At the end of each month, I’d previously posted passive income & portfolio updates. I’ll continue to do this again soon. But some readers have also asked for details on income & expenses. This series will explore this area each month going forward.
We already covered how I received a personal record of $15,986 passive income in December in a recent post. To be clear, this month will be anomaly due to the year-end distributions from various funds I hold.
In all posts, I do try to be as transparent possible; however, as a personal preference, I usually do not disclose every single detail or precise numbers. Where possible, for example, percentages are preferable; they help tell a theme or demonstrate correlations and/or cause & effects.
Nonetheless, certain areas will still contain the exact details.
Income
My primary source of income comes from my day or 9-5 (more like 8-6) job. On the journey to averaging $1000 a month in passive income, the biggest factor is how much you save. Yes, time and returns play large parts, but how much you save carries the most weight.
Like most Americans, my primary income still comes from earned wages – not investment income. Overtime, like the rest of the US economy, this is gradually starting to change. Not only in terms of income bracket, but sources of income as well.
In the long-term, turning that income into assets which can produce additional income is key.
This Month’s Results
Here is a breakdown of this month’s income. Figures are based on net (post-tax) income.
- 9-5 (8-6) Day Job = 99.33%
- Side Hustling = 0.66%
- Passive Income = 0.01%
Although not technically zero, I only receive some interest in February for passive income. The second month of each quarter usually had a stronger showing, but I recently reallocated a large portion of my holdings. I’m gradually looking to rebuild the February, May, August, and November pay periods.
As mentioned last month, compared to December’s passive income, the other two categories are extremely quite weak. This will gradually begin to change as I’m focusing on acquiring additional income producing assets; I’m also hopefully a month or so away from ramping up my new side hustle – more to come soon!
Expenses
Perhaps not surprisingly, most Americans’ top 3 expenses are housing, transportation, and food.
Focusing on these areas that carry the most weight, one could make a positive – or negative – impact on his or her expenses and ability to save.
This Month’s Results
Here is a breakdown of this month’s expenses.
I had to pay a full month’s rent for the second time in a row. With my new apartment’s promotional offers coming to an end in December, I had enjoyed my second – and last – free month of rent in December.
On the plus side, my reoccurring expenses came down ever further after some of the one-off higher than usual expenses due to moving related expenses. I also finished reducing a few select areas now that I’m in my new place and settled.
In a positive way, gifts and charity experienced a high-point in December which continued slightly into January and again this month.
Savings / Investing Rate = 78%
I managed to save and/or invest approximately 78% of my income this month.
Although not nearly as high compared to December’s 92% (61% without passive income), one (1) key factor remained the same and (2) another changed:
- I again had to pay rent; and,
- I did NOT receive annual passive income distributions this month like in December.
But then I smiled ever more. I again forgot that the 78% savings / investing rate represents my NET income. Pre-tax retirement contributions are not included, so I saved even more. I’ll need to factor that in somehow in the future.
Overall, the continued focus on side hustles and other passive income efforts will gradually contribute to an improved savings and investing rate.
Clearly, lifestyle approach also plays a significant part. Despite the high savings rate, I don’t feel like I’m “sacrificing” or “not living” by any means. I’m still traveling, going out, and doing things I enjoy.
Related: Side Hustling: The Fruition of (Potential) Frustration
Ways to Increase (or Decrease) Savings Capacity
We previously explored the 3 Balanced Dividends lifestyle approaches that can impact your ability to save and invest:
- (1) All-In Approach
- (2) Moderate Approach
- (3) Screw The World Approach
For a long time, I’d been in Moderate Approach, sometimes tipping into the Screw the World Approach.
Now I’m focusing on the Moderate Approach but with certain days or periods of time reflecting the All-In Approach.
Selecting which lifestyle approach to consider is a personal choice. There is no best answer.
With many things in life, you’ll likely fluctuate or modify as you learn and live.
Looking Back – and More Importantly – Ahead
I’m very happy with my progress. Next month’s savings rate will definitely be lower, but I’m finding a balance.
The last few months have brought about a whirlwind of change. As things continue to settle down, I’m excited to focus on things meaningful to me: relationships and well-being.
I keep reminding myself: personal finance, as well as fitness, just provide the foundation.
Readers, how are you attempting to focus on what’s important to you? Do you believe increasing your income and/or reducing your expenses can lead to happiness in the other, more important areas of your life? What are your thoughts?
Related:
15 Years Later: 5 Things I Wish I Knew Sooner
Backstreet Boys!? Pre-2019 Goals & Planning
Post-March Madness: 5 (Plus) Ways To Find Balance
Our favorite free financial tool is Personal Capital. We use it to track our net worth, manage our spending & savings, and to monitor our investments. It’s simple and free to use.
