For the last couple years, we’ve been tracking our monthly spending. The first full year in our current house, 2014, was an eye opener. And not in a good way. We bought new bedroom furniture for the kids, a new living room set, a TV, all kinds of little decorations, and did a ton of landscaping. We chalked up our high expenses to the costs of moving.
Yet, even with all these purchases, our accounts were still growing. Looking back on it, much of the growth was due to a combination of amazing stock market returns and a one-time bonus mixed with a smaller amount of savings.
Moving on to 2015, although we cut our expenses nearly 25% over the previous year, flat market returns in general coupled with big losses on a couple individual stocks really dampened our net worth growth. I’ll admit, I drastically underestimated how bad the oil and gas industry would get and held on to a couple stocks that are worth less than half of what I purchased them for. Even though the price of oil should rebound over the next few years, this experience has increased my preference towards index funds. That’s another story by itself.
It wasn’t until this past December that we really started tracking all of our inflows and outflows to get a true picture of how much we’re actually saving. What we’ve discovered has been a bit surprising, at least for me. For whatever reason, I just assumed that our savings rate would be relatively constant throughout the year. I knew some months would be a little higher and others a little lower, but I thought it would stay within maybe a ten percentage point range.
Boy was I wrong! Our income and expenses fluctuate greatly month to month. So far we’ve had insurance and HOA payments in January and an annual bonus in February sandwiched in between relatively quiet months in December and March. We’re sure to see a huge drop in April with a big tax bill and five plane tickets overseas (have I mentioned we’re going to Chile in July!?!).
We can’t complain, though. As you’ll see below, our savings rate is pretty damn good. Even our “bad” month would be considered great by most. For the sake of our calculations, income is considered to be any money coming into our accounts including our normal salaries, bonuses, matching employer 401(k) contributions, rent payments, realized investment gains, and dividends. Expenses are obviously everything going out. Unrealized investment gains and losses are ignored.
We’ve broken our savings out in three ways:
- Percent of gross income saved
- Percent of after tax income saved
- Percent of after tax income saved including mortgage principle
Without further ado, here’s how we’ve done the last four months.
We’ll be the first to admit that our above average income is probably the main driver here. Moderate levels of frugality add around 10-15 percentage points. The thing I’m most excited about is that we finally have a complete picture of our finances. Leading up to our move, the next few months are sure to continue the roller coaster theme. I’m curious to see how our savings rate shakes out once we get settled in England.
Anyone else tracking their savings rate? Do you see wild monthly fluctuations or are your income and expenses fairly constant?