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Financial Jiu Jitsu will teach you how to gain leverage in the real world, step by step, until you are confident you no longer need more.

Did I fix my savings rate? (update from last month)

Did I fix my savings rate? (update from last month)

Last Month I wrote an article on fixing my savings rate which was a piddly pants 22% in December. I will reiterate my formula and caveats below so you don't have to read the other article:

[Income-Expenditures]/Income = Savings rate

Caveats/Assumptions:

  • 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

So here we have illuminated the following savings rates from December, January, and February respectively as 22%, 37%, and 48%. I did bump the rate up, but of course as usual life got in the way so I could not do as well as I wanted. My main expenditure that I could have avoided was my hobby of dancing, for which I have purchased any of plane tickets, event tickets, and hotels every month this year so far. This particular month in question of Feb the percentage I could have upped my savings rate would have been 15% if I did not go dancing at all. There is no way in hell I am not going dancing when I want after working this hard for ten years, so that expenditure stays.

Irregardless, I will continue this experiment and see if I can do even better in March, which I have a feeling will yield more fruit because my credit card lags one month behind the expenditures, so my credit card scrimping in Feb did not materialize as Feb expenditures. This month there were a few positive incomes I ignored and a few negatives that I cut down and their respective impacts:

Ignored expenses/income from February

  • Fix/Flip of a 3d printer, approx net profit = +14%

  • Investment income (remember the big dropoff in Feb?) = +1%

  • Mortgage principal paid off = +4%

  • Retirement account income = +30%

  • Dance lessons I didn't track est = -2%

You can see where if I decided to incorporate all the above then it would be pointless to change my liquid account savings at all, because the savings would be dwarfed by the retirement accounts and any flip that materialized in the calendar month. This would in effect de-incentivize me to work that hard to save any damn thing, because I could just do a flip or two to get an artificial boost. 

A side effect of this is I have already noticed that I feel less stressed out. Maybe that could also be because I quit drinking coffee last week and switched to tea. Spending less money makes things simpler, because you will feel like sitting at home and reading a book instead of going out. You will feel like playing guitar while food is on the stove, and on the evenings when you feel wore out this is an incredible boost to the energy level just to chill out. Sounds lame, yeah I know, but it feels so good just to slow down sometimes and work on simple things!

Ok so does anybody think I can actually beat 48% next month? Here's hopin'

 fingers crossed ish

fingers crossed ish

Investing is fun when the markets are going up!

Investing is fun when the markets are going up!

Take a break from consistency to make gains

Take a break from consistency to make gains