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The weather is finally turning and I love it! It was a long winter with so much snow and finally we’ve been having some warmer days full of sunshine. The older I get, the less I enjoy the snow; ugh!
With warmer weather comes the feeling of wanting to go out and do more and spend more. That’s not good for our budget so we work hard to control our tendencies and emotions to ensure we don’t break our budget. If I had so much money that I never needed to work again and needed to figure out a way to spend all of my money, here are the things that I would buy right now (I included links so you can see what I would want):
- Private island
- House on the beach
- House in the mountains
- Tesla Model X
- Private jet
- Hire people to manage all of my new stuff
While it’s fun to dream, I actually am getting anxiety over thinking about how much money we would have to spend and stuff we would have to manage which is why I included number 7.
Since we thankfully (yes, I’m serious) don’t have the problems of too much money, let’s get back to real life. Warmer weather does still make us want to spend money. I’ve noticed my wife and I wanting to spend more on clothes, outdoor experiences and fixing our house. Also, thankfully, my wife and I are on the same page so we don’t break our monthly budgets. We methodically plan out our purchases and budget for the wants.
Quarter 1 Update
So with all of that, let’s take a look at how we did for the first quarter (January through March). If you haven’t read Jack’s Q1 update, I highly recommend you check it out. He talked about how to calculate savings rate, provided spreadsheets for you to download and use, and also discussed his savings rate. It’s a great post.
Calculating Your Savings Rate
In Jack’s update, he writes that there are multiple ways to calculate your savings rate and I definitely agree with that statement. Regardless of how you decide to calculate your savings rate, please make sure you calculate it the same way each month so you can accurately compare. The only difference we make when calculating compared to Jack is we include the principal pay-down on our loans in our savings rate. Let me walk you through an example of that.
We have a small car loan of about $12,000. Each month our payment is about $267. That payment amount is split between principal and interest like any other type of loan. The interest amount is about $50. The principal amount which is the amount the loan decreases is about $217. We also pay an extra $400 towards our loan each month for a total payment of $667. I include the extra payment and principal reduction towards our savings rate which is about $617.
Savings Rate: 55%
Savings Rate: 59%
Savings Rate: 37%
March, what happened?! It’s not as bad as it looks. This summer, we’re going on our annual vacation with my in-law’s (whom I love dearly). This is a vacation I look forward to every year. We paid for our summer rental during the month of March which decreased our savings rate. We actually absorbed that amount without stressing at all. It’s cool to be able to pay for something like that and not have to worry about paying our other bills.
We’re In This Together
I’m happy with how quarter 1 went for us. We still have some work to do, but we’re working on it TOGETHER. I’m not sure where you’re at in your financial journey, but here are some things that work for us:
- Make savings automatic. A large percentage of our monthly savings is automatic. The money gets taken out of our checks and deposited into our investment accounts.
- If debt is an issue for you, check out Dave Ramsey. His programs helped us a ton!
- Check out ChooseFI. I regularly listen to their podcast and read their blog articles.
- If you’re in a relationship, communicate with your partner. Check out our monthly meeting article where we discuss and analyze our spending. It’s not easy, but it’s important to make sure we stay on the same page.
- Save, but also live. We recently spent some money on tattoos. This would probably be frowned upon in the financial independence community, but I also want to be happy in my journey; and I love tattoos!