This is the third spending rate article of the year. As you may recall, our 2016 goal is a 35% savings rate, mainly because we did not hit our goal last year and the fact that we now have a mortgage payment. Below, you will find the spending rate for July 2016.
The image above shows our 2016 July spending rate, which shows most of our spending going towards Savings! Below is the percentage breakdown of the spending rate:
- Savings: 44% (includes principal from mortgage)
- Mortgage: 9%
- Donations: 8%
- Insurance: 7%
- Vacation/Travel: 6%
- Groceries: 5%
- Utilities: 4%
- Other: 19%
My wife is paid every two weeks and this means that she receives 26 paychecks throughout the year. This means that she receives three paychecks two months of the year. This year, she received three paychecks in July. We used most of this extra money and dumped it into savings. This is why our savings jumped up to 44% in July. We also put a little extra towards donations and decided to go on a little trip with the extra money. This trip was a visit to my family in Nebraska. Since we get to stay with my family in Nebraska, the cost of a trip to Nebraska is pretty low. Other than that, the spending seemed normal and I am happy that we saved 9% over our goal in July! Now, let's look at August (where things did not go so well).
The image above shows our 2016 August spending rate, which shows most of our spending going towards savings and household. Below is the percentage breakdown of the spending rate:
- Savings: 22% (includes principal from mortgage)
- Household: 19%
- Mortgage: 11%
- Donations: 8%
- Groceries: 6%
- Utilities: 6%
- Auto: 6%
- Other: 22%
Household expenses was the main reason that our savings suffered in August. The expenses were reworking a sprinkler system and setting up home security. We have not had home security since we moved into our house and I have always felt safe. I grew up without home security, but I felt like my wife needed it for a sense of security. Utilities has also creeped up a little because of the warm summers in Houston and our electricity bill was pretty outrageous in August. All of these added expenses knocked us below our goal of 35% savings rate. Now, let's look at September.
The image above shows our 2016 September spending rate, which shows most of our spending going towards savings and mortgage! Below is the percentage breakdown of the spending rate:
- Savings: 29% (includes principal from mortgage)
- Mortgage: 13%
- Donations: 10%
- Utilities: 9%
- Groceries: 8%
- Vacation/Travel: 7%
- Household: 5%
- Other: 19%
Remember when I was talking about the extra money we made in July, due to my wife's extra paychecks? Well, since July our income has dropped a little, for a couple of reasons.
- My new benefit enrollment started in September (where I make more gross, but have less take home pay with everything that is taken out).
- My wife did not work as many hours in September and her paychecks were a little smaller.
- One thing taken out is money saved into an FSA (Flex Spending Account). I upped the amount in the account due to medical expenses coming with a baby on the way). I do not count this money into the monthly calculation for money saved.
Based on all of this information, you can tell by the mortgage percentage whether the month was good or not. In July, mortgage was 9% of our take home pay, 11% in August and 13% in September. The mortgage expenses never change monthly, but there was an increase in percentage because our income decreased in September. With this information in hand, I am impressed with our savings in September. We made less and still saved more than in August. A 29% savings rate is close to our goal of 35% and we would have reached 35% with our normal income. We were also able to squeeze in two trips in September and still save 29% of our income.
The first 3 months started off positively with a 41% savings rate, but it has declined to 34% since March. This is one percent below our savings goal. With a baby due in November and family visiting in December, I see it challenging to meet our goal, but we will continue to try to cut costs in as many places as possible. Below, you will find the 2016 current spending rate and how it compares to the first nine months of the year.
- Savings: 34% - Decreased 1% from June
- Mortgage: 11% - No change from June
- Donations: 8% - No change from June
- Household: 8% - Increased 1% from June
- Auto: 6% - Decreased 1% from June
- Groceries: 6% - No change from June
- Utilities: 5% - Increased 1% from June
- Vacation/Travel 4% - Increased 1% from June
Lastly, I want to compare the 2016 savings rate to the 2014 and 2015 savings rate.
2014 Savings Rate: 29%
2015 Savings Rate: 40%
Current 2016 Savings Rate: 34% (decreased 1% from June)
Life will always throw different things at you each month. I know that even with every thing that is thrown at us, we are on the right track towards retirement. We are saving money every month and we have a plan to save and track our spending each month. Make sure that you are taking time every month to look at the numbers of your spending. You will never know what you find that you might be able to cut out.