In a big win for continuous data collection, I came back to the blog just in time to do my twice-annual spending review and financial health checkup!
To start, let’s rehash the goals I set for myself at the year-end 2020 review:
- Hit my down payment goal of $30k cash set aside, which is a goal that has been eating the brunt of my free cash flow for roughly a year now.
- Start scaling back into fully maxing out my 401k contributions by the time I hit my down payment goal.
- Stay on or under my new budget of $2,379 per month on average.
Goal number one was easily met by mid-February, by which point in the year I had managed to add approximately $7,500 to my down payment fund to achieve my $30k goal. As I mentioned in my previous post, we’ve mostly backed off from the home search for now after losing several offers. It’s not possible to make a rational financial decision on such a large purchase when you’re competing against a dozen totally irrational FOMO buyers. I’ve been watching local real estate data closely: inventory is on the rise, and we’re starting to see price cuts roll in on some of the most laughably overpriced listings with moderate drawbacks (which a few months ago, would have sold anyway for $30-50k over asking). If that trend continues for another couple weeks we may dip our toes into the market again. Nevertheless we’ve got a decent cash stockpile of $30k each to throw at a house when that time does come.
My second goal was almost a gimme, but it was a good reminder that when you’re not making an insane salary, different financial goals require trade-offs. It wasn’t really possible for me to save for a down payment at a reasonable rate and max out my 401k at the same time, so I had to reduce my 401k contribution for most of 2020. I didn’t really end up “scaling in” here and I’m not sure why I wrote that out in the goal. I just immediately went from contributing 5% of my paycheck to the biweekly amount required to hit the $19.5k annual maximum.
Bonus goal: I didn’t think I would manage it when I was setting these goals six months ago, but I was able to max out my Roth IRA contributions for 2021 already which comes to $6k invested in that account. An additional two stimulus checks and an unexpected bonus from work certainly helped here.
And now for the third goal, the ever-present budgeting goal! What kind of personal finance blogger would I be, preaching to spend less and save more, if I didn’t try to do so myself and then share those numbers? After adjusting my budget at the last review, I ended up with a goal of spending $2,379 per month or less. So how did I do? Let’s take a look at my average monthly spending over the past six months:
Whoops, not even close! I knew this would happen though. If you’ve read my last post you’d know that we’ve been in the engagement ring shopping process. For various reasons worthy of its own post, I ended up spending around $4k on a custom engagement ring. So obviously the budget goal was blown out. Sorry, “Consumer Goods” category. It’s weird, it’s a lot of money and also… not a lot of money at this stage of the journey. More thoughts and reasoning on my decisions here in a future post.
Just because I’m curious about the numbers, if we ignore the ring I would have spent $2,443.13 per month on average over the past 6 months. Slightly over, but within striking distance of my budget goal of $2,379 per month. This indicates to me that although there was slight overages and under-spending in many categories across the board, these mostly balanced out with each other, minus the ring of course.
Other categories with the biggest overages are Alcohol/Bars, Misc. Entertainment, and Uncategorized. For the first one, maybe I’ve been drinking a bit too much to both get through and celebrate the end of the pandemic. I’ll blame the case of beer I bought at Treehouse Brewery (expensive but worth it!) but probably an area I should be cutting back on for long-term health reasons more so than financials. For Misc. Entertainment, as I already revealed in my last post I bought a guitar, so really a one-off here. I generally try to keep Uncategorized pretty minuscule; I made a charitable donation and didn’t know where else to put it and didn’t think it should be a recurring category, so that accounts for most of that category.
Budget Update, Net Changes, and Future Goals
I took this new data and updated my permanent budget with it. 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.
In the end I decided to make no real changes to my categories this time around. I think this is a fine budget, and my recent spending was more indicative of a couple very consciously made one-off expenses. The one thing I did change was to reduce my expected net income (and by extension, free cash flow) since I went back to maxing out my 401k, I’ll be expecting my net income to drop commensurately.
In terms of tweaking my spending in any particular categories, as I alluded to earlier I’d like to bring my spending on alcohol back in line with the budget of $50 per month.
Setting my goals for the second half of the year, I’d like to:
- Make another attempt to meet the goal that I failed this time around of staying on or under my budget of $2,379 per month.
Honestly, that’s all I can think of this time around for goals! Things such as “max out my 401k” just feels like a gimme at this point, and stuff like “continue to save as much as reasonably possible” is no longer a goal at this stage of the journey, but rather just something that I feel is expected of me. The most important part of these twice annual reviews is making sure that I don’t subconsciously grow comfortable with slowly slipping my spending higher over time.
Let’s take a look at my total cash inflows to savings and investment accounts over the period.
Nice! I still managed to save more in total than the last budget review, despite my massive engagement ring set purchase. I’m very happy with this number as it’s over 50% of my gross income over the period. Saving 50 cents of each pre-tax dollar earned is certainly a tipping point in accelerating my journey towards early retirement.
Net Worth Check-up
December 31, 2020 Net Worth: $200,141
June 30, 2021 Net Worth: $244,621
6 Month Change: $44,480
Who doesn’t love to see their net worth increase by 22% in just 6 months? Most interesting to me is that despite the stock market’s spectacular performance of 12% returns in just 6 months, my savings still represented only about half of my net worth growth over the period. Compound interest has certainly shown its power already, but I am still a long way from the point we all aspire to reach, where compounding takes over as the main engine of portfolio growth.