My regular readers might have some big question marks about this post because I’ve never talked about living on half our income or made it a public goal. I don’t even know that we’ve been consciously trying to live on half, but we do try to invest and save as much as possible with the goal of leaving the rat race within the next decade.
I actually had another post title picked out but when I read this post on Budgets are Sexy, I decided to
copy change the name in tribute to all those other people out there who are working toward a similar goal. When you track your spending it can be really eye opening, in a good or bad way, to see where your money went. So without further ado, let’s see if we managed to live on 50% of our income this past year.
I won’t give exact numbers as to how much money we bring home. Some people would say we are wasting our time with the amount we make and save. Others would say we are rich, and there is no way to save much because their income isn’t as high as ours. I get tired of whiners, so I’ll just use percentages. I am also not including rental income. In a perfect world, our rentals would cover all their own expenses and still make money each month. In reality, that isn’t the case, and we had to use salary dollars for rental repairs. Hopefully next year will be better.
I am basing percentages on gross income.
What Did We Spend Our Money On?
I’m happy to say that over a third of our income went toward saving, investing, and mortgage principle payoff. I know people differ on what they consider investments. Some people consider mortgage payments as an investment. We do not, because as of now, we do not count our house as retirement income. We do consider extra principle payments as investments. We totally count our HSA as an investment because it goes right into Vanguard funds that we don’t plan on spending for a long time. I know, confusing, but personal finance is personal.
24.84% of our money went toward 401K’s, Roth IRA’s, Betterment, our HSA, and a 529 plan.
6.35 % went into liquid savings which will be used for a rental down payment very soon.
2.2% was spend on extra mortgage principle.
Our total on these investments was 33.39%
Rentals: Good and Bad
Our rentals did not cover all their expenses this year, so we had to use 7.56% or our salary income to fund a major repair on the commercial building. We will also have some other rental expenses with the close of our 4-plex, but for now the down payment is sitting up there in liquid savings.
Big Bad Uncle Sam
The reason I’m doing this on gross percentages is to
complain show how much we have to pay in taxes. Even while adding money to our tax deferred accounts until it hurts a little, we are still paying 31% in taxes and FICA. Most of my income is from self employment, so I lose the roughly 7.5% that an employer would pick up.
It makes me a bit sad to pay a third of our income to the government. I do like roads and police and all that, but I’m not sure it’s a good deal. Oh well, what can you do other than try to defer as much as you can? One day, the majority of our income will be from rentals, so we won’t be taxed as much.
The bright side, kind of, is that I think we’ve overpaid by a whole lot. This was the first year since I sold my optometry practice, and I think our accountant was being overly cautions with estimates. He knew of our plans to invest as much as we could, but sadly, I think most people make plans and never actually pull the trigger. He also did not count our latest rental property. If that closes by the end of the year, I’m sure we will get a refund. I don’t like to let Uncle Sam hold my money, but this was truly a learning curve year. If we get some of that back, it will probably go back into the rentals or into our 2015 investments.
The other biggest chunk of our income went toward housing costs. Mortgage payments, insurance, and property taxes for the house we live in took 10.1% of our income. Even with that percent, we are well below what most people pay for housing. That’s due to a combination of low housing costs in Southwest Colorado and refinancing at a low interest rate a couple of years ago. We should have this sucker paid off within the next 8 years!
Food, Warmth, Health
For our basic necessities, this is what we spent.
Utilities (Propane, electricity, water, trash removal): 2.54%
Food/Household Items/Dog Food: 4.45% ( I guess we eat twice as much as we like warmth!)
Auto Gas: 1.9%
Health Insurance: 2.1% We are lucky that Jim gets his insurance free from his job, and the daughter and I have a grandfathered plan. When and if they decide to cancel our plan, this will probably double or triple.
Fun, Life, Stuff
That leaves 6.96% of our income left over for everything else. I won’t break it all down because it would take pages, but basically, this is for travel, home and car repair, clothes, vet bills, dentists, clogging shoes, charity, eating out, getting our bar stools recovered, and everything else. Luckily, we didn’t have any major home repairs or health crises this year. We also didn’t buy any big ticket items other than a new bike for Jim and a washer.
Did We Live on 50%?
Actually we did better than that. Our expenses that didn’t go into taxes or investments were 28% of our income. Granted, we do have a good income, but it’s certainly not off the charts.
I’m also happy to say that not one penny was spent on any kind of interest or debt outside of mortgages. I never tracked our spending when we were at the height our our credit card debt, but I bet easily a third of our income went to monthly payments of some sort. Sad.
I actually think we spend a whole lot, sometimes too much. I’m always looking to improve.I certainly don’t feel deprived in any way at all. I am pretty proud of how 2014 shaped up, and I hope we can do as well or better next year.
Do You Track Your Spending? What eats up the biggest percent of your income?