Now that we’re already halfway through the year, it’s time for another budget review to see how well I flexed my frugality in the first 6 months of 2020. I actually never did a budget review for the latter half of 2019 since that was during the time when I was lax in updating the blog. So I’ll be going back to compare to the budget and goals I set after the mid-2019 review, and commit to not missing another one in the future. To rehash those goals:
- Reduce my spending in online shopping to $75/month by curbing impulse purchases of crap that I don’t need and only buying household goods and other necessities. Savings of $93/month.
- Reduce my spending on clothing to $50/month since my wardrobe is pretty established with high quality clothing at this point. Savings of $78/month.
- Pay off one of my two remaining student loans before the end of 2019. The loan has a current balance of $3,277. Savings of $51.53/month.
Alright! I actually did hit all of those goals before the end of 2019. I killed off one of my student loans, and I managed to cut down my spending on clothing and online shopping, as well as keep it down through today.
After going through all of my expenses, I’ve realized that I need to make a few changes to my budget in terms of adding additional line items for more accurate tracking. I ended up splitting all my car-related expenses back into individual line items; initially I thought that combining them looked cleaner but I think that was a mistake since it’s harder to see each category at a glance, and loses fidelity with tracking over time.
The green lines represent new items in the budget compared to the last review, and red represents ones that will be deleted moving forward. One of the new line items is to track expenses for our cat. Last time I did a budget he was a new enough addition that I left these costs mixed into other categories and wasn’t really thinking about it. I also added an uncategorized line for stuff that doesn’t fit anywhere else, but doesn’t merit a new category of its own since it won’t be even a semi-regular expense. Finally, I will be deleting the tolls category as my new commute no longer has me regularly paying tolls like the route to my old job did.
Anyway, here’s my spending for the first half of 2020, compared with the budget I set a year ago:
I’m actually pretty impressed with my average monthly expenditure of $2,677.86, since this represents a 15% decrease in average monthly expenses since my last budget evaluation, where I spent an average of $3,162 per month. This seems to mostly be the effect of reaching the goals I set during the last budget review (which amounted to a 7% reduction in spending), and the savings from my new, shorter commute.
There’s definitely also some impact from the coronavirus lockdown here, which manifested as a decrease in restaurant spending, and an increase in entertainment spending (primarily video games and home gym equipment to stay busy during the lockdown). My last remaining student loan also went on deferment for 6 months some time in March.
My net income went up due to decreasing my 401k contribution to save for a down payment on a house. Last year I contributed the $19,000 maximum to my 401k, but I’ve reduced it to just a 5% contribution to get the full employer match so I can maximize my cash flow towards the down payment. I also received a $1,200 stimulus check.
Budget Update, Net Changes, and Future Goals
I took this data and updated my permanent budget with it, trying to filter out the temporary COVID-19 effects (for example, I didn’t adjust restaurant spending down, and I removed the stimulus check from my net income). In the net change column, red indicates an increase in monthly spending in that category, whereas green indicates a decrease in monthly spending in that category.
Here’s the rationale for every value change explained in sequential order:
- My rent has gone up slightly with a lease renewal since my last budget review.
- The budget for my cat is a new line item, so it’s an increase by default. During this period I learned firsthand what an unexpected vet bill can cost, so I’ll be basing my budget off my spending during this period as a worst case example.
- My student loan payment went down due to paying off one of the loans last year.
- I’m bumping up the entertainment spending due to some newly acquired subscription services, but I’ll make sure not to go too crazy here.
- I lowered my budgeted amount on gas to account for my new, shorter commute.
- I decreased the budget for online shopping even further after the massive success I’ve had in cutting this category down over the past year.
- Miscellaneous taxes was increased a tiny bit (inflation adjustment).
- Cash withdrawals was decreased due to me withdrawing cash less and less frequently these days.
- Uncategorized was added for things that are too small to justify their own category. It’s my intention that this category stays almost imperceptibly small.
- Tolls will be deleted as I no longer pay them on my new commute route.
Looks pretty good! As far as my net cash flow goes, I’ve been saving all of that for a future down payment. I’m shooting for $50k in cash set aside for a down payment, of which I have $18k set aside right now, so I don’t expect to be there by the end of the year. After I get close to this goal, I’ll bump my 401k contribution back up to the max.
The future is looking even more golden — I’ve got just 4 car payments left, which will free up $525 in free cash flow every month. This is the equivalent of maxing out my Roth IRA for “free” every year ($6000 max split over 12 months). The loan is at 0%, but I’m tempted to just pay it all off now and just move on with my life financially. Waiting for the normal schedule will make me all of $5 in interest over the next 4 months. Either way, my car payment is guaranteed to be gone by the end of the year! Which reminds me, I’ve been intending to write a post about my foolishness with car purchases that led to this situation, hopefully so others can learn from my mistakes.
As far as my last student loan goes, hanging out there with a balance of $3454.61, it would be nice to get rid of the $59 monthly payment. On the other hand, paying this off would take a decent chunk out of my down payment savings, so I’m thinking this will probably sit around until early next year when I’m closer to my $50k down payment goal.
I’m pretty happy with where my budget line items are at right now, so I’m not going to set any goals to reduce specific categories. But going forward for the rest of the year, I’d like to:
- Continue setting aside as much cash as possible into a savings account to put towards my down payment.
- Max out my Roth IRA (haven’t gotten around to contributing anything yet for this year).
- Under-spend a little bit here and a little bit there across the board, hopefully coming in slightly under budget just like we did for this review!
Savings Check-up
I’d like to add another section to these bi-annual budget reviews, in which I look at my total cash inflows to savings and investment accounts. And since I love spreadsheets…
I was actually surprised when I saw that I’ve already saved $22k only halfway through the year!
Net Worth Check-up
We’re actually going to add another section too; comparing my net worth on either end of the period. This will help show how much of my net worth growth is due to raw savings versus investment growth (or losses!).
January 1, 2020 Net Worth: $136,004
June 30, 2020 Net Worth: $152,718
6 Month Change: $16,714
Due to the market turmoil the past few months, my net worth grew by less than my total savings amount. It actually hit a low of $115k in mid-March, so compared to that I’m happy to see positive net worth growth overall. The market is still about 10% off its all-time high, so it’s not surprising at all to see this result.
Nobody knows exactly where it will go from here over the coming months or even years, but hopefully over the long-term the answer is a steady march upwards. All that we can do is live below our means, save, invest wisely, and hope for the best!