Well, that wasn’t the start to the new year that I had expected. January flew by with little accomplished as I’ve been dealing with some unexpected medical bills and undiagnosed health issues.
I had such high hopes for this year that it’s hard not to feel disappointed, but we’ll try to make February a better month.
The month wasn’t a complete bust though. In between working from home and taking on more parenting duties, Mr. RFL was still able to make some progress on his first piece of furniture, a bed for our daughter.
In this post, I’m sharing our January finances, with all the details of this month’s spending, passive income, savings rate, investments, and changes in net worth for your voyeuristic pleasure.
Why share the details of our spending and finances?
Because I’m nosey. Seeing the inner details of other bloggers’ spending habits and net worth gives me a thrill. You, too? I won’t tell anyone.
Everyone’s financial situation is unique. As such, you probably shouldn’t judge your own financial progress based on what others have achieved. However, I do believe there is value in sharing information for context.
We’ve been motivated by the number of people in the FI community who’ve happily embraced simpler lives. Seeing others succeed gave us the confidence to begin our own journey to financial independence and a lifestyle we believe will be healthier, happier, and more fulfilling. I’m just trying to pay it forward.
If you’re looking for the frugalist of the frugal, you won’t find that here. Life is short and we have no problem splurging on things that make us happy. However, while we spend freely in these value areas, we’re trying to ruthlessly cut back everywhere else. We call this “value-spending.”
I’m hoping this commitment to share this information each month will hold us accountable to our goals, and that you’ll find some benefit as well.
Other information useful in reading this report
Did we just buy a money pit?
We took a risk and bought a complete fixer upper in late 2018… with a toddler. When we moved across the country for Mr. RFL’s job, we chose to live close to his work for a shorter commute and better quality of life. Unfortunately, real estate is expensive here.
When we found a great deal on a fixer upper that had a lot of potential, we decided to go for it. We’ve been working on projects ever since, trying to do as much as we can ourselves to learn some new skills and save money.
Since this is a whole home renovation, the costs are significant and non-recurring. We don’t include the costs in our monthly expenses budget as we have cash set aside for this in a renovation SINK fund, but I do share the amounts each month.
How we define an “expense”
Outside of renovation costs, the table below shows all expenses for the month. Principal payments on debt are not included. As a former accountant, I don’t view principal payments to be “expenses” since they directly reduce debt and increase net worth. Our current plan is to have all debt payed off by the time we fully retire.
JANUARY FINANCES & NET WORTH UPDATE
Net Worth
We calculate net worth by subtracting total debt & other liabilities from total assets. We include cash, investments, home equity, and an immaterial amount of other assets in “total assets”.
Our net worth grew by 0.6% from December 2020 to January 2021. This is a bit less than the explosive growth we saw in the second half of 2020, but any progress is good progress. The downturn in the market at the end of the month wiped out some mid-month gains. Additionally, as our net worth and investments continue to grow, the percent changes should naturally become smaller each month.
Investments
Our Financial Independence portfolio, which consists of cash and investments, excluding our renovation SINK fund and daughter’s 529 Plan, increased by 0.8% during the month of January.
We invested $6,795 this month, including company matches and finished the month with a FI portfolio balance of $691,000…or 55.3% to our FI Number. If you’d like to learn more about our investments, check out the recent post on Our Investment Strategy & Portfolio Allocation.
Debt
We ended January with $213,300 in debt, $199,000 of which relates to our mortgage. We haven’t made any additional principal payments since refinancing to a lower rate in November 2020. Once we got the balance to $200,000, we decided the balance and rate were low enough to shift our priority for excess cash to investing (vs. paying down debt).
The remaining debt is for a small project loan for replacing our HVAC systems last year (0% rate), and my student loans (0.75% rate). We only pay the minimums on these balances since the rates are easy to beat.
Savings Rate
Our after-tax savings rate was 68.8% for the month, which is below the budgeted savings rate for the month, primarily due to all the unexpected medical bills. However, it is above our target savings rate for the year of 65%. Mixed emotions there.
As mentioned above, health costs and related expenses (specialty food and gear) were much higher than anticipated in January which brought the savings rate down. We came in under budget in a few areas this month, which helped to offset these overages.
That said, I’m still pretty excited that our savings rate remains consistent with what it was when we were both working, before I quit my toxic job last March. I can’t believe it, but we’re quickly coming up on my first full year out of the workforce! I’ll have to do another update at the 1-year mark, but for now, you can read more about my first 8 months of early retirement here.
JANUARY FINANCES – MONTHLY SPENDING
Ok, full disclosure time! The table below shows our expenses for the month of January, along with some additional thoughts (or excuses).
| January | |
| Fixed Costs | |
| Housing (Interest, Insurance, Tax, HOA) | $883 |
| Auto Insurance | $100 |
| Health Insurance | $360 |
| Student Loan Interest | $3 |
| Needs (but can be managed a bit) | |
| Groceries | $869 |
| Household consumables | $218 |
| Utilities (incl internet) | $203 |
| Cell phone | $58 |
| Fuel | $24 |
| Medical | $1,129 |
| Wants | |
| Entertainment | $13 |
| Alcohol | $87 |
| Shopping | $220 |
| Other | $4 |
| Total Spending | $4,171 |
*Does not include January 2021 spending for home renovation from Reno SINK fund of $348, or charity contributions made (which we don’t share publicly).
Housing-Related – $883
Housing-related costs include mortgage interest paid, property taxed, insurance and HOA dues. These costs made up 21% of spending in January.
We refinanced our mortgage in November to take advantage of lower rates. We paid $855 to lock in a rate of 2.5% on our $200,000 mortgage, which will save us money over the 15-year term. We’ll receive the full benefit of the lower rate this year, saving around $100 in interest each month during 2021.
Insurance – $455
This category includes our premiums for auto, term life, personal liability, and health insurance.
We are on a high-deductible health plan that is subsidized by Mr. RFL’s employer, and as such, health insurance premiums are withheld from each paycheck.
We pay our other insurance plans annually or biannually. Because auto insurance is pretty significant, we allocate that out to the budget each month. However, we just expense life and liability insurance in the months they are paid.
Student Loan Interest – $3
Though my parents helped to pay for my undergraduate degree, I graduated with two degrees and $40,000 in student loans. The loans have a low interest rate (only 0.75% for the past several years). Since high-yield savings accounts have historically paid better rates than this, I only pay the minimum. Just one more year and $3,100 left on this loan. Mr. RFL graduated debt-free.
Food – $869
We didn’t eat out at all during the month of January…this is all for groceries. And it’s a lot higher than budgeted!
We switched to exclusively ordering grocery pick-up this month due to a surge in the pandemic in our area, which meant that it was harder to shop the deals than usual. We continue to prioritize high quality food, but also had to make a number of special food purchases for my current dietary needs, which further drove the price up this month.
I can’t wait until things get better and I can do my own shopping without the worry again. Expect this to be a bit lower next month.
Alcohol – $87
Small stock up on wine and whiskey during a grocery store sale. January ended up being a dry month for me, so the collection builds. Mr. RFL did continue to experiment with his new cocktail hobby though.
Household Consumables – $218
This category includes most of the non-food consumables used in our household, such as toilet paper, shampoo, skincare, laundry detergent, cleaning products, batteries, etc. We continue to overspend here to stay in stock during the pandemic. January expenses included $60 worth of disposable facemasks and filters.
Utilities & Mobile Phone – $262
This includes electric, water, gas, security, internet, and cell phones.
Winter is the cheapest time of year for basic utilities & services in Arizona, and we spent $162 on these.
We were able to get a discount on our internet bill to $42/month last year. We’ll work on reducing mobile costs, currently $58/month, by switching to an MVNO provider. Unfortunately, my iPhone seems to be at the end of its life, so I’ll replace it this year as well.
Transportation (excluding insurance) – $24
We just had one gas fill up this month, which included a $0.40/gallon discount from our Fry’s card. Low transportation costs is a perk of staying at home.
Medical – $1,129
Ugh! In one month we managed to spend about as much on medical care as we did for all of 2020. Plus, there will be additional expenses next month which will push us well over our budget for the year.
Because we’re on a high deductible plan, there will always be some out-of-pocket costs for medical visits each year. Unfortunately, the January costs were all for unexpected medical bills and health issues, so we’ll still have our normal medical costs later in the year. It sucks, but this is why we maintain a significant cash buffer (or emergency fund).
Entertainment – $13
This category is for television, streaming music, books, games, concerts, and happy hours. We cancelled most of our television streaming last October and have been staying at home during the pandemic, so these costs remain low. January spending was for Hulu and Spotify.
Shopping – $220
This month, we purchased some specialty pillows and gear for my health issues and a new laser printer.
I’m still going strong with my year-long no spend clothing challenge!
JANUARY OTHER INCOME (Non-Employer Related)
While the majority of our income comes from W-2 wages and related employee benefits (i.e. 401k match), we continue to build on our passive and other income streams. The total earned in January was $589.
Dividends
December was a huge month for dividends, but January was pretty low at $152.
Interest
We earned $118 in interest this month, primarily from our high-yield savings account and interest earned on Mr. RFL’s deferred compensation investments.
Reselling
I made $216 on Poshmark (affiliate link) this month, from selling one luxury-brand item. The 20% commission hurts more on expensive items, but I feel safe selling on this platform. We have so much more decluttering to do, so I may expand into Ebay and FB Marketplace more this year.
Cash Back Rewards
We earned $103 in cash back rewards from credit cards this month thanks to higher spending in November and December on gifts and groceries. We always pay the cards off each month.
February is a new beginning. Did your first month of 2021 go as planned?
Note: This post contains an affiliate link for Poshmark. If you sign-up using the link above or referral code “RFL2024” you and I will both receive a $10 credit after your first purchase. Thanks for supporting the blog.
