Looking back at August it was a pretty crazy month for us. We purchased our “New” used Honda Odyssey mini van, purchased new life insurance for my wife, bought camping gear, and I spent extra on hotels and food while visiting my dad in the hospital after a pretty bad car wreck. And with all of this going on we still managed to stay within our budget.
Where did our money go in August?
These numbers represent the percentage of our take home pay that we spent in each category this month.
Mortgage (PITI) – 16%
Kids School – 19%
Food/House Supplies – 14%
Auto/Gas – 17%
Utilities – 6%
Miscellaneous – 8%
Savings – 18%
Debt Payments – 2%
Let’s discuss a few of these items.
Mortgage – I know I’ve said it before but one of the main reasons we have such flexibility in our monthly cash flow is because we have been able to keep our mortgage payment (principle, interest, taxes, insurance) low compared to a lot of families out there. For one we live in a low-cost area north of Atlanta, Georgia and our property taxes are low compared to other areas of the country. We don’t live in a small house either, it’s 4000 square feet total which includes a partially finished basement of 1200 square feet. This house sits on 1.35 acres in a nice neighborhood with a lake, pool, tennis, bike trails, etc. I even have 2 driveways and a ton of space for the kids to play. So, what was the trick? We certainly didn’t go out looking for a house like this but we stumbled on it as a pre-foreclosure and we got one heck of a deal about 5 years ago. Just recently, a house down the road sold for almost double of what we owe on this one, and it’s smaller. You have to be smart with your money and there is no better place to start than your housing costs, it’s usually the largest chunk of your budget. Don’t get house fever…Don’t use the full loan amount you qualify for…save up your 20% down payment to keep you from paying Private Mortgage Insurance (PMI)…keep your total payment less than 25% of your take home pay…and slow down, wait for a good deal.
Kids School – What can I say? Kids are expensive when both parents work and you want them in quality surroundings while away. They are worth it.
Food/House Supplies – A lot more money was spent this month eating out mainly being on the road a good bit helping my dad with his situation. No red flags when reviewing this, it was just the circumstances that presented themselves. I do remember going to Texas Road House one day for lunch while we were visiting my dad in the rehab center, $50 for 3 salads and 2 kids meals, this kind of spending on a regular basis can wreck a budget.
Auto/Gas – Well, it’s lower than last month after dealing with getting rid of the leased car. But, this month we bought our new van (with cash from savings) and had to pay the taxes on the purchase to get the title and tags. The good news is that we do not have any car payments and we have 3 vehicles that can get us from point A to point B safely and efficiently.
Most people never factor in the cost of depreciation when they go finance a new car. For example: say you go out and buy a brand new, very reasonable car for $30,000. Let’s also assume you have stellar credit and qualify for the 0% financing offer for a 6 year loan (72 months). Your payment would be $417/month, not too bad right? You might be thinking I can afford that easily but what you fail to factor in, is that new car is probably going to lose 15% or more of its value that first year. That’s an extra $4,500 or $375/month you are losing. My advice is to spend the least amount as possible for your situation for things that go down in value and get more money going into things that go up in value.
Utilities – Our electric bill ticked up slightly with us using the air conditioner a little more in July and I would expect that trend to continue for next month. Our best cost saving moves in this category are having programmable thermostats and not having a cable bill. We also use a low-cost cell provider for our older iPhones (Cricket Wireless).
Miscellaneous – A couple of random things popped up this month like getting the riding mower serviced, my daughters hip hop dance class she wanted to do at school, and our new yearly premium for my wife’s new life insurance policy. She was paying $62/month for her $1,000,000 30 year term…now her new $1,000,000 15 year term is only costing her $27 per month. This change will only shorten her coverage by 9 years and over the next 15 years we will have accumulated a significant amount of assets, I think I will be just fine. My life insurance policy is still in underwriting, waiting on information to be sent from doctors…this is what takes so long! If you are looking for life insurance I would highly recommend PolicyGenius, they are who we are using and can shop a bunch of companies all at once to get you the best deal.
Debt – 20% of our take home pay went to debt payments of which only 2% were the minimums due.
Savings – This gives us an effective savings rate of 18% of our take home pay and does not include the 6% my wife adds to her 401(k) and her company’s additional 6% match.
All of the needles are moving in the right direction and we are very proud of our progress thus far. We just have to keep the gas pressed to the floor and keep a sharp eye on the end goal.
I hope you enjoyed this update and once again thanks for reading,