Time once again for everybody’s…everybody’s…OW! DAMMIT! GET OFF MY LAP, CAT! YES! I LOVE YOU TOO! MAYBE! NOW GO DISPOSE OF THAT DEER HAUNCH OR WHATEVER IT WAS THAT YOU LEFT ON THE WELCOME MAT! PRONTO! AND MOP UP AFTERWARDS!
Right. For those of you who haven’t met Satan–our cute little sociopathic1 ragged-eared murderous furburger, that is–here’s a selfie he just Instagrammed. He’s a vain little bastard, and that’s a fact.
Cats are like teenagers…they only come around when they want something. Which is fine; he and I have truth between us.
And–note the deft segue here–let there be truth between you and me too, O Reader, because today as usual I reveal our family’s financial performance for the previous month.
But instead of posting a tote board with a net worth number on it ($2,574,798 this time around), I’d like to share with you my super-streamlined budgeting process instead in hopes that if yours is tedious and time-consuming, it’ll save you a BUNCH of effort.
(What? You’re not budgeting from month-to-month? Do so immediately, or sooner!)
Every Friday I make sure we’re on budget. Takes just a few minutes. First I gather:
- Our receipts from the previous week,
- Our recycling bin, and
- A beverage.
Then I open our Personal Capital (PC) account in a browser window and my budgeting spreadsheet in Mac Numbers. In PC I open Overview > Transactions > Credit, and for each receipt, I compare the hard copy to its line item. Assuming I find it and they match,2 I toss the receipt in the recycling. (Note to self: get a shredder.) Anything that doesn’t show up in PC yet gets copied to a special “not yet shown” column in our Numbers spreadsheet. Pic to follow.
Having completed the inspection process, I go back to PC’s dashboard and copy the total spending number from the Budgeting pie chart at the center of the page to the appropriate cell in our budgeting spreadsheet, as shown further down. Here you see that in August we spent $5,841 when our budget is in fact $4,250. Our net overage, however, was $251.99, an apparent inconsistency I’ll explain below.
(Yeah, grocery spending looks huge. However, despite our reservations we shop at Walmart a good bit and I refuse to spend a bunch of time splitting out, say, groceries from electronics or whatever. Doing that strikes me as micromanaging, but no judgment if it works for you. The point’s to FIRE, not to nitpick each other’s approaches.)
As you can see, I start with our $4,250 monthly budget–equivalent to $51,000 annually. A $51K withdrawal represents roughly 2.3% of our investment pool (~$2.2 million as of this writing), which is a much safer rate than the terms of the 4% safe withdrawal rule permit.3
Next I deduct our total expenses: spending shown in PC, spending not yet shown in PC (the sum of which I’ve tallied from the aforementioned missing line items), and a budget account deduction. In case you’re new to my monthly status posts, our budget account is an imaginary pot of money with a running total. From this I deduct expenses that amortize across the entire year (e.g. property taxes) as well as emergency expenditures (e.g. a ~$250 hearing aid repair from 8/19.)
I now account for non-budgetary expenditures–little month-to-month exceptions that through inclusion provide in the end a more accurate performance number.
For example, a bank account churning requirement we had this month was $200 spread across twenty debit card transactions. A pain in the ass, true, but it only took five minutes and if we do this for six straight months we collect $500 in cash bonuses from the bank. Well worth the time. And since I spent that on Amazon gift cards, it’d be double-counting to spend money on gift cards AND purchases of material shit, so I deduct the cost of the gift cards from the total.
About the car payment: we bought a very low-mileage used Prius 2.5 years ago for roughly $17K4 using 1.9% dealer financing. Given a consumer price index that’s hovered around 2.9%, market returns that have been much higher, and the fact that to have paid the loan off at time of the purchase I would’ve had to sell investments and incur capital gains taxes, I considered 1.9% to be free money. And since we keep enough cash on hand to pay the loan off in full whenever, I go ahead and yank the payment back out.
Then there’s “other,” which in this case includes emergency and travel spending–both items which appear in our budgeting account deduction as I’ve already described.
And at the bottom is our total spending, which shows that in August we overspent our budget by $251.99. As a rule I don’t like this, but to get back to the safe withdrawal rate of 4%: since our total financial assets are roughly $2.2 million, 4% of that would be $88,000. Last year we spent ~$65,000 in total, so in the big picture a $251.99 overage doesn’t mean much.
That’s it. A very simple process, but it nonetheless provides a good bit of insight into how our spending is going. So I highly recommend this approach. Leave me a comment if you’d like to know more, or–GET OFF ME, FIEND! BEGONE! HONEY? DEAR? PUMPKIN? FETCH ME MY FRAMING HAMMER THAT I MIGHT ANOINT THIS CAT ACROSS HIS NOGGIN WITH IT, AND THUS SHEW UNTO HIM THE ERROR OF HIS WAYS!
Oh, it’s affection you want? Well, that’s different. Good kitty.
- Defined as: “a person and/or feline with a personality disorder manifesting itself in extreme antisocial attitudes and behavior and a lack of conscience.”
- Usually happens that a few hard copies are missing. No biggie, as long as the line items in PC clearly aren’t fraudulent.
- This isn’t necessarily the actual withdrawal amount, but given the 4% rule I feel that working from a cash withdrawal assumption is the most conservative approach.
- I am SO not interested in debating this. In that direction madness lines.