I’ve talked about some expenses I accrued or planned to accrue in the past few months in previous posts and most of those hit in October.
That means October is the ugliest month by far since I started tracking and one where I barely managed to save anything. My pre-tax contributions proceeded as usual but my expenses this month outpaced my post-tax income. That means I had to tap into some cash to ‘cover’ the bills which negatively impacts my savings rate for the month.
This is by the far the biggest spend in any month since I started tracking but sometimes unexpected costs do come up and derail your savings rate for a month or two. I had an emergency with my dog that required an expensive visit to the vet, some medical tests for myself that were suggested and luckily didn’t show anything bad, some more vacation expenses and the more expensive major maintenance that a car needs every 30000 miles.
These four costs made up over 44% of my overall spend this month and aren’t exactly something that will repeat every month. However, emergencies and unexpected costs are something that has to be accounted for as I’m sure there’ll be more months like this in the future that will serve to remind me that budgeting month to month is difficult and unexpected costs can throw a month or two way out of whack.
I’m not too worried about having a bad month or two here and there as long as my overall savings rate remains in line with my targets. The true test will be seeing what this looks like after a full 12 months as that will give me a better look at how far off track I am(I have a feeling it’s a bit off) and if I have to make any changes to help me reach my targets.
Right now, I’m still in the testing and data gathering phase of this experiment so I’m not overly concerned about seeing a really bad month like this one because I know it’ll serve to make my data set stronger. It’s always good to have some expenses you didn’t plan for to give that baseline data set a more realistic starting point I might not have medical tests or emergency pet visits every year but there’ll probably be something unexpected any given year that I want to make sure to account for in my baseline projections.
Early retirement is all about making sure you have enough money to cover your projected expenses and this is all about getting a projected baseline that I feel comfortable with so that when I start seriously thinking about early retirement, I know exactly how much I’ll likely need every year in the future. I’ll want to make sure to add some fat to that number anyway but knowing that my baseline is reasonable and already accounts for some unexpected one-off costs will make me feel better about making that leap.
I’m still years off from that decisions and will have a lot more expense data to analyze once I get there but this first year is a stepping stone that still will contain valuable data. The reality of it all is that this is just one month of many on this journey so it’s not a big deal in the grand scheme of things. I’m not going to let one bad month or more ruin my day just like I won’t get overly excited over a good month.
I’m glad I have that mindset where I don’t get to upset about a month like this because this was a really bad month!
First, let’s take a look at the gross income breakdown.
Yikes, we go from a pretty decent 28% in gross income savings last month down to a measly 5.8%. This means I barely saved anything this month as my expenses ballooned out of control! What’s interesting about this month is that I actually received a small bonus which boosted my pre-tax savings contributions and actually made these numbers better than they could have been.
Employer contributions are an important plan of your savings plan and adding those in sends the gross income savings rate up to 10.8%.
Both these numbers are well below my 33% long term target on this metric.
Let’s look at the savings rate.
I hope purple is your favorite color because you’re seeing a lot of it here! Expenses as mentioned before were out of control this month which means a low savings rate of 8.2%. That number jumps to 15.1% when you add in employer contributions.
The big impact here the fact that my expenses eclipsed my post-tax income this month. Any shortfalls experienced in any given month are subtracted from the savings amount I track as they are a cash deficit for the month I have to cover out of my cash stockpile or on credit.
The long term goal is to have this number above 50% which has proven to be difficult so far which means that will need to be revisited after I get a full years worth of data. I’m either spending too much on frivolous things that can be eliminated or simply wasn’t realistic when setting my savings rate. End of day I want to maintain a comfortable quality of life that allows me to do some of the things I want to experience in life. I could certainly cut back on a lot of things and get to that 50% savings rate every month but it would mean avoiding a lot of things I really enjoy doing and I’m not sure I want to do that just yet.
Part of the journey to financial independence is the trip you make along the way and I want to make sure that trip isn’t something I’ll regret 15 years down the line. There’s definitely a delicate balance between spending too much and not spending enough and I’m still finding my way in that area. This month is no real indication of my spending getting out of control as a lot of these expenses couldn’t be avoided but the overall data set I’ll get through this whole process will help me analyze my spending habits and compare it to what I value most and see if there’s any areas I can cut back on to help boost my savings rate.
Let’s take a look at where all my money went this month.
We’ve got some new high cost areas this month!
Personal health comes down to some medical tests I had run in the past few months that I finally paid for in October. There were some bills I covered in the past few months and another small one I covered in November but the majority of the costs fell in October. Thankfully everything is good but it turns out that medicine in the United States is pretty expensive!. I did have HSA funds to cover the costs if needed but chose to use after-tax money to pay the bills and let the HSA funds continue to grow tax free. I did save my receipts though for future use.
Car Payment + expenses is the second highest category this month and that’s due to my regular car payment plus the 30000 mile maintenance which can be somewhat expensive.
Rent is 3rd and a smaller percentage than usual due to the higher overall monthly spend.
It also turns out that pets are pretty expensive especially emergency vet visits when the poor little girl is having urinary issues. My dog is the best thing around so I have no issues spending money on her well being but owners should definitely be aware of the costs associated with a pet when signing up for one.
Travel expenses and restaurant expenses round up the high cost categories as my extended weekend trip hotel bill fell into this month as did some fancy restaurant visits and general tourist costs.
Nothing out of the ordinary past that although this month marks the first time I paid for my Apple music subscription. I had been coasting on iTunes gift cards my girlfriend collected over the past few years for a while now but they ran out last month. I’m a big audiophile and love the accessibility of tiles that Apple music provides so I’ll likely stick with the service even though I have to pay for it going forward.
That’s it for this month’s update.
Yes, it’s a pretty bad month but such things will happen every once in a while so I’m not upset about it.
November is likely to be slightly better although Christmas expenses are just right around the corner and some may fall in November. The good news is that December is a 3 paycheck month for me which means some additional opportunity for savings.
I don’t have many extravagant expenses planned although I am in the market for a nice winter jacket. I’m getting tired of my general strategy of buying mediocre items on the cheap that don’t provide adequate warmth and break quickly and may actually spend a few hundred dollars on a buy it for life type of item this time. I’ve checked out a few jackets lately and have narrowed it down to a few. Hopefully I can find some black Friday or cyber Monday deals online that will limit the amount I spend.
Here’s to a wonderful holiday season for everyone! See you all in a bit for more updates. How was your savings rate this month; better than 8%?