Another year is in the bag! It’s time to review, reflect, and set my sights on crushing 2022. The past six months were a great time for me personally — I got engaged to an amazing woman and also got a promotion at work. But let’s crunch the numbers to see how I did financially.
I couldn’t think of many specific financial goals to set when I did my mid-year review in July. Mainly because I felt that I was well on track in terms of savings and building wealth, “staying the course” feels like what’s just expected of me rather than a goal to reach for. Last time my monthly budget was completely blown out by my engagement ring purchase, so I did set my main (and only) goal for the second half of the year to stay on or under my budget of $2,379 per month.
I also had set a mini goal to bring my alcohol spending back in line with my budgeted $50 per month. If you’ve read my article from a few days ago where I commit to doing “Dry January” this year, there was a spoiler in there that I failed at this goal. While I was successful in slightly reducing my spending on alcohol from the average of $88.15 per month that I spent over the first half of this year, I was still $22.17 per month over the goal. That was one small motivating factor for doing Dry January, and you can go read that article if you’re interested in my other initial thoughts on how alcohol fits in with FIRE.
So, let’s dive in to reviewing the ever-present budgeting goal! Last time I was over-budget by nearly $700 per month. Did I do better at hitting my spending goal during the latter half of 2021? Let’s crunch the numbers and find out:
Close, but not quite! Over budget by $100 per month, or a 4.2% overshoot. Looks like the primary culprits are Consumer Goods and Restaurants this time. Under spending in several other categories across the board helped bring my overall spending back closer in line with my goal. Of course, I also earned over 10% more than I expected over the period which certainly doesn’t hurt.
For the Consumer Goods discrepancy, a big one here was that I was forced to buy a new phone by my carrier. My previous phone was actually going to be kicked off the network for being too old, as they will be very shortly shutting down their 3G infrastructure. Extra frugality points for keeping a phone until it’s not supported anymore? I bought a $500 mid-range phone outright as a replacement which will hopefully last me at least four years.
In Restaurants, I had to take a couple trips for work, which means dinner out every night. I do get a stipend for this when traveling, which ended up being more than I spent, and I get to keep the difference! The easiest accounting method for this was to just add the stipend to my income, and keep the restaurant expenses in my personal budget. A quick estimation shows I was still over budget by about $20 if I try to filter out the work travel spending.
Everything else is looking pretty good in terms of variance from the budget goal. We can see the effects of consumer price inflation and rising gas prices in my groceries, utilities and gasoline expenditures. Now I’m wondering if anybody out there indexes their budget to inflation! A cool concept, but it probably helps you to save more in real terms every year if you only adjust spending upward as needed in each area.
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:
- Utilities in my area are up in price. As far as I can tell we are still using the same amount of utilities, just the price went up, particularly for electricity compared to last year. Not much I can do about that.
- Groceries are more expensive thanks to inflation. A $10 per month bump here to follow closely along with the CPI.
- Consumer Goods got a bump due to my second budget review in a row blowing out this category. I’ve long struggled with how to represent the occasional, larger purchases with this category, for example like a phone or engagement ring. I’ll be paying close attention to this category going forward to try and figure out the best middle ground.
- Uncategorized gets a slight bump, while still being small enough to encourage me to categorize over 99.6% of my expenses into the existing categories.
- Net Monthly Income is on the rise, baby! Factoring in my higher paycheck from the promotion I got in November, I’ll be taking home an extra $570 per month on average.
So it looks like we’ve got a 3.2% budget increase, which was far, far more than compensated for by my increase in income. I’m fine with spending a little more, as long as I’m earning much more.
Setting my goals for the first half of 2021, I’d like to:
- 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.
Savings Check-up
Let’s take a look at my total cash inflows to savings and investment accounts over the past 6 months:
My highest amount saved to date in a budget review! I’m at just over $51,000 total saved this year. Not bad for someone who didn’t even earn six figures until a couple months ago!
Net Worth Check-up
June 30, 2021 Net Worth: $244,621
December 31, 2021 Net Worth: $278,963
6 Month Change: $34,342
Alright, onward and upward! I don’t put too much emphasis on net worth change over such a short time period, as the larger your portfolio grows, it just becomes more a direct function of stock market gains or losses over the period. Which obviously are out of my control, as we’ve already established that index investors on average see superior returns to active investors which clearly makes it the optimal strategy.
Still, we can see that my savings are by far the largest contributor to the growth of my portfolio over time, indicating just how important the ability and discipline to live below your means and stash cash away is on the journey to financial independence.