Monthly Expenses
2021 Q3
Details into my monthly expenses and how it has helped me make progress towards my Financial Independence goals.
I track monthly expenses as well as FI Progress.
Motivation for tracking expenses
Knowing where each penny earned is a fundamental pillar for financial success. Whether this is for a small business, a large enterprise or personal finances, a robust accounting method is necessary for financial success. For this reason, I track my daily expenses; it helps that it is also satisfying knowing this information and I enjoy the process. In my post, Analysing Personal Finances, I outline the tracking system and methodology I use to track my expenses. Having a methodology is just as important as outlining the reason ‘why’ the tracking is meaningful Having a worthwhile goal will help you to persevere through some fo the more mundane moments. The expenses I report in this post are for two people living and working in Europe, all values are in euros.
Monthly Expenses
I have been tracking our joint expenses since January 2020. In this section I focus only on outflows, these are items that we spend money on, anything from food to vacations. It importantly excludes any type of savings and investment. The above picture shows our expenses on a monthly basis since 2020, until the end of 2021 Q3. From the overview, our average monthly expenses are €4,296. This means that there were two months below the average and September was significantly above the average. My ideal average monthly spend would be €3,000 but with this insight I will need to readjust that spending target for 2022.
Focusing in Q3 (Jul – Sep), the analysis tells the following stories for each month.
July €2,908: only essentials such as food, mortgage, transportation and limited entertainment and shopping. Bought baby crib.
August €4,094: Half the expenses due to trip to Italy such as hotels and flights paid in advance, and wedding gift for wedding we attended. Other expenses were baseline food, mortgage, and other basic items similar to July.
September €8,036: Major expense of vacation in Italy where car rental alone was €1,227. Restaurants and shopping in Italy summed up to another €1,190 (total vacation €2,417). Was a great vacation in Italy! In September also paid second enrolment year for master’s degree €1,094. Living costs went up as well due to higher gas prices (+40%), where normally mortgage expense (includes utilities and mortgage) was €402 in Aug, it went up to €589 in Sep. Spent €446 to get ready for baby essentials to get ready for our baby arriving in November. All other expenses baseline expenses were relatively similar to August. This was by far, the most expensive month we have had in almost two years.
My learning from 2021 Q3?
1. That we need to set a budget on the items we need and want to spend.
2. Make an active effort to bring rolling average back down below €4K (ideally approximately €3,3K)
The below visual shows the expenses for September, showing visually what was described above for the expenses of September. Though the vacation was budgeted before hand and I had set my mindset to splurge more than normal for this particular vacation, seeing it in comparison to the other months gets me thinking. Maybe the vacation was overly expensive and I might reconsider next vacation, thinking that I will be more cautious, reverting to more normal spending patterns.
FI Progress
The above dashboard is very critical in anyone’s path to FI. First it gives current net worth, important to assess if progress is being made towards the ultimate goal of FI. Secondly, it gives a quick overview of investment account balances and where side income is coming from. Third, as my ultimate goal is to become FI with passive income, I also have to other key performance indicators that I created: Passive Income Amount & FI % Achieved. I describe both of these two KPI’s in my blog post, Analysing Personal Finances. In summary, to me the single most important number is the FI % Achieved, as this tells me how much progress the sum of all my efforts have gotten me to becoming FI.
The FI % Achieved number for me puts together how much income my family would need for me and my wife to stop working (also known as ‘work optional’ for us, as we will likely want to continue working past this point, but in another capacity or frequency). This number also tells me how well my investments are doing, the higher the number, the better my investments are working for me. The score is out of 100%. Once I reach 100%, then I would consider myself Financially Independent. The name of my blog is aspirational, as today I am far away from becoming FI, but my goal is to become almostFI (99%) and help others get to the this stage by sharing what I learn in my journey. The last 1% can be taking any direction.
In Q3 of 2021, I have made 280 euros from my passive investments and that makes me 0,58% FI. Though this is less than 1% FI, it could be discouraging to some, however I see it from another angle. When I posted My (self) declaration in 2020, to some day become FI, I did not have even one euro of passive income, and to today have 280 euros coming from me not doing anything is good progress I feel. Another point in time for me was that in July 2021, my FI % Achieved number 0, 21% – this means that I have more than doubled since the summer with my FI % being at 0,58%. In the grand scheme of things, very minor improvements, but I believe in persistence and focus. Furthermore, I am looking into the long game as my goal to become FI is by the time I turn 40 years old, that is in approximately 7 years as I am 33 years old today. This timeframe both allows from breathing room, but at the same time makes me think I need to pick up the pace.
I will continue to make this tracking by writing a similar post every quarter, I would like to pass the 1% point by next quarter. Another good goal for next year would be to pass then 10% mark for my FI % Achieved KPI, that would be good progress if I could finish 2022 with above 10% FI Achieved. We will see.
what is your fi % achieved number today?
FI % Achieved
The single key figures that shows you how close you are to becoming Financial Independent