Budget Review for the Second Half of 2020

One thing is for sure, 2020 will be a memorable year! Now that we’re putting it in the rearview mirror, it’s time for my twice-annual spending review and financial health checkup!

To rehash the goals I set for myself at the mid-2020 review:

  1. Continue setting aside as much cash as possible into a savings account to put towards my down payment.
  2. Max out my Roth IRA (hadn’t gotten around to contributing anything yet for the year at that time).
  3. Under-spend a little bit here and a little bit there across the board, hopefully coming in slightly under budget just like we did last time!

I’d call goal number one a success, as I added over $8,000 to my down payment fund over the past six months. This could’ve been substantially higher, but my next $6,000 of cashflow went to maxing out my Roth IRA limit for the year. Which means that goal number two was also knocked out of the park! I thought those two paths were a nice compromise between saving for current wants (a house) versus investing for retirement to hit my FIRE goals.

Unfortunately I wasn’t batting perfectly this time, since I did not accomplish my final goal to spend under budget. I missed by an inch! Let’s get into the review and see what happened.

There’s just one small change to my budget from the format I presented in my last review. The only thing I’ve done is change the category “Online Shopping” to be called “Consumer Goods” instead. Way back in July of 2019 when I created that category, it was mostly comprised of frivolous spending on Amazon. At the time I cancelled my Prime membership to help curb that, and to this day I’m ordering almost nothing from Amazon, preferring to buy local or at least order directly from manufacturers so they get to avoid paying a cut to Amazon. Anyway this is mostly a change for semantics so that if I buy the same products in person that I used to order online, I have somewhere that feels fair to put it.

I had budgeted for $2,864 in monthly spending back in July. So how did I do? Here’s my average monthly spending over the past six months:

So close! I went over budget by an average of just $15.06 per month! That’s okay though, we were within half a percentage point of error. It’s not a huge win, but it’s still a win.

In fact I know exactly what caused this; just two large (but not totally unexpected) expenses.

The first was a big maintenance bill of $1,500 on my trusty Prius. This was all wear items and preventative maintenance, so she’s still running solidly and hopefully will for years to come. After five years and 160,000 miles it was about time to change out nearly every fluid in my car. Us hybrid folks have the pleasure of needing a coolant system not just for the engine, but for the inverter as well. That balances out with the fact that this also coincided with my first brake job (and probably the only one for the life of the vehicle) thanks to regenerative braking. I’m certainly not going to complain about getting 160k miles out of a pair of brake pads. Like I said, this bill was large but not unexpected, since I regularly monitor my car’s wear items and maintenance schedule.

The second large expense was a deposit on a new couch, which blew out the consumer goods category in my budget. Unfortunately the crappy discount furniture store couch that we bought after college just isn’t cutting it anymore. It’s degraded to the point where it’s a saggy, uncomfortable mess. We were trying to hold out until we bought a house to get a new couch, but given the crazy state of the housing market it’s looking like we’ll be renting for at least another year. The couch is our consolation prize… might as well make it comfortable here!

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:

  1. Spending on utilities is up a tad since we’ve both been working from home nearly full-time.
  2. After two budget reviews in a row spending over on groceries, I think it’s just time to increase the budget. I will never feel bad about spending a reasonable amount of money on quality ingredients nearly any meal cooked at home is cheaper than eating out!
  3. Those who have been following the blog will recall that I recently paid off my car, which represents an absolutely huge cost savings going forward.

I’m pretty excited about the prospect of sticking to this new budget, which is a whole 17% lower than my previous spending. This just goes to show the power of getting out of debt, not having a car payment, and living below your means. My journey to financial independence and early retirement by age 40 is accelerating since I’ll now be able to save and invest an additional $6k each year.

Once again, 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. I think these figures are still reasonable after factoring in the expected infrequency of the two large expenses that I already addressed.

Setting my goals for the first half of 2021, I’d like to:

  1. 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.
  2. Start scaling back into fully maxing out my 401k contributions by the time I hit my down payment goal.
  3. Stay on or under my new budget of $2,379 per month on average.

Savings Check-up

Let’s take a look at my total cash inflows to savings and investment accounts over the period.

Very happy with my work here. I managed to save over $21k during the past six months.

Adding in my savings results from the July review, I’ve managed to sock away over $43k for the year. Not bad for someone that doesn’t even make six figures!

Net Worth Check-up

June 30, 2020 Net Worth: $152,718

December 31, 2020 Net Worth: $200,141

6 Month Change: $47,423

First of all, let me just brag about being (barely) a two-hundred-thousand-aire. I honestly did not expect to hit that milestone so soon (and certainly not before the end of 2020).

Of course, the stock market has been doing great since the March dip, and market returns boosted my net worth by more than my savings did over this period. This was an unexpected, but obviously not unwelcome performance.

It’s just crazy to me that 5.5 years ago I had a net worth of about negative $15,000. And now I’m approaching the point where compound interest is doing some heavy lifting in my investment portfolio. I’m excited yet cautious, and ready to stay the course with my long-term strategy no matter what happens.

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