Fabulous Financials & Fitness

January was a low key month.  I didn’t go anywhere special or do anything exciting.  Shoot, it’s been so cold, my idea of a good time involves my couch, thermal pajamas, and hot chocolate!  Plus, this recession got me all nervous and ish – folks hoarding money and stockpiling food. WTF is that about?  I haven’t gone to that extreme…yet, but with the exception of using birthday gift cards to buy my wish list items in the sidebar, I barely spent any money beyond necessities.

As usual, I track daily expenses in my handy dandy spreadsheet.  Then at the end of the month, I evaluate them against my financial strategy.  Here’s my first report of 2009:

Income: Rounded down to the next $10.

For January, my total net income was $6,910.  It includes:

• Work related income
• Rental income
• Online income
• Credit card cash back rewards
• Gifts

Savings: Savings should be at least 25% of my net income.

For January, I saved $938 or 13.6%.  When I realized I was $790 short, I transferred $700 to savings but it will not count towards this month’s numbers.

Bills: Bills should never be more than 35% of my net income.

For January, my bills are $399 or 5.8%, which is unusually low because January rent was paid at the end of December.  The rest of my bills include:

• Electric: $56.19
• Gas*: $190.36
• Water: $18.93
• Cell: $79.30
• Landline**: $54.48

*My thermostat is set to 68 degrees, so this aint even right.  I’m protesting!

**This is a new addition to the household bills (dial tone only), including installation fees.  I decided to get a basic landline to help BabyGirl cutback on pre-paid minutes.

Business Expenses: Focus is to maintain positive cash flow.

For January, my business expenses were $1,631.  Expenses include:

• Mortgage
• Domain renewal
• Misc. fees

Variable Expenses: Combined variable expenses should not exceed $1,000.

For January, my combined variable expenses were $675.  They include:

• Groceries & Essentials*: $348
• Dining Out*: $138
• Salon: $65
• Auto Gas: $56
• Shopping**: $25
• Credit Report: $23
• BabyGirl: $20

*Notice the 1st two categories total almost $500 and I only have two people to feed.  Umm…yea.  It isn’t that we eat A LOT…ok, maybe we do…but this is really an example of how much food prices are increasing.  I’m sure frequenting the new Harris Teeter doesn’t help much either.  I love their fresh meat and produce, but their prices don’t love me back.

**The only other thing I’d like to mention is shopping.  For the first time since my shopping strike ended, I visited one of my favorite stores.  The one place I’d shop everyday if I could afford it.  The one place every female must go to buy at least one pair of fabulous shoes.  None other than NORDSTROM, of course!!  With gift cards from fabulous friends, I bought a pair of black pumps, a belt, and 2 shirts.  After the damage was done, I had to pay ~$25 out of pocket.  Yes!

As luck would have it, I also found a purple scarf at TJ Maxx this past Sunday.  Now, the only thing left on my wish list is a black suit.  After an entire month, the search continues…

Total expenses for January were $3,644, which left me with about $3,266 cash flow. Seems like a lot of money for the slush fund, huh? Uh…not quite. After transferring an additional $700 to savings and reserving cash for February’s mortgage and rent, I’m right back to square one. Mm hmm. But when bills are paid and I have a little spending change, it’s all good.

Let’s just hope the weather stays cold for a little while longer (where’s that groundhog). Otherwise, a warm front may increase my urge to shop for new shoes…and there goes the February’s report.

Do you spend less money when it’s cold?

[image credit: corbis]

In yesterday’s post, Where Did My Money Go in 2008, I shared a summary breakdown of how I spent a net income of $90,303.  The % for each category was reasonable: household (29%), savings (24%), rental/biz (22%), needs/wants (12% each), misc (0.5%), and debt repayment (0%).  After further investigation, I’ve gathered the dirty details behind the numbers:

1. Debt Repayment ($0 – 0%): I have no consumer debt, but prior to November 2007, I was giving away almost 50% of my income to creditors.  I don’t know about you, but there’s nothing worst than working 40+ hours and having nothing to show for it at the end of the week.  That ish is for the crows.  Now that I’m debt free, I have the flexibility to decide where I want my money to go.  It’s a lovely feeling.

2.  Rental Property/Business Expenses ($20,188 – 22%):  A small amount is associated with Fabulous Financials, but the majority is rental property expenses.  My townhouse was a blessing when I bought it as my primary residence in 2005.  But when I decided to relocate for a new job ($20k+ more), better schools (A+ better), and convenience – it became my greatest financial strain.  Monthly cash flow isn’t a major issue, but after depreciation, carrying costs during vacancies, and repairs (only minor so far, thank gawd!) – I’m in the hole every year.  Thanks to the market, I no longer have 20% equity, so it will be damn near impossible to refinance for a lower fixed rate – despite having excellent credit and decent income.  To make matters worse, the comps in the area are saturated with foreclosures and rock bottom new construction, which means I can’t sell – unless I sell at a loss.  *sigh*  Although I love(d) my house, I don’t think I will ever live in it again.  So for the time being, I will continue to rent it until my tenant’s lease expires, then I’ll need to make a decision about the money pit.

3.  Savings ($21,640 – 24%): This includes all savings and investments, excluding 401k.  Some of it was saved the standard way that most people save – at end of the month after all bills are paid – but most was saved automatically through payroll allotment.  I’m a firm believer in the “pay yourself FIRST” mantra.  If I don’t, who else will?  Besides, automation helps me avoid temptation because I have to think about every dollar that touches my hands.  And when I’m tempted by shiny things, the end result can be disastrous.  So I set it and forget it, then I’m able to achieve my goals and spend what’s left with little remorse.

4. Household ($26,029 – 29%): This includes my uber high rent and standard utilities (electric, gas, and water).  Trash and internet is included in the rent, but I don’t have cable or a landline.  When all you have are the basics, there isn’t much left to trim.  I guess I could have moved to a cheaper place, but I love my little neighborhood.  I really do.  It has every convenience and luxury a girl could possibly need.  But the rent is REE-DIK-U-LUS!  And buying is out of the question.  Can you say 700 sq ft, 1br condo for $450k?  Puh-leeze!  Believe it or not, it’s pretty standard for the location and I don’t see the prices changing anytime soon.  *sigh* Oh well.  My lease is scheduled to expire in May and I plan to renew for one more year.  I hope the rent increase is less than 5% – it was only 3% last year.  When BabyGirl graduates HS next summer, I’m out of here.

5.  Needs ($11,200 – 12%): I define “needs” as things that are essential to my daily life.  I can function without a few of them, if necessary, but none of them would be first on the chopping board if I were in a financial bind.  Overall, I think my spending was pretty normal.  I expect some areas to decrease this year while some may increase.  In the end, the total will probably remain the same.  Here’s the breakdown:

• Groceries & Essentials – $2,453: Hmm…this averages about $200 per month.  I expected more.  This will definitely increase in 2009.
• Medical – $2,026: Most of this was final payments on BabyGirl’s braces and retainers.  The rest was annual exams and routine care.  I expect a 50% reduction this year.
• Car Related – $3,815: My car has been paid off for almost 2 years and she’s in excellent condition, but I still incur regular expenses to keep her running smoothly.
  • Auto Maintenance – $1,213: I bought a new set of tires last year, Good Year Triple Tread.  Expensive but worth it.  Needed a new oxygen sensor.  Renewed my state registration.  And the rest was spent on quarterly oil changes and annual maintenance.  This year, I expect an overall 50% reduction.
  • Auto Gas – $1,615: I damn near choked when I saw that number.  Only two road trips and local travel. *smh*  I hope $4 gas will remain a distant memory.  I plan to take more road trips this year, so the net effect will probably be the same.
  • Auto Insurance – $987: I try to shop around every 6 months to make sure I’m getting a competitive rate, but I was lazy last year.  I don’t think my premium is bad but I need to make sure before I renew the policy again.
• BabyGirl – $898: School related activities and fees.  She worked last year so she purchased most of her personal wants/needs.  We’ve decided that she will only work during the summer months.  So as we prep for senior year and college, I expect this amount to increase significantly in 2009.
• My Pooch – $943: Wow, I spent more on my dog than I did on my child! Ha!  This number is unusually high because my poor baby was infected with e-coli and it caused a UTI.  The vet/lab bills caught me by surprise.  Other standard expenses include annual vet visit, vaccines, meds, and grooming.  I expect a 20% reduction this year.
• Cell – $1,064: Whoa!  That’s a lot of talk time!  Sadly, I don’t expect this to change much.

6.  Wants ($10,941 – 12%): I define “wants” as things I would eliminate without a second thought if I were in a financial bind.  Due to the economy, I cut back on many things.  By the look of these numbers, you can’t tell. LOL  I can’t promise that I’ll cut back anymore, so I don’t expect the total spending to change that much in 2009.  Here’s the breakdown:

• Entertainment & Dining Out – $2,160: Once again, I spent just as much in restaurants as I did at home.  And you know what?  That’s cool.  Cooking is not my favorite activity and I don’t expect that to change anytime soon.
• Shopping – $1,246: Actually, I’m a little surprised by this because I had two shopping strikes last year – 2.5 months and 4 months, respectively.  So that means I spent all of this in 5.5 months?  Hmm…what did I buy?  Must be more selective and focus on quality.  This will definitely increase in 2009.
• Donations – $3,087: This is about 3.5% of my calculated net income but I could have given more.  At least $4,500 or 5%.  I need to plan my donations better throughout the year.  Maybe create a separate savings account that’s earmarked specifically for donations.  Hmm…whatever I decide, I expect this to increase in 2009.
• Personal – $1,008: I’ve cut back in this area considerably.  Didn’t think I had it in me.  Nothing a quality blow dryer, ceramic flat iron, and good hair products can’t cure.  I still visit the salon but not nearly as often.  I keep my nails natural and clear, but I still need regular pedicures and occasional spa days.  I will try to stay within this total during 2009. *side eye*
• Travel – $3,440:  Most of this was spent during the summer – one vacation and two extended weekend excursions.  See what happens when a single mom gets 8 weeks to herself? LOL   I expect this to increase in 2009.  Work Hard, Play HardER!

7.  Miscellaneous ($345 – <0.5%): This is a catch-all category for rare items that don’t fit any other category.  Think bank fees, USPS shipping, membership dues, etc.  This also includes about $70 of unknown, which is why I hate cash.

Compared to my 2007 income and expense review, I increased spending in areas that are important (savings) and decreased spending in areas that are not important (non-necessities and debt).  Overall, I’m quite pleased.

According to my handy dandy excel spreadsheet, I earned $90,303 in 2008.  This amount includes my “net” income and bonuses from the 9-to-5, rental income, online income, child support, cash gifts, and rewards.  This amount does not include any taxes paid (federal, state, local, medicare, social security), fringe benefit premiums (FSA, heath, dental, vision, long/short TD, and life insurance), tax deferred income (401k and pension), or employer contributions.  This is ONLY the amount that touched my grimy little hands.  And here’s how I spent it all:

When looking at my expenses as a % of income, I am not surprised that household (29%), savings (24%), and rental/biz (22%) were my largest expenses.  These three things alone account for 75% of my spending.  On the flip side, needs/wants (12% each), misc (0.5%), and debt repayment (0%) were my smallest expenses.  According to conventional wisdom, this distribution of income is near perfect.  But as you know, the devil is in the details.  I will expound later.

Do you track your expenses and review them at the end of the year?

If so, how’d you do in 2008?

I usually combine this data with my net worth report, but I’ve decided to discuss it in a separate post.  I was going to wait until the new year before doing it this way, but why wait.  Here goes…

Net Income:$7,694

Total Expenses: $7,100

• Saved: $1,611
• Bills: $2,036
• Necessities: $470 (only $105 spent on gas this month!!)
• Non-necessities: $989
• Holiday – new category: $357 (within budget, only $143 left)
• Business: $1,637

Net Cash Flow: $594

I evaluated my income/expenses against the new financial strategy that I established in mid-October.  Here is what I was supposed to do compared to what I actually did.

Income: Based on my strategy, income should round down to the next $10 or $7,690.

Savings: Based on my strategy, savings should be at least 25% of my net income.  Which means, I should have saved $1,923 so I fell short by $312.  However, with $594 in extra cash flow, I could have transferred $312 to savings at the end of the month, but I wasn’t thinking about finances while spending the holidays with my family.  I’ll do it right now.

Bills: Based on my strategy, bills should never be more than 35% of my net income.  My bills account for 27% of my net income so I’m good.

Business Expenses: no data in strategy.

Variable Expenses: Based on my strategy, combined variable expenses should not exceed $1,000.  Shoot, my non-necessities category eat up that limit all by itself! LOL!  If I include necessities and holiday expenses, it’s clear that I get a big ole’ “F” in this area.

This new way of managing my income and expenses is fairly new to me, so I need a little while to adjust.  For now, the important thing is to remember what I said I was going to do and make note of how my actions compared.  As a result, this exercise has helped me to understand where I’m doing well and where I need to improve.  By recognizing “variable expenses” as my problem area, it tells me that I need to evaluate these expenses further and figure out where I can reasonably cut back.  After the holidays are over, this is one area I’m going to focus on with a lot more vigor.

Do you track your expenses and evaluate them at the end of the month?

If no, why not?

That’s the price of gas at an Exxon in my area.  Wow!  Never thought I’d see that (again) in my lifetime.  I was so shocked, I had to stop for a fill-up even though I still had a 1/4 tank.

There was an older lady to my left in a tiny Mercedes convertible and a young girl to my right in a Honda Civic.  Then I glanced around at others who were further away, and surprisingly, there were no gas guzzling SUVs.  Hmm…coincidence or a real change in the tide?

As I waited for my tank to fill, (and this could have been my imagination) but I swear it looked as if everyone was smiling. LOL  When my total showed $24 and change, I felt their joy and began smiling too. Ha!  Then I thought to myself…man, gas prices really did a number on us! LOL

How much is gas in your neck of the woods?

Did the higher gas prices force you to make lifestyle changes (smaller car, drive a different route, carpool, less frequent trips, etc)?

Now that prices are lower, will you continue the lifestyle changes or will you revert back to your old ways?