A year has passed when i picked up my financial game again and it is good to reflect back on what i have wanted to do in the beginning of the year: Game plan 2015
Before that, a personal reflection. I did not realise how much personal finance topics were far away from my mind until i actually sat down and decided to re-focus my energy and efforts on it. While i have always been saving and investing, it was not as disciplined and well thought out as it could have been. Dare i say, it was even quite haphazard.
When we fail to plan, we are planning to fail, and at the rate i am going, i would say i wouldn't have done very well when i reach retirement age. Granted i think i probably would not starve and sleep in streets, but definitely would be less well-off than i could be.
Back to topic. I wanted to cut expenses and increase revenue.
(1) Cutting Expenses
I have diligently used YNAB to record and track my expenses. [for some reason, i find it quite pleasurable to record every single transaction. I think it's my accounting training. I just love to balance my books to the cent] While i always have an idea of where my money went, it was good to have real solid data on what i actually spent on.
And truth to be told, the beginning months were quite tough as i tried to 'live on last month's income', which is a key concept of YNAB. I pay myself first every month when my salary is in, but using February's salary to pay entirely for March's expenses was something i wasn't ready for. After a few months of tuning my expenditure and allocation, glad to say that i have passed this 'test' set by YNAB.
So where did my money go to in 2015? The way i used YNAB is by categorizing my expenses in several buckets for analysis.
Car Expenses: $ 33,198.99
All car related expenses, includes loan, carpark, fuel, insurance and any related expenses. I would be the first to admit that the easiest way to improve my finances would be to get rid of this. Even if i take cab everyday, the savings would be hugely substantial. Something i am mulling about, but it's a lifestyle choice at the moment, and i really enjoy the convenience and experience. Lesson here (i haven't learnt it yet) is to cut this away to accelerate savings.
Fixed Expenses: $ 14,234.21
Insurance and taxes comes in here. I increased my insurance coverage for death and CI this year. This is termed as fixed expenses by me, and not much discretion could be made here from my part.
Monthly Bills: $2,943.24
These are my regular bills (phone + mobile broadband) and membership to my Taekwondo school fees and sports related expenses. A little high because i took my 2nd Dan grading in 2015, and it cost me $450 just to sit for the exam. Additionally, i had to sign up for several preparatory courses, and that cost a bit too. The monthly school (or gym if you will) also do not come cheap at $140 a month. I did rationalize my expenses here a little but cutting away the mobile broadband once the 2 years is up, although that helps only a little.
[My joint family expenses which i track in another budget (groceries, utilities, home broadband etc) comes up to about 5k in 6 months. For simplicity sake, i shall estimate it to be 1k per month. I will use this amount to add to my subsistence level of expenditure]
Daily Expenses: $9,081.47
As opposed to personal spending, these are expenses which i incur for the family, including dining out at restaurants, home maintenance fees (payment for part time maid), changing of light bulbs, family entertainment (movies night) etc.
So i took 3 trips this year, 1 week in Australia, 1 week in the UK and 2 weeks in Taipei. I was lucky that my trip to the UK was part of my work trip, so i managed to save on the airfares. Again, a luxury here which can be removed if need be. For 2016 i am actually trying to plan a trip to the states just to settle some banking stuff as well as to check out my apartment over there.
If you are interested, you can take a look here, where i share some pictures from my trip http://www.casualtaketwo.blogspot.sg/
Personal Spending: $6,175.5
Expenditure which i incur solely. Eg: Office meals, personal shopping (yes, YNAB software comes in here), entertainment expenses (unfortunately these can't be done away unless i'm a hermit), personal dining expenses and other expenses related to weddings/baby showers/birthdays etc
Total personal annual expenses: $73,872.46 [or $6,156 per month]
Quite high, i truthfully admit, and the bulk of it pertains to the car expenses. However, if i DO give up on the car, what is my subsistence level of expenses?
YNAB provides me the option to easily select those categories which i will have to incur to just 'exist', and i came up with the below amount (inclusive of family groceries/houseshold expenses).
Definitely no car and no holidays!
Total essential expenses: $42,140.98 [$30,140.98 + $12,000 [family expenses]]
Works out to about $3,500 a month.
Gives me a solid target to aim towards for passive income. Will write about my investments in another entry.
And before i forget, wishing one and all a prosperous happy new year!