One of the most important things in life regarding personal finances is how to manage your finances in such a way that you have enough money to use at this moment in time and that you save enough for later in your life. To make sure that our balance as we would like to see it we set goals and we follow exactly our income, expenses and savings rate every month. To do that we use a spreadsheet that we downloaded from the site of a fellow DGI. You can find it here.
Tracking your personal income and expenses is very important for us. It not only gives us insight in where our money comes from and goes to, but it also makes you more aware and that makes you think more about expenses and purchases. With every purchase that is not necessary we try to ask ourselves “does this make us happy?”. If the answer is no, than we think again if this really is the purchase we need to do. In the past we just bought everything we wanted. Now we don’t buy a lot of things and it actually makes us more happy than before.
To reach our DGI goals we of course need money to invest. And that money comes from our savings rate. We have a plan for our savings. It’s quite simple and since I like simplicity in finances. It goes as follows:
- Pay € 5.000 a year down on our mortgage.
- Make sure our financial buffer is at the level where we want it to be.
- Invest what is left in stocks. We aim for € 5.000 a year.
To do this we need to save enough. Therefore we set a goal for our savings rate. Our goal is 25% of our total year income.
This introduction is longer than what it will be in future updates, but I first wanted to explain the plan we have in mind. By monitoring the progress towards this plan we can adjust if we deviate to far from it. This gives us a certain amount of control that I like. Other than that, controlling your finances makes the chance that you reach your goals much higher!
July savings rate
First the good news. Our savings rate for the year including July stands at 25,45% so far! This means we are on track. However, it also means we really have to pay attention because we already receive most of our holiday money and we received our money back from the Dutch Tax Office. On the other hand we also have some extras in the second half of the year. We get a little bit extra holiday money and my wife gets a 13th month of payment. I made a budget upfront for the first time in August. We’ll see if we like it and how it turns out, but I expect that we can save a little bit more by doing this.
Than up to the July results and now comes the bad news. We only managed to save a meagerly 3,69% of our income this month. This had multiple reasons:
- My salary was € 100,00 lower this month. My office made a mistake in calculating my pension money and they corrected it this month.
- One of our cars broke down which caused an unexpected extra maintenance payment.
- We normally never use a Creditcard, except for holidays. The last bills where deducted from my bank account in July (for our June holiday).
- We had to paint the outside of our house. We do that ourselves which saves a lot of money, but including a new sander we still paid € 150,00 for the materials (sander, paint and brushes)
- The month had 5 weekends instead of 4 and we always buy our groceries in the weekend for the whole week. That’s 25% more costs for groceries.
- I started this site in July and bought hosting for a year upfront.
All in all we had good reasons to have a low savings percentage, but it still feels really bad. This is our worst month since we started tracking in October 2015. As you can read in this post we also start on our house rebuilding in september and we wanted to save some extra money before we started. Well, for July that goal didn’t work out.
Although the savings percentage for July is not that good our overall savings percentage is still on track. I am quite confident that we can achieve our goal of a 25% savings percentage over the whole year (excluding the house rebuilding). We initiated our upfront budget for August and I’m really curious how that turns out. Especially because I already know that we have almost € 500,00 extra healthcare costs in August. I am confident we should be able to achieve between 15 and 20% in that month which would be quite good considering the extra costs!
I am curious if you monitor your income and expenses like we do. If you do, how do you do that? Do you like doing it or is it a necessary evil for you? And are you on target with your goals for the year?
I’m looking forward to hear from you!