Budget Review for the First Half of 2023

We’re halfway through the year already! It’s time for another one of my biannual spending, budgeting, and savings reviews, and this time we’ll be taking a look at how I did in the first half of 2023.

Six months ago I set only one goal for myself:

  1. Hit the ever-present budgeting goal to stay on or under my new budget of $2,744 per month.

However, I think many of you can likely guess that I did not hit that goal due to buying a house three months ago. That was my renter budget, and buying a home has brought both a higher monthly housing payment along with other expenses — both expected, and unexpected. My Personal Capital account reveals that I made 25 trips to Lowe’s within the past 90 days.

One hard decision that I had to make was reducing my 401k contribution from the annual maximum of $22,500 down to the 5% required to get my full employer match. I did this so that I could rebuild my emergency fund after paying for my share of the down payment, closing costs, and initial home maintenance items, as well as building a cushion for our wedding which will be another big upcoming expense.

Let’s dive in and take a look at my actual spending compared to my budget during the first half of this year. I am still using yellow to denote a temporary category for our wedding expenses, which will fall off of my budget after the next review since we are getting married in the second half of this year:

At $1,012.22 over budget per month, this is the biggest budget blowout in my entire life! What we’re looking at here is 3 months of renting, then our first 3 months of home ownership.

Moving to a house was rather expensive! In addition to the cost of materials and tools for the renovations that we’re slowly doing, there was a whole bunch of stuff to buy that we never needed as renters, such as window air conditioners (still, much cheaper than installing central air or ductless mini splits) and lawn maintenance equipment. Then there was the cost to move itself, and our mortgage lender also required us to pay a whole year of home insurance up front.

That’s a very inefficient conversion of financial resources to gain about $1,500 in home equity from paying down the principal on our mortgage. But I think we’ve put a lot of those initial one-off home ownership expenses behind us, and this category for extra money that we’re putting into the house should drop and stabilize at a lower level going forward.

With our wedding coming up in the second half of this year, this is shaping up to be my highest year of expenses by far. We can clearly afford both the house and the wedding, but it’s still a lot all at once!

Besides the housing-related expenses, nearly all of the other categories in my budget were in line with expectations. With some quick mental math, I would have hit my budget goal for this period if we were still renting, but so far I am considering the house to be a worthy endeavor. I am enjoying the additional space and freedom, and staying quite busy with home repair tasks that are satisfying to complete.

I did buy some new homebrewing equipment which accounts for the overage in that category. Wait, I thought this hobby was supposed to save me money?

My net income appears higher due to reducing my 401k contribution, so this will be only a temporary boost.

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. I’m using yellow to denote a temporary category which will fall off of my budget in the near future.

Here’s the rationale for every value change explained in sequential order:

  1. Our mortgage and utilities are more expensive than rent by around $1,000 per month, so this accounts for my half of the increase.
  2. I have added a category to track additional housing expenses for things like maintenance, upgrades, and other associated costs of home ownership.
  3. For Wedding Planning, I’m really struggling to come up with a number for what our out-of-pocket wedding costs will be, as it’s nearly impossible to estimate what you might receive in gifts. This is my best guess, though I could see it being wildly inaccurate in either direction.
  4. Insurance costs are increasing as home insurance is more expensive than renter’s insurance.
  5. After several times of going over-budget on Clothing/Shoes, it’s finally time to accept that this is a category that I need to budget more for.

All in all I’m estimating an increase in my expected budget by $1,170 per month on average compared to the budget I put together at the start of the year when we were renting. The good news is that this is just for the next six months, and my spending will drop at the next budget review once the wedding category falls off.

Setting my financial goals for the second half of 2023, I’m aiming to:

  1. Control spending as much as possible during this period of high expenses to prevent another budget blowout.
  2. Make sure to max out my Roth IRA before the end of the year.
  3. Ratchet my 401k contributions back up now that I have rebuilt my emergency fund, in preparation for maxing it out next year.

Savings Check-up

Let’s take a look at my total cash inflows to savings and investment accounts over the past 6 months:

About 20% less dollars saved than at my last budget review, which is less damage than I expected given my increased expenses. Saving $4,000 on average per month will still get me to financial independence at a respectable pace, but I’m hoping to bump this figure back above $30,000 saved per six months in 2024.

Net Worth Check-up

December 31, 2022 Net Worth: $301,720

June 30, 2023 Net Worth: $355,832

6 Month Change: $54,112

It has certainly been a good few months to be a stock market investor. Some claim a recession is just around the corner while others claim it’s cancelled. I have ignored both sides and my net worth has continued marching slowly upwards.

In the near future I need to begin differentiating between my investment portfolio for FIRE purposes, versus my net worth. A primary residence contributes to one’s net worth, but I don’t consider it part of a portfolio since it can’t be drawn down to pay for living expenses. Previously my entire net worth was essentially stocks, cash, and a small amount of fixed income so the two were synonymous. I will add a task to begin working on revamping the net worth tracker on the “My Finances” page of the blog.

Happy summer! I’m off to get some painting and other house tasks done.

Thoughts? Questions? Leave a comment below!