July 2022 Spending Report: Knowing Your Cash Flow Is Empowering

As the saying goes, ask and you shall receive. We asked on Twitter if people get any value from early retirees posting their spending habits, and 75% of respondents said they do. So let us try it again!

Before we retired from corporate, we used to post our spending quarterly. Even though we didn’t post for a while, we kept track of our spending religiously throughout the years.

Why do we continue to track it?

We still want to see where our money goes. It’s also critical that we don’t overspend and stay under the 4% Savings Withdrawal Rate (SWR), or $51,497, adjusted for inflation, which we use as a guideline for how much of our Freedom Fund Portfolio we should withdraw to avoid running out of money later in life.

This year, we intend to withdraw $41,100 from our Freedom Fund portfolio and fund the remainder of our expenses with rental property income.

Without further ado, let’s take a look at how we spent our money in July.

July category spending

Food and dining

Food and dining accounted for $1,008 of our total spending (25%). The first $859 was spent on groceries, and the rest on restaurants and alcohol.

This year, we’ve spent an average of $872 per month on groceries for a family of three.

The majority of the food we buy is organic and non-GMO. We make every effort to consume food that is unprocessed and made from natural ingredients. Our typical 12-dozen egg carton costs around $5.50. We try to find organic or pasture-raised eggs on sale to keep costs down. Almost every week, a different brand is on sale at Publix supermarkets here in FL.

Health and fitness

Through the ACA exchange, we pay $117 per month for health and dental insurance. We also went to the acupuncturist, had dental work done, purchased essential oils, vitamins, and supplements, and saw a few doctors. Total amount spent: $926.

Home

As you may have read, to buy our house, we decided to put down 50% and took out a mortgage with a 3% interest rate for the remaining half. In July, the loan interest payment was $301.

$245 was spent on home maintenance. Repairing a sinking driveway concrete slab was part of the maintenance. The job is not finished so there is still work to be done on that front. The remainder of the funds were spent on home furnishings and supplies. $714 was spent in total.

A note about how we report the mortgage transactions

We have an escrow account for our mortgage. As a result, they pay our taxes and insurance on our behalf. We record those transactions once, as they’re paid from the escrow account.

We do not record principal payments as expenses, so the only monthly expense shown here is the interest payment on the loan. The principal is simply a transfer from one asset to another. The principal is also a cash flow outflow, accounting for approximately $225 per month. We don’t worry about reporting this outflow here because we make it up with other sources of income throughout the year, such as income tax refunds, credit card rewards, dividends on savings, small cash gifts, and so on.

Shopping

There isn’t much to report here. We bought some clothing, and our internet modem/router failed. The new router set us back $171. Total amount spent: $559.

Bills and utilities

Our monthly utility expenses are not bad at all. We can save on energy now that we live in Florida and don’t need to pay for heat. There’s no high gas bill to look out for. 🙂

Our monthly internet bill is $50, and our current Comcast contract expires in October. We’re hoping to get the same or a similar deal to what we have for internet only.

The electricity bill is reasonable, given that we have central air conditioning that runs 8–10 hours per day during the summer. We keep the thermostat set to 77º F during the day and 74º F at night.

We only pay for water because our house has a septic tank. The city will be installing a sewer system in our neighborhood over the next few years, so we expect this bill to double. Since we have an irrigation system for our raised beds and fruit trees, our water bill is higher than it would have been otherwise. However, we are at the peak of the rainy season this month, so it helps us save by not having to irrigate daily.

I recently renewed my Mint Mobile annual contract. The plan costs $15 per month plus tax. This includes 4 GB of data as well as unlimited voice and text messaging. I’m very pleased with the service, and I renewed for a third year.

If you want to save money on your cell phone bill, you can use my referral code to get $15 off! If you sign up, I’ll get a referral bonus at no extra cost to you.

The total amount spent on bills and utilities was $475.

Other expenses

The rest of the money was spent on travel, gifts and donations, gasoline, and a few other small expenses.

Travel

We booked a flight to the Dominican Republic on points for the fall. We also spent a few nights in St. Petersburg, Florida.

For Tatiana’s birthday, we spent the night in downtown Sarasota. By the end of the month, we were on our way to Rhode Island to see friends and family. Overall, we didn’t spend much money because we used points to book all of our nights in Florida and stayed with family in Rhode Island.

Gifts and donations

As part of our monthly recurring donation, we gave $50 to ICAN. No matter where we have to cut in our budget, this is a donation we will not skimp on because we strongly support their work and see the results through The Highwire. We make it a weekly family activity to watch it and stay informed on important health issues.

ICAN’s Mission:

At the Informed Consent Action Network, you are the authority over your health choices and those of your children. In a medical world manipulated by advertising and financial interests, true information is hard to find and often harder to understand. Our goal is to put the power of scientifically researched health information in your hands and to be bold and transparent in doing so, thereby enabling your medical decisions to come from tangible understanding, not medical coercion.

Informed Consent Action Network

In addition to the ICAN donation, we purchased a few gifts for friends and family.

These miscellaneous expenses cost a total of $514.

Total July spending

July’s total spending was $4,276.

Our goal is to spend less than $4,425 per month, so we came in under budget for the month.

How did we arrive at a monthly spending figure of $4,425?

For 2022, our monthly withdrawal from our portfolio is $3,425 and our monthly rental property net income is around $1,000. That sum of $4,425 is our monthly spending plan. Our CAPE suggested withdrawal amount for 2022 was $41,402, so we chose $41,100 to make it an even $3,425 per month.

So, what happens when we go over our monthly spending limit?

In addition to our portfolio withdrawal amount and rental income, we use our savings when we need extra money to cover our expenses. We obviously aren’t working, so we can’t rely on savings indefinitely. We retired with a nice cushion in savings that we didn’t include in our early retirement portfolio, but that has been diminished as we’ve made some home upgrades and had a few unexpected expenses.

To help reduce the bills, we also rely on credit card rewards and cash back.

Our cash flow management

We manage our cash flow on a monthly basis. Apart from our mortgage and a few cash transactions to support local small businesses, we charge everything else on credit cards in order to earn rewards.

I usually check and tally credit card bills due for the following month before the end of the month. Since credit card bills are past expenses, they do not correspond with monthly spending, so I cannot rely on expense tracking to determine the amount due for the bills.

Outflows

So I add the credit card bills and mortgage payment that are due. This is the total amount of cash we need in the account next month to cover the bills. Aside from the bills that are due, we don’t want cash sitting in the checking account earning next to nothing, so we keep it lean with a $500 cushion.

Inflows

Now that we know how much money we need in the account, I add the projected gross rental income ($2,200) and portfolio withdrawal amount ($3,425) to the equation.

Why include gross rent income when we only apply $1,000 in net income to cover our expenses?

We must include all income because rental property expenses are also included in the bills that are due. Some rental property expenses are charged to credit cards or deducted from checking accounts.

If, after adding all of the funds, we have a surplus in the checking account that exceeds $500, we transfer that surplus to the savings account.

If we have a deficit, we must draw on our savings.

If we didn’t have any savings, another immediate option would be to increase our portfolio withdrawal amount because we’re only withdrawing about 3.25%, which is far below the traditional 4% SWR. We also don’t want to increase the withdrawal rate too quickly because the majority of the investments are retirement accounts with penalties if we withdraw before the age of 59-1/2.

Total spending year-to-date

Since we haven’t been posting our monthly spending this year, I decided to include them in the table below so that we can get a complete picture of this year’s spending. What’s not included in our monthly spending report is our blog maintenance spending which is still relatively low.

Spending by month

So far this year, we’ve spent an average of $4,215 per month. These figures were updated on August 27 to correct some reporting issues caused by a duplicate bank account.

$4,425 (budget) – $4,215 (actual spending) = $210 (monthly surplus)

Although this looks good on paper, we will be over budget by the end of the year. We’re way over in some categories, but we’re under in others for which lump sum payments are due later this year, such as home insurance and property taxes.

We’ve gone overboard in a few areas. For example, in lawn and garden, we are $1,000 over budget. We are also over by $400 in bills and utilities because we had to unexpectedly clean the septic tank earlier this year.

We had to replace our laptop in June. Even though we bought refurbished and in excellent condition, we had to pay $958. We saved $300 by purchasing it refurbished rather than new.

A technician once told me that buying refurbished is preferable to buying new because the product goes through a rigorous inspection process that is not available for every single product that leaves the assembly line. We bought a lot of refurbished electronics and never had a problem with any of them. They also appear and feel new.

Final thoughts

This took some time to put together as I looked more closely at our spending habits but I actually enjoyed it. The benefit of writing about our spending is that we get to closely examine it.

We’ve been doing this for more than three years and feel confident and in control no matter what the stock market throws at us. We’re making moves that are increasing our net worth and will provide an income for life. The tricky part will be continuing to do Roth conversions while keeping our taxable brackets low so that we can access our retirement funds sooner.

One of the most important exercises is knowing our cash flow. When there is no employment check coming in to cover all of our expenses, we must ensure that money keeps coming in from various sources. For example, if we do not receive the tenants’ rent by the 10th of the month, we must be prepared to make a transfer from elsewhere to cover the rest of the month’s bills. It’s not something that happens very often, so it’s all good.

Let’s see what the rest of the year’s spending looks like. We hope you find this report interesting.

Is there anything else you would like us to report on? How was your spending for the month?