I have finally caved, and from today I’m planning on sharing with my lovely readers (google analytics assures me there’s more than one of you reading) a monthly finance review!
For a bit of background, I’ve been tracking my spending and other parts of my finances since mid 2011 when I started University. Initially I just used a simple app on my phone to record all of my spending manually, and I think after about a year actually started recording that data into some form of Excel sheet.
Over time, that spreadsheet has grown significantly, and while the basics of my finances are actually pretty simple and automated, I LOVE spreadsheets and like to do weird and wacky analysis. Yes, I’m a nerd. Deal with it. On the last day of every month I import my spending (recorded on Spending Tracker), income and account balances into my master spreadsheet, and pore over the numbers.
The important thing to note is that with the whole idea of the FIRE Engine, none of this is actually that necessary. If I keep working and getting paid, and once a year logged into my broker and increased my monthly contributions by 5%, then I would likely have automatic financial independence for my current spending levels by my early fifties. No other input required. But that’s later than I’d like, so I prefer to keep a close eye on the numbers to optimise my progress.
I wanted to start on a good month
As you will see, January 2018 was a *bit* of a heavy month for my bank balance and saw a net worth drop. Aside from paying the deposit on my house last year, it was my most expensive month ever. So it doesn’t make me look all that good, being someone who writes about this stuff and all. The temptation, and original plan, was just to wait a bit until things evened out and my reports looked a bit nicer before I started posting monthly updates.
But that’s cherry picking. Life isn’t always gonna be all rosy and smooth, and where better to start than the beginning of a new year?
These reports will likely change in appearance with time, as I decide what is and isn’t useful for you all to see (or depending on feedback of course!)
Before the actual report, I want to clarify a couple of the headings I use:
- General expenses – this includes mortgage, bills, insurance, professional and car costs (not fuel)
- Personal expenses – groceries, entertainment, sports, travel etc
- Net worth – obvious one here! FYI, there are two things I should mention about my net worth. I DO include estimated equity in my primary residence (= property valuation on Zoopla – outstanding mortgage). On the flip side, I DON’T include my outstanding student loan. I’m in the UK, and my student loan deductions are taken from my pay checks automatically before I ever see the money. They also only carry an interest rate of around 1.25%. To me, it’s just another tax for the next 10+ years, so I don’t include it.
- Lifetime Wealth Ratio – this is a bit of a nugget I picked up a while back from Budgets Are Sexy. Basically, it is your current net worth ÷ your total lifetime earnings, so of all the money you’ve ever been paid, how much of it do you still have. It’s a good barometer of long term financial history. Read the full article here.
- Spend rate – expenditures ÷ income. The aim is to push this back down below 50%. The six month moving average smooths out smaller fluctuations to see how I’ve been doing over the last half year.
- Goal updates – I do have a few personal finance goals for 2018, as I’ve previously talked about here. I regularly monitor progress towards these and a couple of mini goals along the way, so if I pass a milestone on the way to a goal during the month, that goes here!
January 2018 Report
Overall, January was a busy and expensive month. On New Year’s Day, this happened while I was away on holiday;
Unfortunately the boiler needed fully replacing, so I had to shell out for that. I’d expected to have to replace the boiler in the first couple of years in the property, just not the first six months. I also spent around £600 on a ten night trip in Europe over New Year (yes, that’s including flights, accommodation, food and lots of beer), and a service and MOT on my car. The boiler took a nasty chunk out of my savings, but I have a lodger and it was reassuring knowing I could afford to get the new boiler in without delay.
Now, onto the nitty-gritty!
- Salary – £2,055
- Lodger – £300
- Bank signup bonus – £250 (I switched one of my current accounts recently, bagging a tidy short-lived sign up offer)
- FundingCircle – £1.35 (I used to do some peer to peer lending on this platform but decided I wanted more money in index funds. This was a recovery payment from an old loan segment that defaulted)
- Total income – £2,606
- General expenses – £3,179
- Personal expenses – £812
- Total expenses – £3,991
- Investment contributions – £600
- Total – £3,781 (+18%) (this is currently low, having restarted from scratch after buying my house last summer)
- Cash Flow – -£1,385 (this was slightly painful to see)
- Spend rate – 153% (77% 6mo average)
- Net worth – £19,819 (-4%)
- Lifetime Wealth Ratio – 0.34
- Emergency Savings – before the boiler I had three months’ expenses saved, now I’m back down to just under two months. This is a priority to start building back up.
So, that’s my first monthly report! Phew, that’s a load off. Plans for the coming months are:
- Cracking down on my expenses, to get back below 50% of income
- Building up the emergency fund to three months’ expenses
- After 1 and 2, increase monthly contributions to portfolio
I’d love to hear how you keep track of your finances. Let me know in the comments below.