely to have a bigger impact as I get older. Luckily, it’s nothing terribly bad and I’ll gladly take the hit to my savings rate as an ounce of prevention, treatment and testing is worth the cost to make sure it doesn’t change into something life altering.

In 3rd place, I have other savings. Some people might see this as something that should be included in the savings rate as it’s mostly money that’s going towards a future down payment on a house; something that will positively impact my net worth and future cash flow.

However, to me it doesn’t directly impact my ability to retire early nor does it improve my cash flow production in the near term, nor does it hit my main financial accounts. It’s just a deferred expense to me even if it’ll eventually improve my fiscal position. Still, I figure I should track and adjusted savings rate for those that want to see it and that number is 26.6% for the gross income rate and 36.5% for the savings rate.

My car expense is next and is simply my car payment. I’m hoping I can get that paid off before the end of 2018 especially if I throw some extra money at it. That extra cash flow would be pretty awesome to see and would certainly improve my savings rate.

I was pretty surprised by my restaurant expenses this month but I guess the fiancee and I went to lunch a few times too many although they were all good meals so I don’t feel too bad about it. Restaurants were right above groceries for the month so it’s clear that I could probably tighten up the hatch on the eating out part of my life but it is something I really enjoy. In fact, I had a pretty great brunch right just the other day that I’m still thinking about.

There’s nothing exciting in the rest of the stuff – just normal monthly expenses. I had a few birthdays and events that required some gifts and I’m always eager to make other people happy.

On a side note, I really need to check on my internet bill and see if I can get that reduced as it seems to be going up every six months these days.

June is up next and an exciting month from a dividend perspective. One of my funds that normally doesn’t pay until December paid a small dividend and also a long-term capital gain so I’ve already received a nice 1k+ payment in one of my tax-advantaged accounts. That’s always nice to see although most of it was the long-term cap gain which I won’t track as a dividend but it’s always nice to get more shares. The rest of the cash should starting flowing in soon and will be reinvested into more securities to keep that growth coming.

June is also a three paycheck month which should help the savings rate although I also had some added expenses in the form of an engagement ring which will reduce it just a bit!

How was your savings rate for the month. Any unexpected costs derail it?

 

3 thoughts on “My savings rate and expenses – May update

  1. Some months are like that for our family, too. And June is going to be one of them. We have to put a new roof on our house, and it costs a whopping $14,000! So we’ll have a negative savings rate this month, if you look at purely income minus expenses! But luckily we’ve been saving for this big project. Like you, I don’t actually count the money saved in my savings rate, because it is future spending. Ahh, the joys of home ownership–enjoy your time renting! It is a lot more worry-free! 🙂

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  2. Not sure if anyone in the US can figure out the medical question as it’s evolving as we speak. Part of the thought process should include potential pre-existing conditions (including possible pregnancies). Being at the other end of the spectrum carries the risk of unbudgeted premium increases based on age. Just when you think you’ve got it figured you see another potential budget disruptor in tax reform on the horizon. So enjoy your lunches and save what you can as the future will always bring unexpected twists and turns.

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  3. Hi timeinthemarket,

    For I’m just assuming that my current living expenses (once adjusted for inflation) will continue to apply during retirement. There will be some significant savings (no mortgage, one or even no car etc) but these might be cancelled out or reduced by higher costs in other areas such as healthcare.

    Assisted living for the really longer term is another area that is concerning too, but perhaps selling the house would pay for that. It’s hard to say right now and even the medical insurance landscape that far out is hard to predict.

    Anyway, a 20% saving rate is still nothing to be ashamed of – it all adds to the long term value. Hopefully higher income in June will swing the pendulum back in the other direction. May was fairly similar to April for me – nothing too exciting I think.

    Congrats on the engagement ring!!

    Best wishes,
    -DL

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