I track both my income and expenses monthly. I started this process over two years ago to provide a better picture of my financial standing, and do this in tandem with a monthly net worth calculation. This process paints a fairly clear picture of my financial status and helps me identify the savings I’m adding to my net worth snowball as well as the growing interest my net worth snowball is accumulating.
January 2013 Income:
$7,465- Total Income
January 2013 Spending
$ 375… Housing
$ 151… Groceries
$ 181… Restaurants & Bars
$ 99 … Entertainment
$ 166… Transportation
$ 70… Cell Phone
$ 198… Gifts
$ 66… Gym/Fitness
$ 20… Drugstore & Dr.
$1,326- Total Spending
$280,716 ….January Net Worth
Overall this was a great month financially. I was able to save 82% of my income which is my 4th highest monthly savings rate since I’ve begun tracking income vs. expenses, and exceeds my yearly goal of 80%.
The income component was higher than normal thanks to the extra pay period resulting in five checks this month rather than my usual four. I also received some compensation for extra hours worked which padded my income total.
My monthly expenditures for January were less than my 2012 monthly average by $140. However, it still has room for improvement as this month contained some out of the ordinary expenses including higher than usual spending for gifts as I purchased both Birthday presents and Valentine’s presents for my girlfriend as well as making purchases for another family Birthday. Also, the entertainment category carried extra expense from a beer and wine tasting event I travelled to. The event itself was costly, but it allowed me to visit with many old friends and make some valuable memories.
January established a great financial foundation for 2013. Looking forward, February will prove more challenging financially as I have a weeklong vacation planned which will be pretty costly. I will be sharing some of the ways I’m looking to cut costs while vacationing on a future post.
On a net worth basis, January was also a prosperous month. My net worth climbed over 5.6% to exceed $280k which is my 3rd highest monthly jump ever. Much of this gain is attributed to the large monthly gains of the stock market as both the S&P 500 and Dow Jones soared over 5% in January. It’s always exciting to see when my net worth increase from investment gains is greater than my monthly savings amount. These instances really demonstrate the power of compound interest and reinforce the priority of saving.
My net worth will soon have a 3 for the leading digit! I’m hopeful this will happen in the first quarter of this year. My net worth now is equal to nearly 16 times my 2012 spending and would require me to maintain a 6.2% withdrawal rate of my net worth to fund my current lifestyle with annual spending around $17k. 4% is considered the standard safe withdrawal rate across many personal finance circles, so I have some more ground to cover before achieving financial independence. Based on a 4% withdrawal rate and $17,500 2012 spending, I would need to have a net worth of about $440k to be financially independent. I am very excited about my prospects of attaining this figure before age 30.