We’re already at the halfway point of the year, and it’s been an interesting ride so far. We’ve seen some turmoil in financial markets as inflation has been running rampant. How did these factors impact my spending, saving, and net worth over the past six months? It’s time to crunch the numbers and find out.
At the year-end 2021 review, I set a couple of goals for myself heading into 2022:
- Stay on or under my new budget of $2,454 per month on average.
- See out my Dry January commitment and re-evaluate the place of alcohol in my life and my budget (I later committed to a 30% reduction in alcohol consumption, which should put my spending on alcohol back in line with my budgeted $50 per month).
We’ll have to dive right into the spending review to see whether I met my goals:
Unfortunately, I overspent my budget goal by an average of $120.60 per month. Thankfully (and as usual) this was more than compensated for by earning about $600 more in net income per month than I expected, due to receiving a small bonus at work as well as pocketing some left over per diem meal allowances from the work travel I have been doing recently.
One change that I’ve made to my budget is that I have stopped tracking the “Cash Withdrawals” line item. This was kind of a hold over from my earliest days of budgeting, in that I was only tracking electronic expenses because it was easier. Recently I have been meticulous with noting down cash transactions for maximum accuracy when I do my monthly financial ritual, so I’m no longer tracking cash withdrawals to avoid double counting errors.
The most over-budget category was Restaurants, mainly due to me taking six work trips so far this year. As I alluded to earlier I add my provided meal allowances to my income, since I get to pocket the difference. With work trips subtracted, Restaurant spending would have averaged $186.74 per month, only slightly over-budget.
Clothing/Shoes is a frustrating category to budget for on a 6 month time scale; my spending here tends to be lumpy with large expenditures every few years rather than gradually acquiring items. For example, going from the 2019 budget reviews to the present day, my six month expenditure on Clothing/Shoes has been $118, $0, $7.50, $0, $25.72, and $138.36. Interestingly when averaged over the long-term, that comes out to an average of $48.26 per month which is nearly exactly on budget.
Uncategorized was also larger than I like it to be. This is where I put my half of the home inspection that we paid for on the house that we backed out of buying because it would have been a money pit, which accounts for 87% of Uncategorized. Overall I am doing a good job putting nearly every transaction into my array of categories, only having to explain the odd one-off during these budget review posts.
Elsewhere we can see how price inflation of inelastic goods such as gasoline and rent has caused some overspending in those categories which is hard to avoid.
Last but not least, celebrating some wins — despite the June CPI release showing a 10.1% increase in the cost of groceries over the past year, my spending on groceries has decreased 23.6% since the previous budget review. We have been shopping smarter by regularly switching grocery stores every week to hit the one with the best deals, and buying things like meat in bulk when it’s on sale, vacuum sealing and freezing it to use during weeks when no good sales are to be found.
Finally, I exceeded my goal to reduce my spending on alcohol! When I set that goal at the budget review for the latter half of 2021 I had spent $72.17 on average per month on alcohol. During the first half of 2022 I have reduced that to $34.88 per month, over a 50% reduction! I have been drinking less and less as of late since I find it gets in the way of using my free time for satisfying productive activities such as writing and other side projects.
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.
Here’s the rationale for every value change explained in sequential order:
- We went month-to-month on our apartment rent instead of signing a one year lease. Month-to-month is more expensive (on top of general rent increases this year), but will allow us to walk away penalty-free at any time when we eventually find a house. As the housing market appears to be continuing to cool in our area (inventory and days on market are both rising, leading to many delightful price cuts) I have hopes for that happening later this summer or in the fall.
- I reduced my Groceries budget back to $200 per month. I had bumped it up from $200 per month at the end of 2020, however my recent shopping habits as reflected in this current budget review have proven that one person can still eat most of their meals at home for $200 or less per month by shopping wisely, cooking healthy meals from scratch, and being flexible.
- Insurance prices went up a bit come policy renewal time.
- Cat food has seen some price increases too!
- We’re all seeing sticker shock at the gas pump due to ongoing geopolitical events. Thankfully, my trusty and fully paid-off Prius helps limit the damage to my wallet.
- I had previously bumped up my Misc. Entertainment budget in 2020 to make room for some pandemic lockdown video game purchases. I am rarely playing video games these days and current spending in this category shows some overhead.
- For Net Monthly Income, I have taken roughly the midpoint between what I budgeted for last time, and what I actually earned over the past six months. I always seem to underestimate my income which is definitely not a bad thing, but I am trying to see if I can get more on the nose next time.
Overall, I have budgeted for an increase of $110 per month, or 4.5%. Interestingly, this is exactly in line with the cumulative CPI-U change over the most recent six months of available data (December 2021–May 2022) which was 4.6%. My personal budget appears to be experiencing inflation at about the same rate as the theoretical CPI-U household.
Setting my goals for the latter half of 2022, I’d like to:
- Hit the ever-present budgeting goal of staying on or under my new budget of $2,544 per month.
- Hopefully buy a house to get some more space and lock in our cost of living.
I’m not setting a hard date on the house, but it’s looking more and more possible that we could get a home for a reasonable payment in the near future now that the housing market is showing some cracks. We recently achieved setting aside enough cash to have 20% down on our target price range, meaning no more PMI, ergo rising rates will not damage us nearly as much as the average first time buyer.
Savings Check-up
Let’s take a look at my total cash inflows to savings and investment accounts over the past 6 months:
Wow, yet another all time high for savings! This beats what I put away at the previous budget review by nearly $4,500.
I just calculated my savings rate for the past six months and the result was 67.3%! Thanks to limiting lifestyle inflation by trying to live frugally while gradually increasing my income, my savings rate is starting to hit numbers that I never thought I would see when I first started learning about FIRE over a decade ago.
Net Worth Check-up
December 31, 2021 Net Worth: $278,963
June 30, 2022 Net Worth: $266,915
6 Month Change: -$12,048
Ouch, my first ever loss of net worth over a six month period! This can be viewed in two ways:
- Not only did my net worth fall by $12k, but in addition the $31k that I managed to save over the past six months has completely vaporized, resulting in a total loss of over $43k.
- My high savings rate was able to stem most of the bleeding of my small portfolio; in a time when stock market indices are down a little over 20% year-to-date, my net worth is only down 4.3%.
I prefer the latter. We’re officially in a bear market, but truly I am not stressed in the least about it. My asset allocation across different “buckets” in my portfolio accurately reflects my risk tolerance and time horizon — my emergency fund is in cash, our home down payment is in cash and could double as a massive extra emergency fund if needed, and everything else is in stocks which won’t need to start being sold for a decade or more when I eventually retire early.
I’ll be keeping my head down and continuing to steadily sock away the majority of my earnings, putting those dollars to work for me so that one day working for money will become optional. If the market marches lower, it just means better entry points for my regular purchases of diversified index funds.
Best of luck out there with whatever this financial turmoil develops into, and to my fellow American readers I hope that you enjoy the upcoming holiday weekend. I’ve got some great ideas for articles queued up, so stay tuned!