How A Family Of Four Lives On A Teacher's Salary

Teacher's salaries have been a hot topic lately (as they should be).  TIME Magazine made the subject of teacher's salaries a cover story in September 2018: 13 Stories of Life on a Teacher's Salary.  

I definitely know how challenging it is to be a teacher (no one can understand unless they are in the trenches as a teacher) and how (in most cases) teachers aren't adequately compensated.  And related to that ... yes, the profession in general (at least in our country) seems to not be appropriately respected by the general public.  But this blog post isn't about that.  This post is about how at least one family of four (our family) can live on a teacher's salary (and save the higher salary).  We definitely understand that every situation is unique.

-Tara

We want to break down more specifically just how a family of four is able to live comfortably off of just one salary (a teacher's salary at that).  We are able to allocate the second (higher) salary to savings / investments for our journey to financial independence (FI).

We touched on this in previous posts, but now we want to take you line by line to see just how we do it.  

We would not be able to do this if we were still carrying around debt from cars, school loans, credit cards, etc.  It wasn’t until 2015, (the year that we paid off all of our debt) that we were able to start living off of just one salary.  

We will break this down exactly as it appears in our budget, which is just a very basic excel spreadsheet that I have been using for the last 10 years.

Total Teacher Salary (After tax) Per Month = $3,998

Our youngest working in my (Tara's) art classroom.

Tara with both kids on the first day of school (in my (Tara's) art classroom).

Item 1: Tithe = ($589)

This is the amount that we give to our church on the 1^st of every month.  We started consistently doing this 7 years ago by giving 1% per month and have upped it by an additional 1% per year with the goal of eventually reaching 10%.  I tried just giving 10% outright in the past, and I never stuck with it.  Building the percentage up slowly has helped us with consistency.  (Others who don’t tithe could use this part of their budget for donations, etc.)

Item 2: Mortgage = ($1,750)

This includes principal, interest, windstorm, and property taxes.  We could actually pay this off at any time with the money in our Vanguard account.  But since the interest rate is so low and we only plan to live in our current house for another couple of years, it makes more sense to put the money into the stock market with VTSAX.  

Item 3: Groceries = ($300)

We have been able to maintain this level of spending for groceries by eating a plant based diet revolving around whole grains, fruit, vegetables, potatoes, and nuts for the most part (no, not just bread and water on $300 / mo).  That said, with a little bit of planning, I am confident I could make this same budget work while also buying meat and eggs.  

Our homemade food on a $300 / mo budget.

Here are some tips to help get your grocery spending down (what tips do you have?). 

Drink water!  Don’t buy juice or soda.  It’s not good for you, and the cost adds up.  I confess I will break down and buy the kids orange juice, but only when I am able to buy all of our other staples first (and if we have money leftover within our $300 budget).  After all, if you want orange juice, eat an orange!

Don't drink milk / drink less milk.  Only use milk for cereal, coffee (if that’s how you like it), or baking.  All your body needs is water so you can stop drinking it.  Spinach helps with calcium, and the sun is great for Vitamin D.

We actually make our own vanilla rice milk at home which saves at least $20 per month.

Baking Soda and Vinegar: Use as your primary cleaning products.  Both are cheap, and do a great job.  (Baking soda also has many other great uses!)

Make a List: Don’t go to the grocery store without a list.  This is just asking for trouble.  We like to plan our meals for the week ahead of time so that we know exactly what we need once we are in the store.  I also remember the prices of products like a Price is Right winner, but for most people just having a list written out (and sticking to it) will help you save.

Item 4: Gas = ($120)

We became a one car family by choice back around 2013, and this helped cut down on our gas bill (we were recently gifted a second car (see below), but we still only use one car 95% of the time).  While this may not seem like a realistic option for most right off the bat, think about it before you completely write it off.  If you are a couple that both work is it possible to carpool to and from?  Could you ride your bike (I do) or walk/jog to work?  What about taking public transportation in your area?  If you really stop to think about it, you could probably eliminate one of the cars if you really had to.  It doesn’t hurt to try it out for a month.  If it works then great - get rid of the extra car.  If not, then at least you tried!

Item 5: Cell Phone = ($41)

Say it with me, Republic Wireless, Republic Wireless, Republic Wireless.  We switched back in 2013 and haven’t looked back. 

Item 6: Internet = ($63)

This is one area that I would actually like to get the price cheaper than this, but it’s hard to do when you aren’t bundling cable, phone, etc. (and you shouldn’t because you canceled cable and use Republic Wireless for your phone, right?).  

Item 7: Car Insurance = ($75)

Alright confession time.  A couple of months ago we were gifted a car by our much too generous parents (who says no to a free car?) and so this cost went up from $45 per month to the current $75.  I still consider us to be a one car family for the most part because our old car just sits in the driveway 95% of the time.  In fact, we have had two cars for over three months now, and I still haven’t used a tank of gas in the old car yet.  All that said, if you haven’t tried GEICO for your car insurance needs, now is the time.  They will almost certainly beat the rate you are currently paying. 

Item 8: Natural Gas = ($40)

This expense is pretty self explanatory, and we actually over budget a little bit for it because it does tend to go up during the “winter” months (Houston "winter" months).  If you live in a really cold climate where this bill gets in the hundreds, then drop the temp!  We keep ours at 60 when we aren’t home and no more than 64 when we are home.  This keeps our bill manageable during what few cold spells we experience living in Houston.

Item 9: Electric = ($31)

This is not a typo.  Our electric bill has been $31 since we switched to our new plan back in April.  To sum it up, if we stay under 1000 Kwh for the month, we have a fixed bill of $31.  When I originally signed us up for this plan I anticipated having a couple of the summer months go over 1000 Kwh.  They probably would have had it not been for two long summer trips (one week each) that we took in June and July.  We are also pretty conservative with the thermostat (which is where the majority of the electricity is being used).  We keep our AC at 80 when we are home and just hanging out and usually drop it to 78 (me) or 76 (the wife) when we go to sleep.  When we aren’t home that bad boy gets pushed up to 84.  If 84 seems too extreme for you then take baby steps.  Try bumping it up to 80 or 81 when you leave, and work your way up.  There really is no point to have it below 80 when nobody is home, that’s just throwing money away.  One final note, we live in Texas where we have the power to choose our electric provider.  If you are lucky enough to live in a state that allows you to choose, by all means shop around for the best deal!

Water / Sewer = ($50)

Not much to say here.  Some months we are able to stay under budget on this, and some months we are a little over.  We don’t stress about this one all that much; it is what it is. 

Dance = ($70)

This is our daughter's ballet and tap class.  Unlike sports which have seasons that end (logical right?), this little rascal is basically year round so it gets lumped with our monthly budget rather than just our variable spending (and I digress).  (Although she doesn't go during the month of July).

Dog Food = ($65)

You have to feed the beast!  We have stuck with the same dog food that the breeder recommended.  This cost is for a 25 lb bag, and it gets delivered (PetFlow) right to the front door every month. 

Netflix = ($12)

Ahh Netflix.  This $12 is worth its weight in gold because it will allow you to cancel your $100 cable bill (do it now!).  Also, check your local library for free DVD’s (movies and TV shows).  We have been using a combination of the two for the last 5 years and haven’t missed cable at all (we also use a Mohu Leaf to pick up all of the local channels for free).  We have Amazon Prime too, but that isn't counted in our monthly spending.

Let’s Do The Math

Our youngest working in my (Tara's) art classroom.

So there you have it!  That is how a family of four is able to live off of a teacher's salary and save 100% of the other (larger salary).  

What do you think?  How do you stretch out or make your salary work?

-Erik

Did We Just "Lose" $55,000 in 3 Weeks?

When people make statements like “I lost $X in the market today,” or “I made $X in the market today," most of the time the statements are not true.

$55k SCARRRYYYYY

What Do You Mean?

On any given day the stock market is going to go up or go down, but the only way a person can actually lose or make money is if they actually sell some of the shares that they own.  Before we go further, let’s go over what actually happens when you buy stock.

When we tell you to buy VTSAX, we are recommending you buy shares of a company (or in the case of VTSAX you are buying a portion of every single company that is traded in the US Stock Market (thousands)).  These shares have a value placed on them, and that value fluctuates on a daily basis. Over the long term (assuming you are invested in VTSAX) you can expect the value of the shares that you own to go up by about 10% annually or 7% once you factor in an adjustment for inflation.  Note, that doesn’t mean they will go up 10% every year.  Rather, on average, over the long term you can expect them to go up about 10% before inflation adjustments.

When people say they lost money in the market today, unless they physically sold shares, they haven’t lost anything.  To further illustrate this, let’s look at our two retirement accounts and how they have performed over the last 3 weeks.  

Did We “Lose” Almost $55,000!? 

This is when most people would say, “I’ve lost $55K in the market over the last 3 weeks.”  But a closer look actually reveals that you have in fact gained (bought) almost 60 shares of VTSAX at a discount (congratulations savvy investor)!  The shares will eventually go back up.

So….

Being invested in the stock market is going to be a wild ride.  The important thing to remember is we are in the stock market for the long haul, and we are buyers no matter what!  Block out all the outside noise, and continue to buy more shares.

What do you think?  Did you gain / buy in the stock market in the last few weeks?

-Erik

FI With Kids: Easy Color Theory Science Experiment

I've brought you a few posts on FI (financial independence) and kids (such as our visits to a local art museum).

But being an art teacher, I plan to bring you more art education / education posts.  Why?  A few reasons ...

• Art / Art Education / Education Is My Passion
• I think it is important for me to supplement their (my kids) education outside of their school / classroom.
• Once we reach FIRE (financial independence retire early) it may be even more important for me to supplement their education (depending on where we go / what we choose to do for their education).
• And related to the previous bullet point ... depending on where we go once we reach FIRE (Spain, anyone?), I may choose to supplement their education even more (prep my own curriculum / World School?).
• Once we reach FIRE, I may not work in the traditional sense, but I will probably be "working" in the non-traditional sense!
• I will continue to bring you ways to do activities at home (and away from home) with your kids that are free, cheap, or fit within variable spending as you journey on your way to financial independence too!

Easy Color Theory Science Experiment

One of my goals this year is to try to incorporate more science and history at home with my kids since there is less time for that in the public school setting.

This is an easy and inexpensive science / art activity that you can do at home (or in the classroom if you are an educator!).  I actually did this experiment at school with all of my classes since we were (and are) recently focused on the color wheel / Rodeo Art.  Not only am I trying to incorporate more science at home, but I am trying to incorporate more science into my art classroom.

I bought less than $10 worth of supplies at a local grocery store (HEB), and I did the science experiment as a Do First activity with all of my classes (Kinder - 4th Grade; 6 days worth of classes).

• Package of Plastic Cups (if you are doing this at home the same glasses or plastic cups should work).  (You need six total or more depending on how big you want your color wheel to be).

• One bag (or more depending on how many times you are doing the experiment) of regular M&Ms.

You only need to use red, yellow, and blue (primary colors!) M&Ms.  I used the primary color M&Ms only to show how the primary colors mix to make the secondary colors.  We set up a basic color wheel.

Step 1: Set out 6 plastic cups in a circle.

Step 2: What are the primary colors?  Put a red, yellow, and blue M&M into one cup each (in a triangle shape).

Step 3: Red and yellow mix to make what color?  Put a red and yellow M&M together between the cups that have red and yellow M&Ms.  Answer: Orange.

Step 4: Yellow and blue mix to make what color?  Put a yellow and blue M&M together between the cups that have yellow and blue M&Ms.  Answer: Green.

Step 5: Red and blue mix to make what color?  Put a red and blue M&M together between the cups that have red and blue M&Ms.  Answer: Violet or purple.  Note, we found that sometimes adding two red M&Ms with one blue made our violet / purple color turn out better.  It is an experiment!!

Step 6: Add a small amount of water to each cup so that the M&Ms are covered.  I personally didn't measure, but I tried to make the water part somewhat equal.  It didn't matter in my case the temperature of the water.

Step 7: Watch to see how the colors mix together!  I would also pick up the secondary colors (the ones that mix to make orange, green, and violet / purple) and move the cup in a circular motion to watch how the colors mix together.

Next, I talked to my classes about the - primary colors, secondary colors, warm colors (red, orange, yellow), and cool colors (blue, green, violet / purple).  We also talked about complementary colors (colors opposite on the color wheel), and I finally poured the complementary colors together.

My students loved this experiment!  Not only was the experiment fun (lots of oohs and aahs), but it was easy and low cost.

What are other ways you incorporate science at home with your kids (or at school)?

-Tara

The Stock Market Was Down This Week. Did We Panic?!?

Did you notice?  The market has been down quite a bit over the last week (or so) which has caused a lot of rumblings in the media and in the FIRE (financial independence retire early) community.  It was approaching correction status as of the close on 10/11/2018 which is when it goes down by at least 10% from its highest point (note, it is healthy for the markets to have corrections).  

NYC's Financial District

When this occurs you can be guaranteed of two things:

• The media is going to hype it up!

• People are going to panic!

We want to calm your fears and share how we handle a week such as this one.  Overall a week like this is pretty meaningless.  But it is also a good time to run through some “what if” scenarios in your head just to make sure you aren’t buying all of the media hype (and that you are buying in the market (as you always should be)).  

What If We Were Retired This Week and Living Off Of Investments?

If we were already retired and living off our investments and this week happened, (hint, it will happen again and eventually be much worse than it is now) we wouldn’t need to change a thing.  To understand why, you have to understand our withdrawal strategy (let’s run through a hypothetical situation).  

Example Scenario: Let’s say we retired in January of 2018.  We have $1,000,000 in investments, and we plan to live off of $40,000 per year (or 4% of our investments).  In January we would have withdrawn $3,333, and every other month of 2018 we would have withdrawn the same amount (unless of course we found we didn’t need this much, or we had some side hustle income coming in (we will)).  

$3,333 * 12 = $40,000

But What If The Market Is Down in 2018?

If the market ends up being down in 2018, we would still continue to pull the same $3,333 every month.  Our withdrawals for 2018 are based on how the market performed in 2017 (we can’t predict the future!).  Since the market was up over 20% in 2017, we know we can confidently pull the 4% from our investments for all of 2018.

That’s why this past week would have no impact on us.  We aren’t worried in the least bit.  In fact, we are excited because we plan to buy more shares of VTSAX on Monday (who doesn't like buying things on a discount!).

Now, if the market is down overall in 2018, then our withdrawals starting in 2019 would be impacted.  Let’s run another hypothetical based on a down market in 2018.  

Hypothetically speaking, if the market was down let’s say 10% overall for 2018, then we most certainly would not withdraw the entire 4% from our investments.  We would take 1% from our cash cushion which would be $833 per month, and 3% from our investments which would be $2,500 per month.  Our lifestyle won’t be impacted since we are still living off of our planned $3,333 per month.  We are just applying some safety margins when needed (in this case lowering our 4% withdrawal rate to a 3% withdrawal for 2019).  

We could also choose to pick up some part-time work / side hustle to lower our withdrawal rate even more, or practice some geographic arbitrage by living in a cheaper part of the world (Puerto Rico anyone?) during down years.

(Hint, you will make money in ER (early retirement).  You may not know how, but it would be almost impossible not to earn another dollar for the rest of your life).  

The Market This Week

Don’t believe the hype that you hear in the media, and definitely don’t panic!  Keep an eye on things from a distance while you enjoy your FI (financial independence) (or work towards FI) and, implement your safety margins as needed.  

So what do you think?  Were you worried this week?  Does this make you feel any better?

-Erik

Family of Four: One Year Budget in Spain Less Than $40,000

We are going to take a look at what we are forecasting our spending to look like for our first year of FIRE (financial independence retire early) / early retirement.

This example is based on the idea of moving to Granada, Spain for 10 months out of the year and then coming back stateside for 2 months to visit family and friends.

One of the things that I did in order to figure out how much money will easily sustain us in retirement is to look at our current spending (which really hasn’t changed much over the last 5 years or so).

We currently have about $3,200 per month in expenses so we can conclude that we will need $38,400 to sustain our current lifestyle in early retirement.  We can then take the $38,400 and multiply it by 25 in order to get the amount of money we need to be able to live off of the 4% rule.  

$38,400 * 25 = $960,000 (We plan to have more than this.)

But you’ve never been to Spain, how can you possibly have any idea how much it will cost to live there?

Research!  Luckily for us there are others that have done what we are planning to do.

For example, a family of four from Wisconsin (Bucking the Trend) was able to live in Granada for two years on a similar budget to ours. 

We have also been able to get a very good understanding of how much a home will cost to rent based on Your Year In Spain.  And Your Year In Spain can help us rent any of the properties that they have listed.  

There will be 6 main expenses for living in Spain:

• Rent / Utilities
• Groceries
• Medical Insurance
• Travel (Within Europe)
• Travel To / From US (And Within US)
• Variable Expenses / Spending Money

Lets go over each of these in more detail. 

Rent / Utilities

We are planning to rent through Your Year In Spain.  We have a goal to keep our rent / utilities expense the same as what we pay in the states ($1,750).  We also have to factor in currency exchange which is currently not in our favor so we want to stay below $1,750.  We are thinking between 1,100 - 1,250 euros (rent and utilities) per month which would be $1,280 - $1,450 USD (as of 9/2018).  

We are estimating that our utilities will be between $200 - $300 per month (based on Bucking the Trend, for example).  This is significantly more than we pay in the states, and this will be the only aspect of our budget that will increase when compared to our US budget.  Keep in mind the homes in the city are literally thousands of years old so some still don’t have gas connections (use electric instead).  But we feel confident that we can stay below $1,750 for rent / utilities.

Groceries

There isn't a great way to estimate how much groceries will cost because the cost is connected to the types of food a person eats, and everyone likes different things.  We have been a plant based family for a long time (approaching 10 years).  Our meals tend to revolve around rice / potatoes / beans / lentils / fruit / veggies.  From everything I read, Granada has lots of markets that sell fresh produce, and I think we will be able to stay close to our current grocery budget of about $300 per month.  300 Euros would mean about $350 USD.  

Medical Insurance

One of the prerequisites for our non lucrative Visa is that we have to have proof of medical insurance (for a year).  Luckily the medical system in Spain is fantastic and cheap! After doing some research, I was able to get a quote from this company Sanitas Expat.

The plan recommended would cost $233 USD per month (200 Euros) and would cover all of this. 

If you don’t want to read through that (I don’t blame you) here are a few highlights:

• 100% primary care coverage in Spain 
• 100% coverage for dental cleanings
• Worldwide Emergency Healthcare: Up to 12,000 Euro per person.  This covers expenses from doctors, surgeons, hospitals / clinics from medical services received outside of Spain (like when we come back state side for 2 months).

I think we will quickly learn that people don’t worry about health care in other countries like we do in the US because their health insurance is affordable.  We are planning to pay for annual checkups out of pocket.  The insurance will just be for emergencies and to qualify for our Visa.

We also have a little Health Savings Account (HSA) hack that we plan to use for our insurance expense for the first year or two of early retirement.  My employer currently deposits $1,500 to my HSA account each year.  We have been paying for our current medical expenses out of pocket so that we will have around $4,500 sitting in our HSA (deposited free of charge by my employer) that we can then take out during early retirement. 

Travel (Within Europe)

On to the fun stuff!  A big selling point of moving to Spain is so our kids (and we) can be immersed in the Spanish culture and language.  It also opens up the door to some great travel opportunities within Europe.  It's super cheap to travel from city to city or country to country (compared to what we are use to in the US).  We used GoEuro to run some hypothetical trips that we plan to take.  

A 1:45 minute round bus trip from Granada to Malaga is less than $100.  That is not per person, that’s total for a family of four!  Malaga is the birthplace of Picasso and home to many great beaches.

After beach bumming and visiting the Museo Picasso Malaga for a few days we could then either fly ($375 total for a 1 hour flight) or bus ride ($147 total for a 6 hour bus ride) to Madrid round trip.  We could then fly from Madrid to Paris for $316 (these numbers are total for four people).  

In this example, we would go from Granada to Malaga by bus, Malaga to Madrid by plane (or bus), and then Madrid to Paris by plane for between $563 - $791 total for a family of four.  We would use Airbnb for lodging with averages of $50 - $70 per night in most cases.  Unbelievable, right!? 

Travel To / From US (And Within US)

We have budgeted $3,500 to travel to / from the US once per year.  We will fly in and out of NYC because flights to Europe tend to be cheaper from this hub.  We'll also spend time with family / friends in the US before heading to our next adventure.

Spending Money

We currently have $800 allocated to spending, and we don’t plan to change it for Spain.  In fact, my guess is that we will be able to stay under budget on this for most months.  

Now that we have come up with some educated estimates for our six main expenses (we also threw in a cell phone expense below), we can start to put together our budget for Spain to make sure that it falls within our current spending of $38,400 per year. 

We came in well below our target of $38,400.  This example leaves us under budget for the year by $6,300!  We could apply these funds to another trip within Europe (Germany? Italy? Portugal?) and still stay well below our annual budget.  If we kept spending as shown above at the $32,071 level, this would put us at a 3.34% withdrawal rate (assuming the $960,000 net worth that we mentioned at the beginning of the post).  Not too bad for year one of FIRE!

What do you think?  If you could ... would you spend a year or more in a different country?  What do you think of our Spain budget?

-Erik

Taking Flight To Spain: Flamenco Master Class

As we mentioned previously, Spain is on the table of possibilities once we reach FI (financial independence) (but nothing yet is set in stone).

Why (maybe) Spain?  Read more about our thoughts here: What Are You Going To Do?

We're going to start sharing our preparations for FI and included in that are preparations for possibly going to Spain (among other destinations!).  Stayed tuned this weekend for Erik's financial post on Spain (how a family of four can live in Spain for one school year for well under $40k).

Spanish Culture & Language

One of the ways we are preparing to take flight to Spain is to expose the kids (and the family) to Spanish culture and language as much as possible right now.  This also reinforces what both of my children are learning in school since they are in a dual language (English / Spanish) program in their elementary school.  

I also value exposing them to as many cultures / languages as possible (in general!).

This past weekend our youngest had the opportunity to take a Flamenco Master Class with Ivan Vargas (from Granada, Spain).  Funny thing is ... Granada is currently our top pick of where we may want to stay for a school year (or more).  (Just a quick Google search of Ivan turns up much about his Flamenco experience including some really great videos!).

Our youngest has been in dance since she was two years old (ballet and tap), but she has never taken Flamenco before.  When I told her about it she was very excited - "flamingo!  Yes!  I love flamingos!"  (She is 5 years old).  As much as I tried to explain the difference in what I was trying to say, I'm still not sure she understood.  Hah!  Kids.

What is Flamenco?  From Flamenco Houston: Flamenco is a Spanish art form made of three parts: guitar playing (toque), song (cante) and dance (baile). Flamenco originated in the southern regions of Spain, but its thought to be influenced by many world cultures, including Latin American, Cuban, and Jewish traditions.

How did I find out about this opportunity?  Facebook of all places!  Social Media is good for something (sometimes).

Flamenco Master Class

Ivan Vargas, a professional Flamenco dancer, came from Granada, Spain to perform and teach at MECA (Multicultural Education and Counseling Through the Arts) with Mercy Renteria of Underbel Flamenco.

This was from MECA's website: Ivan Vargas is one of the most internationally acclaimed Flamenco dancers. This will be his first performance and Master Classes in Texas, along with Houston based flamenco dancer Mercy Renteria.  He is one of the most internationally acclaimed Flamenco dancers.
 
Ivan Vargas was born in Granada, Spain in the Sacromonte district, specifically in the cave "La Rocío" where he joined the world of dance at the hands of his family, Los Maya, a dynasty of renowned dancers such as Manolete, Mario Maya, Juan Andres Maya.  Representing centuries of history, flamenco blends Andalusian, Iberian, Arab, and Romani culture into one spectacular show with live vocals, live music, and highly technical dancing.

We had a blast at her Master Class (very near our old neighborhood when we lived in Houston).  She was very lucky to be one of only five students, and Ivan Vargas was really great with the kids.  Sadie seemed to be the youngest and possibly one of the only ones that has not had previous experience with Flamenco.  I loved that Ivan communicated in Spanish 99% of the time, and Sadie hung in there (she's had Spanish exposure at school since late August so that has probably helped!).  What a unique opportunity for her to be able to learn from and dance with an internationally acclaimed Flamenco dancer.

The cost for one of the Master Classes for children was $40.00, and we used our variable spending on this expense.  A friend of ours happened to have a dress from Spain that we borrowed (free!) so shout out and thank you to that friend.  Often times someone in your circle may have something you can borrow for a one time (or few times) use (another perk of Social Media - crowdsourcing friends).

MECA also offers Flamenco classes for children through Mercy of Underbel Flamenco so that is something I may consider in the future.  I personally enjoy learning about cultures through art history / the arts, and what better way for Sadie to learn more about Spain than through Flamenco?

What do you think ... how do you like to learn about other cultures?  What else should we add to our list to prepare for Spain?

-Tara

Financial Update: August 2018

We plan on presenting our monthly financial update so that you can ride along on our trip to financial independence.

August Monthly Income: $8,344

Nothing fancy to report here.  This is simply our two salaries lumped together for the month (our take home pay).  Note, this amount will increase in March 2019 due to my annual salary adjustment and bonus (and in September 2018 due to Tara’s annual salary adjustment).  

August Monthly Expenses: (-$4,445.23)

Our expenses are broken down between variable and fixed.  Let's take a closer look:

August Variable Monthly Expenses: (-$1,370.50)

We typically allocate $800 per month for variable spending, so we went over this month, but that’s because August is typically a crazy month with back to school, Brooklyn's regular vet visit, and the semi-annual dentist visit for the kids.  Our kids have two sets of very generous Grandparents that also helped with back to school expenses (otherwise yes, our spending on school clothes and supplies would have been higher).

We will make up for this overage in September when things settle down.  As you can see from the charts below, the Dog Boarding / Vet made up 47% of our monthly variable expenses in August.  The boarding was due to a trip we took to New York City in late July (which was unexpectedly extended for several days due to a cancelled flight), and the vet visit was for a regular checkup.  If you take one or both of these out (which would be more in line with a typical month for us) our spending for August would have been great!

August Fixed Monthly Expenses: (-$3,074.73)

These are the expenses that are (for the most part) fixed from month to month.  We budget these expenses to be $3,237.25 per month, but usually we are able to stay under budget over all because I tend to purposefully over budget for certain things such as utilities.  This month represents $162.53 under budget (thank you $31 electric bill!).  

We have $3,898.77 left once we deduct our monthly variable and fixed spending from our monthly income.  We are now going to divide this up between our Vanguard account and our cash cushion (you could leave this in your regular bank account for the cash cushion portion).

August Monthly Investments (Taxable): $2,955

We deposit $2,955 in our taxable Vanguard Account.  I typically make a deposit on the 15^th and one on the 30^th of every month.  This account had market gains of $10,663.54 in August. 

August Monthly Investments (Pre-Tax): $1,880

$1,880 is deposited to my 401k (which obviously is taken out of each paycheck before tax).  This account increased by $9,962.92 in August (market gains).  

Note, total increase in August investments = $20,626.46  (Thank you Stock Market / Compound Interest!)

August Cash Cushion: $943.77

This amount comes from the difference of our leftover $3,898.77 (shown above) and the $2,955 that we deposit to Vanguard each month.  For most of the year I like to keep this amount in our regular checking / savings account just in case an unexpected expense pops up.  At the end of the year I will move this to our Vanguard Money Market Account which will eventually be part of our cash cushion in early retirement. 

How did your budget look in August (or September (our September is coming soon!))?  Is August a higher month for you like it was for us?  Are you watching your budget closely?

-Erik