February is my best month so far this year and my best month ever since I started watching my expenses in 2013. Between no more car payments and some other adjustments I was able to cut my spending and work towards my goal of rebuilding my emergency fund. Let's take a closer look and see where I saved and where the DFG family went over. Yes it is almost the end of March but better late than never.
I have decided to follow some of my fellow bloggers and not look at any windfalls (bonus, tax refund, etc.) that might fall within the month. I will look at my fixed budget (based on 2 paychecks in a month) and track whether or not I stay within that budget. By keeping it simple I will have a consistent budget which will help me with my spending.
What about big purchases or travel? That will come out of the emergency fund. So if I do not have enough cash for it, it doesn't happen.
I liked the features of Quicken 2015 from Dividend Life's review so I decided to upgrade. One of the features is virtual accounts. You set it up and money is transferred from your checking to this savings account only in Quicken. Say you have $1000 dollars in your checking account. You transfer $200 to this virtual savings account in Quicken. It will only subtract it from the Quicken account and not the physical bank's checking account. Quicken will say you only have $800 in your checking account. If you login to your banks website it would say you have $1000 still.
I may fire up a couple of those to help save for vacations and big purchases. This will keep the funds in the emergency fund for what they were intended for.
Going forward I will be removing income from my posts. The focus will be on my expenses vs. budget and how much I was able to save for the emergency fund. Once I get my 2 months of expenses saved I will shift the savings over to my investment account.
Another nice feature of Quicken 2015 is the Planning & Budget area. In older versions of Quicken I never could get it to work properly. That is why I started tracking my categories in Excel. With 2015 it was intuitive enough where I was able to setup all of my categories just like my spreadsheet. Then at the end of February I compared the two and the numbers matched! Looks like I can retire the spreadsheet.
Another nice feature of the budget is you can set it up to rollover unspent money. This is almost like having savings accounts for each category. This is really helpful for the categories that fluctuates every month like your electric or gas bills. Say over the course of the year you average $100 dollars on your gas bill. For example, if I spent $50 in January because of a war winter the extra $50 would carry over to February ($150 to spend). If February was extra cold and the bill was $150, I would have enough cash to cover it.
One of my discoveries is you need to start off the year with some kind of buffer of cash in each category. If you don't have that buffer and go negative in January there will not be enough in your checking account to pay the bill. So I started my budget with a one-time buffer. This should not be an issue after this year as the budget will save that cash over the course of the year.
Below is an example of my Childcare budget.
In last month's budget I wrote about all of clothes we bought our kids on clearance for the next year. In the image above you can see in grey $132. That is the average I spent on my kids per month in 2014 and is my budget for 2015. In Quicken I can easily see I am still negative (red) in this category for February. Without some initial buffer I would be in the hole and not able to pay my January bills. So to balance it out my new goal would be to spend less than $132 to get that balance back to a positive number. I did just that by spending only $82 in February. If I keep that trend up I will rebuild my buffer to ensure there is adequate cash in my account to cover the bill.
So how did I pay that bill then you ask? Well my buffer came partly from coming under budget in other categories. For example my automobile budget includes saving each month for car repairs. So I had some extra cash in my account because the cars didn't need repairs in January. This is not ideal as that money was supposed to be set aside for when a repair is needed. That is why it is important to have that buffer/emergency fund.
There were only 2 other categories that went over for the month. The first was guilt free spending money. Previously I had no budget for fun but with my car paid off I set one for February. Unfortunately I set it after I spent more in this category than what I budgeted. This should improve next month as I have a visual that I can look at any time to help me stay on track.
The second was utilities. The cold winter where I live had an impact in January. Both electric and gas were over budget. These are rolling accounts so in the summer I hope to be under to build that buffer back up before next winter. The other utility that contributed to the miss was my quarterly water payment. Same applies to this and I will have 3 months to build that buffer up before the next bill comes.
So this was my lowest expenses for a month in 3 years. Came in at $809 under budget. All of that goes to build up my emergency fund. Boy do I miss buying good dividend paying companies but as the sole income stream for my family I need that buffer.
One other extremely positive savings category was food. My budget was $900 a month which does not include eating out. The price of food was ridiculous last year so that is what I averaged. This year something needed to change to rebuild my buffer and hopefully have some money to invest.
For February I came in $200 under budget. How you might ask? Well I don't buy as much organic food as I used to but the big saver was from switching stores. I am now a faithful Aldi's shopper. I plan my menus around what the store has and pay in cash. I actually feel good coming out of the store having some change in hand.
I feel really good about this month and it gives me hope for the rest of the year. There are some big changes coming to my family this year (still have to blog about that) so saving as much as possible is the key to a happy family and happy DFG (that's me).
Take care all,