There’s that proverb ‘when it rains it pours’ and it clearly applies to my savings rate in the past few months.
I’ve mentioned before that I had some unexpected medical expenses. Those sprung up right when my car insurance bill was due as well as a planned vacation to celebrate an anniversary with my loving girlfriend. The first two of those had an impact on my savings rate last month which was the lowest I’ve seen since I started tracking this. I fully expected those medical expenses to continue trickling in for the next month or two. I had already come into these two months with the reality of a relatively meager savings rate for September/October due to the vacation expenses(September/October) as well as some major maintenance on my car in October(30k mile checkup) but it looks like September was mostly spared as the medical billing took forever.
Low savings rate in any months suck but I was already aware of what’s coming and then I woke up last week to my lovely dog teddy having some unusual urinary incontinence issues which eventually developed into bloody urine and an emergency vet visit. That means that I now have a pretty sizable bill in October that will further kill my savings rate next month!
I love my dog(she’s keeping me company in my office right now as I write this) and being a responsible dog owner means doing everything you can to make sure your pets are comfortable and feel great so it was a no brainier to take her to a vet(a new one since my regular vet was closed) to make sure nothing major was wrong. Thankfully it was nothing major, the costs weren’t outrageous and she’s feeling great now after getting some medication to treat her infection but it was just another reality check around expenses that you don’t plan for too often that may arise during a year.
One thing that came out of it is that I added ZTS(Zoetis) to my watch list after seeing their name as the distributor of both the drugs that Teddy was prescribed by my vet. The fact a week supply for both meds cost nearly $80 made me realize that the veterinary game and all things connected to it are probably pretty profitable and worth looking into more deeply.
These unexpected costs in the last few months made me think about some things in regards to my search for early retirement. I know there are some people out there with a similar goal as me that have much lower cost expectations and can get by in the 20-30k/yr range and that’s certainly an option to consider but I’m starting to realize it’s probably not for me.
Not only do I like some of the finer things in life that make my normal budget a bit more than that but I also like having a bit of a buffer in case some unexpected costs arise like they have in the past few months. I haven’t had many medical issues in the past few years nor have I had any pet expenses beyond the maintenance costs that come with a pet and suddenly I’m looking at 3k+ in bills within a two month period.
This is the type of situation I would dread if I retired early, knew my portfolio was pretty finite and small and could only support a strict budget of 20k or even 30k/yr.
The whole point of this blog was to find out what I want to do with my life, when I want to retire and how much do I want to spend for the rest of my life and I’m starting to get a better idea of all of that. The one thing these last few months have made me realize is that I love the lack of stress that comes with having excess money to deal with the unexpected things that may arise. I am fortunate enough to be in a situation right now where I don’t even have to worry about spending extra money to make sure my dog is OK and I know that I want to be in that situation when I retire. I don’t want the stress of having to make choices around the health of my pets or myself because I’m on a strict budget due to retiring too early and not accounting for these costs(the medical expenses I incurred were more of a just in case suggestion instead of a you must do this type of thing).
I’m actually glad to have had these unexpected expenses this early on because they give me a better idea of the reality of life. I don’t know what will happen ten years from now but I am starting to realize that I probably want to have a pretty wide safety buffer in case my expenses suddenly spike up for some reason.
Not everyone is like that and can take the plunge without that buffer but I guess I’m a bit more risk averse than some when it comes to projecting expenses. I’m coming to realize that I like the idea of having a good deal more than I’ll likely need. I know that might push back my retirement age a year or two and I’m OK with that right now. That might change as I get older and more unhappy with work but for now, I think the path I’m on is one that I want to stay on even if it means my savings rate suffers a bit.
The other path that I could take when these types of situations arise is to cut back on other expenses and try to maintain a high savings rate. I could maybe even cancel my vacation. The concern there is that I also want to experience life and not just worry about making sure that early retirement is on track.
Early retirement is obviously the goal but so is living life in an enjoyable way while I get there and that means experiencing things with people I love even in the face of unexpected costs which may derail my savings rate goals for a month or two. That’s the reality of life, unexpected costs are part of it and I’m glad to be learning the impact of those costs now rather than later when I retire. It’s a lot easier to make adjustments now while in my earnings prime than later after retiring.
With all that said – September actually wasn’t as bad a month as I was expecting mainly because most of my expenses were pushed back due to the inefficiency in our medical system.
I might have gone to the doctor two months ago but somehow it takes months for the bill to get sent out to my insurance company, get back to the doctor and finally into my hands. My lab work bill for services that happened months ago still isn’t in my hands and I’ve actually reached out to Quest Diagnostic two times now to see when I’ll actually be able to pay it as it looks like my insurance already processed it. Making it hard for willing customers to pay their bills sure is an interesting business model.
First, let’s take a look at the gross income breakdown.
I was actually impressed by how good this month turned out to be but that was mainly due to the timing of my medical bills which I originally expected to impact this month. Most of them ended up being paid on October.
The gross income savings rate % this month is 28% which becomes 33% when I add in my employer contributions. That’s a big jump over last month’s 15.5% but still below my target of 33% before employer contributions.
I received a 5% mid year raise a few months ago that finally went into effect in August and this was the first month where both paychecks reflected that raise. My expenses were in line with the pre-August average so the savings rate actually gets a boost here due to the increased income. Taxes are trending up as an expense due to the increased income as well as the fact that I continue to decrease my 401k contribution % to make sure I don’t max it out before year end. That’s needed since there’s no true-up contribution at my company so I have to make a contribution in each pay period in order to get my match.
Let’s take a look at the savings rate.
My savings rate for the month is a pretty solid 38.6%. That number jumps to 45.5% when you account for employer contributions.
That’s not bad and actually my second highest month when you exclude July(3 paycheck month).
The goal here is to get this number to 50%+ on a consistent basis in the long run. I’m still a bit far from that so it’s something to work on in the upcoming year. Hopefully next year will see a natural bump in savings rate as my quarterly tax bill will disappear which will free up some extra cash for savings.
Let’s take a look at where my money went this month.
Rent continues to be the largest expense.
Half of my vacation fell into September and the other half in October so some vacation expenses are reflected here.
Restaurants see a huge spike as I ate in out in a lot of expensive places during my vacations. One of my big pleasures in life is fine food and I certainly indulge a bit when I travel. If I remember correctly, I think I paid more on the front end of my trip while my girlfriend paid more on the back end so my expenses may be a bit front loaded here and may drop off next month.
Travel expenses and entertainment were also up for the same reason. The hotel payment actually fell into October so travel expenses here are just parking/tolls and cash for expenses.
My nephew had his 2nd birthday this month as well plus there was the anniversary with the girlfriend so the gifts/short term savings category is a bit high this month as well. That also includes any additional dollars move into my short term savings account to pay the last of the quarterly tax bills in December.
The other spots are in line with prior months. The grocery bills were a bit lower this month as I was away from my home for a few days and ate out more.
It looks like my Comcast promotion also ran out as my internet bill went up this month. I’ll have to make sure to call them and see if I can get that reduced. It’s not like I have any other choice though if I can’t so I’m somewhat out of options there. I am not a huge fan of these internet NOT AT ALL MONOPOLIES that essentially leave you with one option in most areas. That means they can pretty much raise internet prices at will since who can go without fast internet these days and they will do so to make up for the increase in cost cutters.
That’s it for this months update. Actually not a bad month but I know October will be a blood bath with the amount of bills falling into that month. How was your savings rate this month?