Happy New Year! It’s time for our last budget update of 2018!
Thinking back on December, I can’t say enough about how nice it is to have sinking funds for things like Christmas and life insurance. When we were paying off our student loan debt we didn’t do sinking funds because we were funnelling absolutely everything extra to our loans, then when big expenses came up (like Christmas or life insurance) we just made a smaller payment to debt that month. It worked great and I wouldn’t change how we did it.
Now that we’re on the other side of those student loans, we are doing sinking funds for a handful of categories (scroll down to see all the details) and it’s wonderful. We’ll still keep most of them up while we work on paying off our mortgage, our next BIG goal.
I’m curious do YOU use sinking funds while you’re paying off debt or not?
Speaking of paying off debt, I recently had a reader reach out to me with an idea that I think will be fabulous for our community! She suggested that at the end of each month participating readers could report how much each paid off in debt that month. Then we can keep track of how much we pay off as a group!
I’m calling it Debt Smash-athon 2019!
I’m excited to see the total amount of debt paid grow throughout the year. That big number will represent the positive change we have made in our personal finances, which is definitely worth celebrating!
To join, click on the graphic above, enter your name and email, and you’re in! You’ll get instructions and a report form in your email every month. Get ready for some serious debt smashing in 2019!
Okay, now onto budgeting! Here are the details of our December budget:
Income
Our total income for December was $8,696. Since we live on last month’s income, this is money that we’ll spend in January.
Attorney Income (Day Job)– $6,837 Mike has been working full-time as an attorney for the state of California since the fall of 2015. His actual take-home pay was $5,663 but I add back in the cost of the benefits (insurance, dental, vision, parking, and retirement) that are automatically taken out of his check so that we can tithe on that money.
Attorney Income (Private Practice)– $352 Mike has a part-time private law practice on the side that he grew when we were working to pay off debt. Now, he’s scaling it down and finishing up what he’s working on so we can work together on Six Figures Under.
My Income (Blog)– $1,507 Another low month of blogging income. After meeting with our tax guy, we realized we don’t need to set any more aside for self-employment taxes, so I didn’t take out any money for taxes this month.
If you want to earn money blogging, then I recommend checking out Elite Blog Academy, the course I took to learn to blog. Enrollment only opens a few times a year, but when you’re on the waiting list you’ll get lots of valuable (but free) help to get you started.
Airbnb Rental– $0 When we started our Airbnb this fall, we spent around $4,000 getting everything set up. I’ll have a post with the details on that soon. We used money that we had in other categories like our rental emergency fund and our home projects category. We’re paying ourselves back for that with the income we’re getting from it. We started renting it out in October. With the bookings we’ve had and have currently have scheduled, we should be clear and start recording a profit in January! We’re excited to find out how this works for us and share what we learn with you.
Spending
Each month we budget down to zero using last month’s income. This has revolutionized our budget! For more about how living on last month’s income works and how you can get started, check out my free Guide to Getting a Month Ahead Financially.
Our spending in December came from the income we earned in November. Here’s how we spent money in December.
Tithing– $947— We pay a 10% tithe on our total income from the previous month. You can read more about why we always pay tithing, even when in debt.
Other Giving– $80– Other charitable giving this month.
Mortgage– $3,200 We recently refinanced our mortgage from a 30-year to a 15-year mortgage. If you want to see all the numbers and read about why we did it, read Mike’s post explaining everything! This is our regular monthly payment. I’ll talk about extra mortgage payments in the bottom section of this post.
If you want to know more about our house finances, you can read more about why we got a conventional mortgage (instead of FHA or USDA) and then why we didn’t wait for a 20% down payment.
Electricity– $279 We get our electric bill at the beginning of the month for the electricity we used in the previous month, so this is paying for November’s electricity. We have the thermostat pretty low at 62 degrees during the day and 55 at night. The big difference in electricty use now is that during the summer we mostly dry our clothes on a line, but during the winter we have to use the clothes dryer.
In addition to saving money by saving electricity, we also earn extra money by reducing our electric usage. If you’re in California, Toronto or Texas, you should definitely check out the OhmConnect program. I have a post and video all about the program.
Water– $40 Our water bill comes every other month, so I set aside approximately half of what I expect the bill to be.
Trash– $32 Our bill for trash service comes every other month, so I set aside half of the bill each month. We’re currently paying for curbside pickup, but that’s not the only way to do it. If you’re trying to cut every expense to its bare minimum, here are some ideas to save on trash service.
Internet– $70 We love our Internet bill! Not because we like bills, but because it means we have internet at home. When we bought the house, it had no access to fiber, cable, DSL, or fixed wireless Internet. We shelled out almost $5,000 to get cable internet brought out to our house and we love it!
Home Phone– $4 Since my husband works at home a day or two each week, we decided to get a home phone for him to use. It’s Ooma, which is internet-based, not a traditional land line. The monthly service charge is a minimal $4 and the initial set-up (hardware, etc) was under $100. If you want to give Ooma a try, that link will also get you a $20 credit.
Republic Wireless Cell Phones– $18 We’ve been using Republic Wireless as our cell phone carrier for over four years now. This covers the cost of service for my phone, including all taxes and fees. (We’re on the Republic Refund plan from a few years ago which is no longer available; an equivalent plan for a new user today would be $20/month). My husband also has a Republic phone which he uses for his private practice, but that’s a business expense, not a family budget expense. If your cell phone bill is killing you, I definitely recommend that you check out Republic Wireless!
Health Insurance– $316 We have insurance through my husband’s employer. This is the portion of the insurance premium that his employer does not cover. The total coverage includes health, dental and vision insurance premiums. This $316 is deducted directly from his paycheck and goes straight to the insurance company, so it never makes it to our hands.
Car Insurance– $168 Our auto insurance at USAA is fabulous! In addition to the wonderful coverage, they also give us dividends at the end of the year, which is always a nice treat. We’re able to get insurance with USAA because my father-in-law was in the service years ago. If you, your parent, or your spouse were/are in the military, you’re probably eligible for USAA too!
Food– $420 We had another disorganized food month. I didn’t make our normal big monthly shopping trip. I made some smaller trips throughout the month. It definitely saves money to shop less frequently, but we just didn’t make it work in December. We’ll be back to a more normal grocery month in January.
Gas– $384 Gas is now below $3/gallon around here! Hooray!
Parking– $165 Working downtown means paying for parking. It comes straight out of my husband’s paycheck, which means it is paid for with pre-tax dollars, a small consolation.
Clothing– $70 We have a Kmart near us that is going out of business, so I’ve stocked up and bought ahead on things like kids shoes and sandals and other great clothing deals.
Household– $477 Our miscellaneous household expenses were a little crazy in December. We spent $99 to have a chimney sweep come. We can sweep it ourselves, but our new homeowners insurance (our old carrier dropped us because of all the California fires) required an inspection and certification from a chimney sweep. We also bought new toner for the printer, diapers and wipes, toiletries, a shop vac, and a few other random things. Finally, we subscribed to the online version of YNAB. I love the YNAB 4 we’ve been using for years, and so do people who see it in my YouTube videos. Then I have to break the news that you can’t buy it anymore (#sadface)! Rather than keep teasing you with something you can’t get, we’ll make the switch for you and future budgeters everywhere. Lastly, I bought a beautiful gently used violin at a yard sale for $30!
Fun– $44 Our kids got bikes for Christmas (they’ve all outgrown their debt-free celebration bikes from a few years ago), but in order to transport all of our bikes and people we needed another trunk mount bike rack. We also took an impromptu trip to Yosemite to go ice skating and hiking, but that doesn’t come out of the family budget. Instead, the kids voted to use money from the Family Fun Fund (where we keep the money the kids earn from recycling and from OhmConnect).
Animals– $12 We got a 40-lb bag of chicken feed to get us through the end of the month. We’ll have to stock up in January.
Tax Prep– $90 Our tax advice and preparation plan allows the cost to be spread over the year. Some people wonder why we pay so much for this (a total of $1080 a year.) That’s a valid question. We prepared our own returns for years, but in the last few years, as our income sources have been varied, we’ve found the planning and preparation more than pays for itself in minimized tax payments (actual dollars saved), not to mention to the additional peace of mind.
Allowances– $60 We give our kids “practice money” as a weekly allowance. Each week they get $.50 per year of their age. I’ll explain our system and how it works in an upcoming post, but if you want a sneak peek, check out the book The Opposite of Spoiled.
Kids Activities/School– $0 We didn’t pay for any kids activities in December.
Sinking Funds
When we were paying off law school debt, we zeroed out all of our budget categories at the end of each month so we could maximize our debt payment each month. Now we set aside money each month in certain categories where it builds up until we need it. We plan to keep up these sinking fund categories while we pay off our mortgage.
The amount in bold is the amount that was added to the fund this month. Any spending from the fund is noted in the comments, along with the current category balance.
We do not have separate accounts for these funds. All of the money lives in our checking account. I’m not worried about getting the money mixed up because we spend according to our budget category balances, not our checking account balance. We seriously never even look at our checking balance unless we’re reconciling the account. We track our budget categories and spending in YNAB.
Home Projects– $0 We temporarily borrowed from this category when we were setting up our Airbnb rental, but have been able to pay ourselves back now thanks to a well-booked schedule. The Kmart near us is going out of business and we were able to get some great deals on fixtures they were selling. We got a set of eight shelving units from their stock room for $276. We’ll be using them in our garage (and I’m sooo excited!) We also got some 6 ft folding tables for $17 each, some folding chairs for $5 each, and a few other things. We currently have $706 remaining in our home projects fund.
Dental– $30 We didn’t spend anything this month. We have $323 in the dental sinking fund right now.
Medical– $100 We currently have $1,085 in our medical category. Right now most of our expenses are covered by insurance, but that will change in 2019.
Car Repair– $200 Hooray for no car-related expenses in December! The current balance in our car repair fund is $1,681.
Car Registration & Smog– $40 We currently have $243 in this fund.
Christmas– $120 We got most of the spending for our own family done before December, but we still had more things to buy for others. We also got a few decoration items, treats, cards, and postage stamps. We used money from the Family Fun Fund to help with Christmas gifts for a family we adopted. Using that money is a way that the kids can be real participants in that project.
Life Insurance– $75 This is one of the first sinking funds we started. It’s so nice to have the money set aside when the big annual bill comes. We’re bumping this up to $75/month (from $70) since our premiums can increase in the new year.
Gifts/Birthdays– $40 We had a birthday in December, but I got everything for it early, so we didn’t do any birthday shopping in December.
Retirement– $693 With Mike’s state job, this amount comes directly out of his paycheck and into his state retirement fund.
College Savings– $125 We put $25 per kid into 529 accounts. More on our decision to start saving for college in this post.
Vacation/Family Reunion– $0 This one is a more seasonal sinking fund. We don’t have any big “vacations” planned for the near future, so we’re holding off on contributing to this category so we can focus on our big goal!
2018 Savings Goals
Our savings goal for 2018 was $26,000 ($15,000 toward our emergency fund and $11,000 to my IRA).
Emergency Fund
Our goal for 2018 was to reach $25,000 in our emergency fund (we started out with about $10,000 at the beginning of the year). We reached this goal in July, so in December we didn’t add anything to our emergency fund. If you’re curious about where we’re keeping that $25,000 emergency fund so that it’s not just sitting around losing value but is still accessible, Mike shows it all here.
IRA
In December we contributed $550 to my IRA. We have now maxed out my contribution for 2018, and have reached our 2018 goal.
At the end of November we are at precisely $26,000, which is 100% of our 2018 goal!
Mortgage Payoff Goal
Last month we got a head start on our next BIG financial goal. It’s going to be a long road, but we’re ready for a good challenge.
In December we put $734 extra toward our mortage. I know that’s nowhere near what we need to do to reach our goal, but that’s how it goes! Some months, like November, we have a big payment, others are smaller.
This extra payment is on top of the $3,200 normal monthly mortgage payment we make which includes interest, insurance, and taxes. This extra payment goes straight to paying down the principal.
Original balance of 15-year mortgage: $372,700
Balance at start of 5-year goal (Nov 2018): $363,171
Current balance (after Dec 2018 extra payment): $354,313
Percent of 5-year goal reached: 2.44%
Whew! That was a lot of numbers. Thanks for reading our personal finances made public!
How About You?
- How did your budget and/or debt repayment go in December!?
- How is your progress on your financial goals for 2018?
- Have you come up with 2019 goals yet?
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Thanks for your transparency – and I think you are doing GREAT on the debt-smashing goal 🙂
Not sure how your CA winters compare to New England winters, but I still hang up several loads of laundry each week to dry…..sometimes it gets hung outside and I bring it in frozen but mostly dry and sometimes it gets hung on drying racks inside.
Our 2019 goal is to pay off both cars, redo outside of the house/yard, and get the mortgage balance below $75,000 (we have no other debt). We are still adding to student loan debt (tuition is ridiculous), but he will graduate in December 2019 with his doctorate and 2020 can be all about paying down the mortgage and student loans.
We have a few sinking funds that we are keeping while we pay off our debt. Specifically, we have one for car maintenance, one for gifts (which includes Christmas) and one for our cats (in the event they need to go to the vet). I have been thinking this year about adding a couple other smaller ones to the list (our car registration as a separate line, for example) but I’m not 100 per cent sure about it yet. We usually contribute about $20 a week to each fund and let it build up. These little funds – specifically the car one – have come in handy time and time again.
The big financial goal for 2019 for us is to pay an additional $15K on our final debt, the student loan. It’s a big goal, but I think it’s achievable. Honestly, I would just love for the loan to be gone haha.
PS – there are ways to line dry your clothes in the winter, but they’re all ugly. Popular solutions here include drying racks and undercover clotheslines (for instance under a porch or covered deck.) We have an expandable clothesline on our porch, which I refer to as our hillbilly clothesline. It’s unsightly, but nobody really uses dryers here so we’ve all learned to overlook the ugly, and it sure beats those power bills! (Ours are around $40 in the summer and $100 in the winter.)
Meant to add, our connection fee is around $1/day so our summer bill isn’t much more than just the connection fee. We have a small 1 kW solar system and our buyback tariff is significantly higher than the price they charge us for power, so while we use more energy than we generate, the summer bill isn’t too bad. (Our panels aren’t facing the right way. Under ideal conditions you can generate around 4 to 5 kW/day with a 1 kW system but we’re lucky to get 2, and our rock-bottom energy usage is 4 kW/day while our average is around 8.)
We made a debt-free move out West summer 2018. Our 2019 financial goals are to finish paying off our van, pay cash for a trip to Texas to visit family stopping by the Grand Canyon on the way, and pay 20% of our student loan balance which will bring it under 100K finally!
We haven’t used sinking funds in the past but have decided to start using them this year. My husband is self-employed, and his income can vary by several thousand dollars a month.
You are going to love the new YNAB! The undo button, reports, and the amazing app make it so worth it!
We are hoping to save enough this year to buy a car with cash. It was our goal last year but Murphy kept knocking on our door so we didn’t make much progress. Our current income is about 43k and our goal is 7k by December. Wish us luck!
We are hoping to pay off our car this year and then we will be 100% debt free again. After paying off our home four years ago, we read that having 100% no debt would start to drop our credit score. So when my husband needed a car for a new job he has to commute to, we took out a small loan to pay for it. Instead of paying it off in five years, we are hoping to pay it off by the end of this year.
2018 was a pretty good year for our finances. My goal was to save $30,000 and we saved closer to $50,000. We aren’t on an extravagant income, just average, but since we don’t really have wants, it’s easy to save without feeling like we’re depriving ourselves. Hopefully in 2019 we can either save a similar amount, or spend up big with another investment property. More home improvement projects are in the works too – now that we’ve got the inside where we want it, it’s time to tackle the outside!