Last month we set a pretty crazy challenge, which was to spend less than 25% of our wage for the month of February. It was more challenging than it had to be because I had to travel for work, which caused some duplication in expenses, but we got it done, finishing the month with a total spending rate of 24.14%.
It’s obvious that being able to save a large portion of your wage will have positive consequences for your finances, but it’s not until you have a month like we have had that you can sit back and take stock of how effective it really is. We’ve been able to put a much larger portion of our salary into our mortgage, which you can see in the following graph:
If were able to do this every month we’d be able to get rid of our mortgage must faster than we thought was possible, and we’d be able to start increasing our Vanguard investment account big time. The reality is that we can’t have months like that all the time because a lot of what we did was just pushing expenses into March – but there were still lessons learned that will help us save more in every month.
We had a good look at how much we were spending on food and realized that were was a bit of waste there – we’ve been cooking more on the weekend so that we have left overs for dinner most of the week. This frees up time that would otherwise be spent cooking and cleaning up at night, and avoids the temptation to make a special trip to the supermarket for an extravagant meal (or takeaway, although we do that so rarely that it’s almost not worth considering).
Overall, it was a great challenge, because it has renewed our commitment to keeping our expenses as low as possible without missing out on any fun. It’s sharpened us up a little bit, and also made me remember the inherent fun frugality can bring. I still haven’t had any alcohol since last year, which is another good reminder of the value of these challenges – they can provide a productive hangover into subsequent months. Much more useful than the old hangovers I used to get that’s for sure!
Other financial charts
The massive drop in expenses for February brings it excitingly close to our theoretical investment return. It’s theoretical because it takes into account non-retirement assets that aren’t actually being actively invested, like the equity in our house. To some extent it’s just useful for motivation purposes, because we don’t intend to actually sell this house anytime soon. It’s a nice reminder that if we did, we could earn a large part of our monthly expenses if we moved that equity into our investment account.
When the red expenses line crosses under the yellow investment income line, we know we are becoming close to being financially independent (at least theoretically).
March challenge: increase non-salary income by 25% compared to February
Increasing our non-salary income is a goal of ours for 2014. Time to start putting that into practice. I’m not sure how I’m going to achieve this goal yet, but I’ll let you know how I go next month. As you can see from the above ‘non-salary income’ graph above, it is generally trending upwards, but a 25% jump is going to be hard to achieve.
Time to start brainstorming! I have been considering starting a new site, and have purchased a couple of domain names, but I don’t think I’ll be able to get them up and running and earning money in a few weeks. It’ll have to be something else, but I have no idea what just yet.
I recently posted about some passive income ideas I’ve had here.
If you are earning money on the side, what is it and how much are you making? Let me know in the comments below.