No more BS - I'm fixing my savings rate
As the prestigious half owner of Financial Jiu Jitsu (FJJ,) it should be known that I take pride in my work. I take pride in knowing that I preach a solid piece of financial advice most weeks in article format. I spend the time to rev up my brain in the middle of a chaotic life just to squeeze out some useful tidbits for anybody who likes to get ahead and maybe didn't start with too many handholds. I make this stuff easy to understand because let's face it, being in good financial shape is a lifestyle choice and it really isn't that hard unless we make it that way.
But now, there's a problem. I have been preaching about saving money and investing and blah blah blah for at least a year on this blog. But what is my actual, personal, savings rate? After all, one would assume that you should practice what you preach first and foremost. I would even say quite a bit of practice is needed well before you start preaching to anybody! This is common knowledge. I don't want to be the clearly overweight personal trainer at 24 hour fitness, I want to be the guy everybody thinks is on steroids at Gold's. You understand that right?
So what, you may ask, is my problem hmmm? I had a month (December) where my savings rate was 22%. That's right, just 22%. I am frieking terrible at this sometimes! Can I make excuses? Yeah, (Christmas Presents,) but I'm not going to. This site isn't called Financial Excuse Mental Acrobatics (FEMA) It is called Financial Jiu Jitsu. Period. This is just completely unacceptable. Here is the basic formula I am using for this calculation, followed by the caveats and assumptions I must make to keep the results consistent on a month to month basis:
[Income-Expenditures]/Income = Savings rate
- Investments are ignored (IE Income spent on investments in the month are not classified as expenditures, so they increase the savings rate)
- Principal balance decrease of mortgages are ignored (Monthly principal balance decrease is not counted as additional savings/income)
- Fluctuations of investments are not taken into account at all (IE equity, stock market valuations, 401k value increases/decreases, etc...)
- 401K is completely ignored (not income or expenditure)
- I may opt to split up major payments like a 6 month insurance premium to get a monthly average if any pop up during this experiment, because they would absolutely skew the results unfairly against any given month
- Ignore fix/flip purchases/sales because these usually span months and will jack up my monthly on either end of the spectrum for sure
The reason I am making all of these assumptions is because I want to be hard on myself here. I should be able to do better on a personal level by doing things like making my own lunch, not splurging on car parts that I don't imminently need, and spending some time crunching the weights and working on music instead of going out to have fun in a social environment which always incurs expenses. I want to see what this old tired machine can do before I finally roll over. Am I serious? Kind of. But that's about as serious as I have been in a long time and I wonder if that level of drive can produce the results I'm aiming for. To be fair, the 22% SR was two months ago, and the month after it was already up to 37%. A fairly large increase in and of itself. BUT THIS IS NOT GOOD ENOUGH. I need to do better and I know it, I have just been slacking. I have been out racing my financial portfolio for too long already, and this should not be the default mode of operation. Time to put it in park.