Time in the Market Savings Rate Report – May 2018 – Getting Ahead on my Car Payments
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Car payments are on my mind lately. I bought a new car in 2014 with a standard 5 year loan. The interest rate is low(2%) but I’m the type of guy who likes not having debt. That means I’ve been throwing extra payments here and there throughout the years. $200 here, $300 there but it adds up.
Now, I’m suddenly a good year ahead of my payments and my car loan is down to ~$4000. When I see that and I know the end is in sight, I get pretty excited and want to add more to my regular car payments. That’s exactly what I did this month throwing another $750 towards my car loan to bring that total closer to $3000.
I know what you’re thinking. It’s only 2% so why not just let it ride for the full length and invest the money? There are a few reasons.
One is I already have excess cash in my portfolio so if I want to invest in anything I can. Two is that paying off my car loan with some extra payments means no debt! Three is that it’ll unlock extra cash flow much earlier and cash flow is always a good thing to have.
I like to run my income statement like a company. I’m all about the free cash flow baby! If I can lower my capex by eliminating debt then I’m all about it.
That’s especially true given that I may take on more debt soon in the form of a mortgage. I’m conservative and I’d rather have the extra cash flow even if it means trading some potential return for it.
I’d be less inclined to do this if this was a smoking market to invest in but I still have a hard time finding awesome values here as evidenced by my cash hoard. That means my focus is on clearing up this debt and unlocking future value in the form of decreased forced expenses. That’ll certainly help once my wedding expenses start to flow in towards the latter part of the year.
The thing that has allowed me to do this is a disciplined start to the year. I ended Q1 with a 50%+ savings rate and April was great as well so I have some leeway to spend more now and still potentially hit my yearly goals.
That means I can be more aggressive now, pay down my loan with some extra car payments then save more cash when that’s gone from my expenses. I know I have wedding expenses that will hit later in the year. The goal is to have the car loan paid off before September which is the wedding date so those months are more managable. We’ll see how that goes.
As I mentioned, April was a great month with a 55.8% savings rate so let’s see where I sit in May.
Gross Income Savings Rate
I saved 23.3% of my gross income this month. This number goes up to 28.26% if I include employer contributions.
That’s the second lowest month of the year after March but still an improvement over last year.
The long term goal is to save at least 1/3rd of my gross income. I’m on pace so far this year even if you include this month. However, the last few months of the year will include wedding and honeymoon expenses and that will likely mean I’ll fall behind. That’s why it’s good to have a nice lead going into those months.
The strong start also allows me to work on those car payments.
Now, let’s take a look at the savings rate.
My savings rate for the month is 30.99%. That number jumps to 37.61% with employer contributions.
May is generally not a strong month for me. It’s 2 paychecks and something always seems to come up. In 2015, the savings rate was 29.84%. Last year, it was 26.57% so it’s nice to see this year be higher despite the extra car payments.
After Q1, my savings rate was at 53.2%. April was above that but now May brings it down a bit.
June is still ahead and I’ve got 3 paychecks in June which bodes well for those results. It’d be great to go into the latter part of the year with a savings rate above 50%. That would set me up well to hit at least my 2018 bronze goals.
Related : My 2018 Annual Goals – the financial goal Olympics
Let’s take a look at where my money went this month.
Savings still reigns at #1 which is always nice to see but the car category jumps to #2 with the additional car payments.
This might be the case for the next few months as I work that car loan down to $0.
Rent and groceries are next as always and are two things I depend on to survive and be safe. Not much I can do about that. We have been looking for a house lately so if we do buy one, that category may see a big overhaul in terms of how much it costs. Houses are expensive here so it’s possible my mortgage will be above my current rent.
Side hustle/blog is up next and includes my yearly hosting fees for this blog. I think I’m at a spot right now where my book income probably covers most of my blog expenses. The blog, however, has made no money so far which is fine. This is not a money making venture. If do I make any money then 50% of the profit made from this blog will be donated to charity immediately. The other 50% will be invested in a separate account with the goal to have more to donate in the future.
I do plan for blog expenses to increase in the future. For example, I recently signed up for a Tailwind account to try expand my Pinterest audience which will show up as a cost next month. Right now, it’s helped double my monthly views on Pinterest and that has become my #1 traffic source this month. I’m very interested to see where it takes that traffic source from here.
Restaurants are next and include a few brunches with my wife to be. Health includes some supplements and a doctor visit to get a lump checked out. It’s always better to be safe than sorry and the lump was just some weird muscle tissue so things are good on the lump front.
Entertainment includes the standard streaming services like Netflix and Hulu. I also subscribe to Apple Music and bought some tickets to see the musical of the Lion King in a few months. Beyond that most of our entertainment has been hikes and visits with friends. The nice weather makes it easy to avoid spending money on entertainment and just spend time outdoors instead.
The rest are all common visits to my expenses list. I still can’t believe how much I pay for the pleasure of parking next to work! It’s more than I spent on home bills this month and that’s just outrageous. On the other hand, my health insurance is a lot lower than it would be if I didn’t have my job so I’m much better off in that regard.
Overall, this has been a pretty solid month given the added car expenses. If I hadn’t done that, that would have been a nearly 12% shift in savings rate. That means I’m doing better than last year despite forcing myself to spend more on my car loan. That’s a good sign going forward!
How was your May?
You seem to have a good plan but I’d recommend a better one might be to never ever buy a new car again and to buy your next (used) car with cash. I’m early retired, zero debt and could write a check for any car made but instead when I replaced my car last month I paid $7,000. Why pay $60,000 for a new sports car when the 2008 one I bought looks like new and can outrun most cars on the road? New cars are just such a ridiculously expensive and rapidly depreciating luxury that I agree with Dave Ramsey that if you don’t have a net worth north of one million dollars you can’t afford a brand new car. And if you are worth millions like me you still may not want to throw money away like that. My wife did buy a new car though, in 2006, and she is still driving it.
wealth from thirty
Nice work Time. I’m impressed with your Pinterest – it’s something I don’t yet understand but am hoping to get more into it with time. Also good news on the lump front. Those things can just be a source of worry that’s not needed in life!
May over at WF30 was pretty decent, and June is EOFY so that makes for a more compelling month. Sorting out taxes and whatnot will be interesting.
Keep up the great work bud.
As always love your visual styling. You seem to have everything under control and I applaud you for paying down your loan earlier. I would say keep it up.my friend and knock that doubt out of the park. The only debt we carry is our mortgage and we are making payments towards that as well.
Reverse The Crush
This is a really great report. Thanks for sharing the great visuals and break down of your savings rate. Nice job with your savings rate as well.
Overall, I only saved 14% of my income in June. It was less than my goal of 20%. I eventually want to bring it up to 50% but that’s after I get rid of my student loan. I understand that feeling you described of getting your car loan down to $4,000. The lower it gets the more I just want to pay it off.