GYFG here checking in for the March monthly financial report. If you have been reading these reports for a while you will notice that I introduce each month with the same intro month after month. I do this for two reasons, a) for the newbies to the site (which make up about 50% of the sites traffic) and b) to remind everyone what these reports are all about. By all means if you have read the intro at least once, then please feel free to skip down to the “Summary of March 2016” section where the new content begins (click the orange link to be taken there automatically).
For those of you that are new around this corner of the internet, I wanted to fill you in as to what these reports are all about. These monthly reports are about full transparency. They are just as much for me as they are for you. It’s a hard decision to make all of your financial details public, but it’s also a very motivating one. It’s not just the post, but the process of putting this post together that really benefits me.
My sincere hope is that my transparency will inspire you to take the helm of your own financial ship and be intentional with its direction. I truly believe that anyone can reach financial freedom, if they are willing to do things differently. If you earn an average salary and have an average savings rate, then you can expect an average result! That means you will likely have to work at a job you may or may not enjoy until you’re 65 and then maybe you can retire IF you’re lucky.
Hey, there is nothing wrong with average. If you’re happy with average, then by all means keep doing what everyone else is doing. Not sure how you feel about that, but I have no interest in living an average life. I want EXTRAORDINARY.
Most people don’t want to live below their means in order to reach FINANCIAL FREEDOM, because that’s painful. They think it involves cutting out all the joy in life. You know what I’m talking about, those financial gurus that tell you that in order to get rich you need to cut out the $5 lattes and stop going out to eat. Then after 40 years of diligent and above average savings and super low spending, you will be a millionaire. Basically, you have to live like a college student and suppress all the things you want to do in life and then when you’re old you will be rich.
Okay, that doesn’t sound like the plan for me either.
The good news is there is another way. This site and these reports are here to show you the OTHER path to financial freedom. There is a way where you can have your cake and eat it too. I believe and hope that over time I will be able to convince you of the following:
In order to reach financial freedom you can choose to live below your means by cutting expenses to the bone and living in a state of scarcity or you can expand your means and live in a state of abundance by increasing your income and enjoying the $5 latte or other indulgence of your choice.
Not only that, but if you’re diligent you can reach financial freedom a lot sooner than anyone has ever led you to believe.
Our Mission Statement:
To Humanize Finance, Build Wealth, and Reach Financial Freedom.
I know I don’t have to publish my juicy details every month, but it’s important to me that you know that I put my money where my mouth is (because not that many finance blogs or people giving financial advice do this). I publish all of my financial details not to brag, but instead to show you what is working as well as what’s not working. Sometimes finance can get pretty dense, but I think real life examples and numbers can help slice through the complexities (and BS). Personally, I have always enjoyed the financial reports put out by other bloggers around the blogosphere.
As always, you can find all my previous reports on the Financial Stats page (as well as annual trends and a few other financial metrics not found on this report). In these monthly reports the plan is to give you a month over month update on Gross Income, Assets, Liabilities, Net Worth, Expenses, Contributions, Savings Rate (NEW), and progress on the mortgage pay down goal.
Summary of March 2016
We use Personal Capital To Track Everything
I will continue to add screenshots of my Personal Capital account as another level of TRANSPARENCY in the numbers that I share.
We use Personal Capital to aggregate and consolidate our transactions from across all of our financial accounts (checking, savings, retirement, credit cards, mortgages, HSA, and other investment accounts). At the end of the month I then drop that information into my financial stats spreadsheet for this monthly report.
Tracking your finances is, in my opinion, the best way to stay on top of your finances. You can’t optimize what you don’t measure. You can’t make informed decisions if you don’t know what you having coming in vs. going out. Without a holistic view of how much you spend every month, there’s no way to set savings, debt repayment, or investment goals. It’s a financial freedom must, folks.
Personal Capital (which is free to use) is a great way for us to systematize our financial overviews since it links all of our accounts together and provides a comprehensive picture of our net worth. If you’re not tracking your expenses in an organized fashion, give Personal Capital a try.
Month Over Month Financial Summary
Just three things to point out in case you missed it:
- Cash took a -9.1% hit, and will take an even bigger hit next month as we finish up a refinance.
- Gross income declined -63.2%, but it was expected, we only wish we could have income like that every month. One day…
- Our credit card float declined by 82.6% as I paid all credit cards in full towards the middle of the month to reset the float. This is where most of the cash was deployed, which is net worth neutral as it was just a shift on the balance sheet.
What went down in March?
Last month I was forecasting a drop in income down to $18,200/month, yet we beat it again thanks to Mrs. GYFG. She continues to blow her numbers out of the water bringing in an additional $5,000 in income again this month (that’s 3 for 3 for anyone keeping track).
Since this extra income from Mrs. GYFG is not guaranteed our current forecast still has income dipping to around $18,200/month, with the exception of July, which is currently forecast at $43,400 due to my mid-year bonus. There are several factors that could help us exceed expectations:
- Mrs. GYFG is still killing it. The last three months she has brought in an additional $5,000/month above and beyond her salary from monthly bonus payouts and notaries.
- There is the potential for a mid-year promotion to VP that I am working towards. This could lead to a substantial increase in both my base and bonus compensation.
But we won’t count our chickens before they hatch.
Here is a look at the trend for the last 13 months:
I updated the 2016 forecast, and it’s now forecasting gross income of $295,443 for 2016 (based on new information, and I think we will actually come in closer to $315K or more). If you’ve read my blueprint for how I plan to reach $10M, you will notice that we have jumped about 6 years ahead of schedule on the income front.
I didn’t have us at this earning level until 2021 in the original blueprint…which will obviously need to be updated (post to come probably late April).
The Juicy Details
- Previous Month: $59,495
- Difference: -$37,5899
Now where did all that money go?
I have come to the realization that there are always going to be unplanned expenses. Our goal is to save 50% of our income and live off and enjoy the difference guilt free. With that type of rule governing our financial life, it is a free pass to inflate our lifestyle, but only proportional to our income. You can see prior financial reports here. We do however try to line up expenses with expected income as much as possible.
Since we are at the end of Q1, rather than talk to the month over month variance, I thought it would be worth wild to take a look at Q1 Actual spending vs. Q1 Budget for a year to date analysis. Let’s take a look at what happened in Q1 vs. what we had planned and figure out why???
Notes on Q1 Results:
1 – Income was up $9K or 9% over the plan. This is all due to Mrs. GYFG kicking ass and taking names. We are all going to have to start referring to her as the “Rain Maker.”
2 – Home Improvement expenses are about $4,700 ahead of budget. This is really just a timing issue as we have front loaded our spending here. For the year we have budgeted $11,000 and don’t have any plans to exceed this budget.
To date we have done the following: refinished our kitchen cabinets, had to repair some plumbing, bought furniture for our formal living room (after leaving it empty for 2 years), and bought a bed for one of our empty guest rooms.
3 – Food & Dining is a total budget bust. It is no secret that we spend a lot on food. I do however expect that the unfavorable variance will improve over the next couple of months until we hit summer time. We did budget for about $2,000 in savings for 2016 vs. 2015, but we did the same for 2014 to no avail (ended up spending $300 less).
4 – Travel & Hotel is also a timing issue. We had our trip to Nicks Cove that we took in February, but have also pre-paid for our flight & hotel for our upcoming trip to Costa Rica this summer. I had put cost of our Costa Rica trip in June, not knowing when we were actually going to book it. We ended up booking it in Feb/Mar.
Mrs. GYFG also had a girl’s trip to Vegas and a bachelorette party this month (two separate events).
5 – Shopping & Other should fix itself through the year.
6 – Bills & Utilities should fix itself through the year.
Almost 80% of the $9,500 unfavorable variance is attributed to timing issues for Home Improvement and Travel & Hotel. These are self-cleansing issues that will take care of themselves over the next 3-4 months.
On a YTD basis our savings rate clocked in at 55% vs. our target of 50%, so we are very pleased with this so far.
All that said, and I don’t think we risk any serious budget busts at this time. We will take another look at this at the end of Q2 to do a new YTD analysis. If we have not caught up by then and closed this gap significantly, then we may have to take measures to reign in the spending.
But we are not concerned at this point and time.
Here is the trend for the last 13 months:
I haven’t change the chart to reflect the add-back of loan amortizations.
CALL OUT: It is crazy how slippery money can be. Because of this I totally recommend you automate as much of your finances as possible, especially the saving and investing piece. We set our financial goals at the beginning of the year and then automate the process of reaching them.
- Our mortgage payment is automatically set up to pay $1,600 in additional principal.
- My 401K contribution is automatically deducted at a rate that will ensure I max out by year end ($18,000)
- My HSA contribution is automatically deducted at a rate that will ensure I max out by year end ($6,750)
All of these things take priority over any spending that we do in a given month. We monitor expenses but don’t really manage them. Instead we manage savings and investments and let the expenses work themselves out.
What were Investments and Contributions?
- Contributed $0 There is no longer any tax benefit for us to contribute to my wife’s IRA due to our income level in 2016.
- Previous month: $0
- Difference: -$0
- Contributed $962 Into my 401K. Contributed $7,065 so far in 2016.
- Previous month: $4,622
- Difference: -$3,660
- P2P Lending $0 We now have $6,000 invested here. We opened an account with Lending club last month. Trying to spread the love :)
- Previous month: $1,000
- Difference: -$1,000
- Rich Uncles REIT $0 This was from reinvested dividends. We currently have $5,255.
- Previous month: $0
- Difference: $0
- Increase in Savings $0 This includes checking, savings, and CD’s.
- Previous month: $26,732
- Difference: +$26,732
- HSA Contribution $488 This is set up to max out by the end of the year. We currently have $8,000 here.
- Previous month: $669
- Difference: -$181
Total Investments & Contributions $1,450
- Previous month: $33,063
- Difference: -$31,613
Below is how we’re tracking to our goal of saving 50% of our after tax income.
You can see that although our goal for the year is 50%, we bounce all over the place on a monthly basis.
So far in 2016 we are still on target to hit our goal of 50%.
Speaking of savings rate, have you checked out my recent post where I mathematically prove the importance of your savings rate as a higher priority than the compound return? If you’re trying to build wealth quickly, then you have to read this post.
Net Worth and Mortgage Pay Down Update
My ultimate goal is to build up a Net Worth of $10M returning 6% a year or $50,000/month in gross income (at the end of March we are officially 3.7% there). Don’t freak out, this is only about $5.5M in today’s dollars when you take into account a 3% inflation rate.
I am not anywhere close to a 7-figure net worth yet (or what some refer to as the double comma club). However, it is growing at a very respectable rate (just take a look in the side bar for growth at a glance). If you want to see how I plan to get there you can read all about it here (soon to be reviewed and updated in April of 2016).
March Net Worth $368,985 (this puts us up $51,258 or 16.1% vs. 2015 with 9 months to go)
- Previous month: $362,579
- Difference: +$6,405
Since publishing the first financial report we have been able to post 15 consecutive months of positive gains to Net Worth. Let’s see how long we can continue this trend. The larger the number becomes (and the more invested we become), the more difficult it will be to continue this trend.
Net Worth Component Break Down:
You will notice that in the second chart above that I have broken our net worth out into 6 categories: Primary Residence, Cars, Real Estate, P2P Lending, Gold, and Investable Assets. I want to continue to see our primary residence and cars make up a smaller and smaller piece of the overall pie. Gold is a new allocation and the plan is to work to build this up to about 5% of our Net Worth.
Something I have been thinking about and worth pointing out is that our net worth was actually negative to the tune of almost -$300K back in early 2009, so we have come a long way in a relative short period of time. Until now I had only reported our ending net worth from 2012. I am thinking up a post that would give the full story of how we started so negative right out of college and how we have improved it so dramatically in such a short period of time. I mention the first drag in this post about our investment condo.
Note: I think people tend to glaze over the fact that the savings rate plays a much bigger role in increasing your net worth than the rate of return on your investments (in the early days of your journey). In the short term, savings rate has a bigger impact on net worth. The goal is to eventually build a big enough asset base that the gains from compounding will eventually outpace the gains from savings. Actually, check out the post I recently wrote: Savings Rate – The Most Important Variable to Wealth Building [and the math to prove it]
Progress On Our Mortgage Payoff Goal
You can read about our strategy to pay off our mortgage in 7 years (and 3 months). When you break it down and follow the 3 simple rules, it’s not as hard as it sounds. We bought our house in February of 2014 and then refinanced it into a 5/5 ARM in September of 2014 to remove PMI and free up cash-flow to put towards the principal and keep us on track to pay the mortgage off at an accelerated pace.
The progress chart above shows how much of our goal we have completed. Last month we were at 7.0%, which means we picked up another 60 basis points in March.
We are currently amortizing the loan at about $2,200 month in 2016. Next month we will see the completion of this goal jump to 14.1% as we finish a cash-in refinance. Post to follow shortly after we close the refinance.
I hope these reports inspire and move you to action. Don’t take a passive role in your finances and hope for the best. There is a famous Jim Rohn quote that I think everyone should keep in mind:
If you don’t plan your future, somebody else will. And you know what they have planned for you? NOT MUCH!
You have to be intentional with your finances if you ever want a fighting chance to make it to financial freedom. It doesn’t have to take 40-50 years of slaving away for the man before you have the option to retire. I personally think that 15-20 years is really all you need, and for the folks that are more aggressive (i.e. extremely frugal, not us) or very high earners you can probably reach financial independence in 10 years or less (maybe us, it’s yet to be seen but income is our focus vs. expenses).
I am looking forward to chatting with you all in the comments below. How was your month? Also, if you have a blog, I encourage you to write a monthly financial report and come back here and share the link. I would love to be part of your support and accountability.
One last thing before we go. If you are new or even if you’re not new and you have been wanting a more guided tour of the blog, I finally launched a “Start Here” page. I highly recommend you check it out.
– Gen Y Finance Guy
Oh, you’re still reading.
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Strong work and Kudos to Mrs.GYFG for killing it. The progress is coming along, and wish you luck on the potential promotion to VP.
Thanks Dr. J!
Looking forward to making another big jump between now and July, hopefully it will get us over the $400K mark.
Congrats on another great month. Glad to hear even sophisticated financial bloggers find money slippery!
Easy come, easy go as they say :)
The increase in salary is very nice. Congratz for that. At the same time, expenses also increase. Looks like it does not bother you to much. The details you give are very plausible. A trip once in a while is well deserved in my opinion.
AmberTree – At this point the increase in expenses does not bother me because it is currently just a timing issue. Meaning the next 3-6 months should bring the average significantly lower. That said, our only goal is to keep spending low enough to hit at least a 50% savings rate.
Based on what I know now on both the income and expense side I think we have a high probability of coming in greater than a 50% savings rate. But the next 3 months will be very telling.
Nice job man you continue to kill it. My net worth didn’t increase quite as much as I was hoping in the month of march thanks to a couple of my core holdings taking a hit, the real estate market finally cooling off a bit up here, and me and the mrs just over all enjoying life :D We are currently at about $409k.
I have a feeling you are going to win this race to a million. Your income is increasing at a rate we just can’t keep up with. While my income steadily rising, my wife as an occupational therapist makes $100k and there’s really no way for her to improve this income without taking on a second job and working more than 40 hours a week, which neither of us want her to do. I just landed a huge account, my biggest ever, which will increase my income by about $20k/year. I just need to find out how to penetrate this market a bit more ;)
One upside is we just completed our taxes and much to my surprise, after 5 years, I will finally be getting a tax refund. While doing my taxes it looked like I was going to owe around $4k, then I updated my house purchase and all the costs associated and much to my surprise, I went from owing 3-4k to getting back $4k. a much appreciated swing and I should be getting that money later this week.
One last thing, me and my wife decided to go big on our honeymoon that we are currently planning. We have our sights set on Bali and are going to go all out. We both turn 30 this year, it is our honeymoon, and we plan to spend at least 10-15k to make this trip amazing.
Keep up the great work over there and we will continue to grind it out ourselves :)
“me and the mrs just over all enjoying life”
Dude, you have to enjoy life, it is too short not too. $409K is still awesome my friend!
Congrats on landing the new account. You’re still closer to $1M than I am ;). But I can’t deny that we have caught a pretty good wave on the income front. Even if you don’t keep pace on the income front, your returns could still get you to $1M before us. I still believe you can beat me…but I am going to try my hardest to get there first.
You have to love a tax surprise when it ends in a refund.
Re – Honeymoon
You know what they say “go big or go home.” I am sure Bali with a budget of $10-15K will be AMAZING!!! When are you guys planning to take your honeymoon?
Now back to grinding it out.
Well played, Sir! You will likely have increased expenses for disposable razors going forward, as I see #beardlife is not in the projected forecast. Springtime is a good time for that change, though! Continued success!
JayCeezy – Great observation, you noticed that my cartoon lost the beard…yes, razor blades will be in the expenses over the next few months. Will start growing it out again in November.
Good report. Lots of detail as usual. “Rainmaker” is a good nickname.
I think “Rainmaker” is flattering :)
Nice work, love these very detailed graphs and charts. Congrats on the increase in salary, that’s fabulous.
Dang- this is the most detailed finance report I’ve come across. Good job and well done!
Hey TY – they come out every month. Hope you enjoy the level of granularity!