No matter how well you budget and plan, there always seem to be some surprises each month. The surprises aren’t an excuse not to plan though. In fact, those unanticipated expenses are one of the reasons a budget is so important!
This month we had a couple of surprises that threw our budget off a little bit, but they were good surprises, nonetheless. Since we do budget and keep our finances in order, they didn’t cause any financial disasters.
Once again, being a month ahead financially has been a huge blessing!
Surprise #1
Our new house includes a separate living space that we had planned to rent out with Airbnb (you might have guessed that if you read this post). We had put getting it ready to rent on the back burner while we worked on some other projects around our own house, though. In the mean time, we used it as a storage area for the boxes of stuff we weren’t ready to deal with. I was really enjoying having a second refrigerator to use too!
Well this month, some people we know were looking desperately for an affordable place to rent. We were approached and asked if we would be willing to rent to them and we felt really good about the idea.
Less than a week later we were landlords!
When we were newly married, we were blessed on multiple occasions by people who rented very affordably, so we are happy to be able to do the same for another young couple.
At this point it’s not really a profitable endeavor because the very affordable rent is just going right back into fixing up the place. In fact, we’re coming up on a major repair (the one that was holding us back from renting in the first place) which will wipe out any profits we would have made for the next year! Still, we are excited to have neighbors and be able to help some friends out. Plus we’re happy to be “forced” to move ahead with making the improvements that we would otherwise be putting off for who knows how long.
The financial implication for May (besides some minor quick repairs to the place) was that I spent about $150 on quality storage containers so that all the things we had stored (mostly in cardboard boxes) in the space that is now rented could be securely stored in our attic or garage instead. We share the same utilities (which are included in the price of rent), so it will be interesting to see how those change.
Surprise #2
I feel like the second surprise is related to the first in a way that only God can orchestrate. Only days after agreeing to rent our extra space to people who needed it, we received a completely unanticipated blessing.
You might remember that last month I said that our next financial goal would be to save $5,000 or so for a new (used) car for my husband. His 1997 Toyota Camry has over 260,000 miles on it (and a lot of quirks). We hoped it would go to 300K, but wanted to be prepared with cash for a new vehicle because it could die any day.
Well, a friend who happened to be selling a car for a family member saw (right here on the blog) that we might be in the market for a used car and gave us a call. He was selling a slightly newer Camry with more than 100K fewer miles in beautiful condition with all the timely maintenance records for under the Blue Book price.
Already loving the Camry as a commuter vehicle, it was totally worth it to us to scrap our prior plans to save for a used hybrid and purchase this affordable newer Camry.
The thing I was most excited about was not having to go out looking for a car. Taking the time and effort to find a great car that is honestly represented and fairly priced is exhausting! Having to find one in a rush is stressful and dragging the process out just makes it rule your life. I strongly dislike car shopping! Of course buying a used car with 150K miles on it means we’ll be shopping for a car again in a couple of years, but we’re happy to put it off for now!
Here’s what the numbers look like:
Purchase price– $1,100 (needed new tires, but we’re just swapping out the newish ones from his old car)
Smog test– $59
Repairs to pass smog– $265
Transfer tax and registration– $95
Total: $1,519
Of course we hadn’t budgeted $1,500 for a new car in May, but with the luxury of being a month ahead, we knew the money was there just sitting in the bank waiting to be budgeted and used in June. So we spent the money and budgeted the $1,500 into June’s budget. Like I’ve said before, this isn’t something I recommend doing regularly (it could get convoluted and confusing), but in a pinch it’s a great option to have. (And here we are doing it two months in a row. Eek!) So you won’t see this expense below in our budget report, but you can be sure it will be there on June’s report!
If you want to learn more about living on last month’s income and how to get started, you can download my free Guide to Getting a Month Ahead Financially when you subscribe to my newsletter.
We will be selling or donating the older Camry sometime soon so we don’t have to pay insurance on three vehicles again, although we are kind of curious (in a weird frugal way) to see how long it actually will go! Getting rid of a working vehicle is not something we’re used to! 🙂
That was a long (and more exciting) introduction to our budget report than I usually give! Let’s get down to the numbers for May!
Income
Our total income for May was $12,161. Since we live on last month’s income, this is money that we’re waiting to spend in June (except for the $1,500 that I mentioned above, but I’ll list that in June).
Attorney Income (Day Job)– $5,509 Mr. SixFiguresUnder has been working full-time as an attorney for the state of California since the fall of 2015. His actual take-home pay was $4,407 but I add back in the cost of the benefits (insurance, dental, vision, parking, union dues and retirement) that are automatically taken out of his check so that I can show them to you in our budget below.
Attorney Income (Private Practice)– $4,334 On top of working full-time, my husband has his own private law practice on the side (crazy, I know!). He started it last year to help speed up our debt payoff. His income fluctuates greatly from month to month.
My Income (Blog)– $2,318 The income that I report is the income that I received this month minus all of my blogging expenses. Of this, I set 30% ($695) aside for self-employment taxes and the remainder ($1,623) goes into the family budget.
If you’re interested in the details of my blogging income and expenses as well as other blogging tips and resources, you can sign up for my Behind-the-Scenes Blogging emails to get the scoop.
Spending
Each month we budget down to zero using last month’s income. When we started doing this, it literally changed our lives! 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 May came from the income we earned in April. Here’s how we spent money in May:
Tithing– $1,135 We happily pay a 10% tithe on our total income from the previous month (April). You can read more about why we paid tithing even when we were in debt. Since we pre-paid a big chunk of tithing at the end of 2016 (for tax reasons), this didn’t actually come out of our pockets this month, but we’re keeping track so we know when we’ve reached the end of our $8,000 of pre-paid tithing.
Other Giving– $80 Other charitable donations this month.
Mortgage/Rent– $2,500 Our payment is actually slightly less than this, but I like round numbers, so we decided to just pay a nice even $2,500 each month. This small adjustment actually shaves a few years off the mortgage! Curious about our mortgage? 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– $118 Our bill was $182, but we had allocated some extra sitting in this budget category from previous months when we had allocated more than our actual bill, so $118 came from this month’s budget. We use OhmConnect to earn some extra money for saving power. My kids think it’s super fun to save power now. They love Ohm hours! If you’re in California (or Toronto or Texas, I think) then you should definitely check it out!
Water– $35 Our water bill which comes every other month came to $80 and I set $45 aside for water last month.
Trash– $7 You can read all about how we keep trash costs low here!
Internet– $0 We still don’t have internet but we should have it installed by the end of June! I cannot even express how excited I am! There are some up sides to not having internet at home, but there are so many little (and big) ways we really miss it! You don’t realize how often you just need to google something or lookup a recipe or check the weather or get medical advice or pay a bill or look at your finances or…. the list goes on and on. This is one bill we are eager to start paying each month!
Republic Wireless Cell Phones– $40 We’ve been using Republic Wireless as our cell phone carrier for over two years now. This covers the cost of service for both our phones, including all taxes and fees (we’re on the Republic Refund plan). If your cell phone bill is killing you, I definitely recommend that you check them out!
Health Insurance– $408 We have insurance through my husband’s employer. This is the portion of the insurance premium that his employer does not cover. It includes health, dental and vision insurance premiums.
Car Insurance– $103 We finally removed our blue van (which we donated) from the insurance! Hooray! I think our insurance was extra lower because of a reimbursement for some insurance that we already paid. We now have a third car on our insurance so it will be back up next month. 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 husband’s father was in the service years ago. If you or your parents were in the military, you’re probably eligible for USAA too!
Food– $378 I was aiming for $350 during May, so I went over, but not too badly. Now that we are out of debt, I’m not as good at reigning in the food budget. Ice cream, popsicles, cold cereal, and other treats find there way into the cart more easily nowadays.
Gas– $606 While my husband’s commute is down to about an hour, I have a commute now too—taking the kids to school, which is an hour round trip, twice a day. But the kids are out of school now, so I’m expecting June’s gas budget to look much better!!
Parking– $155 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– $31 The majority of this was because I am helping out at girls camp (for the teenage girls at church) and I opted to get a hoodie which was $20 (camp is in the mountains where the snow is still melting!). I also found a couple of things at the thrift store or yard sales for the kids.
Household– $248 The bulk of our household expenses came from buying bins to store stuff in our attic. On top of that were regular (and random) household purchases like toilet paper, kitchen things from the thrift store, family photo enlargements for the wall, and back-of-the-door hooks.
Fun– $130 We bought a deeply discounted early bird pool pass.
Home Improvement– $212 We put all new window screens into the rental unit and added screen doors to the sliding doors in our own house. We made a handful of other small repairs and upgrades and found some flower pots for outside the entrances.
Furniture– $0 We didn’t set aside any money for furniture this month, but we used most of the $100 that we budgeted in April to get a dresser and some bookshelves at the thrift store (which I’m really excited about)!
Gifts– $45 We used this and some money that we had set aside in our gift fund last month for teacher gifts. The teachers my kids had this year have taught my kids for 2-3 years each. Normally we don’t spend much on teacher gifts (but they are full of love and creativity), but this year we did Amazon gift cards.
Animals– $181 My husband is still working on the coop and run for our chickens and ducks, which required a trip or two to Home Depot. We bought a new hanging chicken feeder that holds much more food so we don’t have to refill it daily. We also got these chicken water spouts (called chicken nipples) that you put into a 5 gallon bucket to make a watering system for your birds. It’s much less messy than our other waterers and it doesn’t need to be refilled as often. We also bought chicken feed.
Sinking Funds
Now that we’re done funneling every extra cent toward debt, we are using sinking funds in our budgeting. This is money that we set aside each month into certain categories where it builds up until we need it. With everything else this month, we didn’t fund all of our normal categories.
Car Repair– $0
Medical– $50 We’re expecting a new baby at the end of August!
Car Registration & Smog– $0
Christmas– $0
Life Insurance– $70 If we put this much in each month, we will have our premiums set aside for when they’re due in the fall.
Retirement– $539 With my husband’s state job, this amount comes directly out of his paycheck and into his state retirement fund.
College Savings– $100 We contribute $25 per month per child to 529 accounts. It’s not much, but it’s a start. More on our decision to start saving for college in this post.
Savings Goals
Here’s a quick look at our current savings goals. We’ve taken care of taxes and the cost of getting internet installed, and now we’ve crossed saving for a new (used) car off the list.
Next up is beefing up our our emergency fund so that it will cover at least 3 months of expenses. Right now our emergency fund is sitting at around $5,000.
We have a major-ish repair for our rental which will be probably be done in June and may require us to use some of our emergency fund. We are hoping to fit as much of it into our June budget as possible, so June won’t be a month for adding to the emergency fund, but whatever we can fit into the regular budget won’t have to come out of the emergency fund. Come back next month to see how it turns out!
How About You?
- I’d love to hear about how your budget and/or debt repayment went in May!
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Wow! How exciting that everything worked out with the car and the rental property! Now that my husband and I are actively home shopping since the fixer upper, we’ve come across a few homes with extra space and we’ve tossed around the idea too! Even though we keep on telling each other we want “move in ready”, I’m sure we’ll end up with a fixer-upper with a rental area/guest house! (So TWO fixer uppers!) Thanks for sharing everything every month! 🙂
Congrats on the fortuitous new car purchase! Our retirement savings are slowing down this month, thanks to a 2 week stretch of a horrible puking virus in our three kids.I had to cancel shifts at my contract job for two whole weeks.
Congrats on becoming landlords! We recently bought a rental income property to help us pay off our fat $600k of student loan debt– you obviously did it the smart way and waited until you paid off your student loans first haha. exciting!
I hope you don’t mind that I added up your expenses – they seem to be much less than your income for April – what do you do with the rest of the money, save it?
I don’t mind you checking my numbers. In fact, I was hoping that you “found” some money for me!
When I very first started sharing these monthly reports over three and a half years ago, I was pretty meticulous in checking that everything added up right (thinking that others might do exactly what you did).
Now, I don’t meticulously check our last month’s income with our current month’s spending. I simply trust YNAB to take care of making sure we are spending within our allotted money from last month and I report all of our budget categories and spending by looking at YNAB. The thing is, YNAB is a more robust, complicated system than simply reporting list-style like I do on the blog (one of the reasons for the discrepancy, which I’ll explain below).
We don’t have any “hidden” savings that I haven’t already told you about. I committed to transparency and honesty when I started these reports, so in the case that we have lots of extra to save, I’ll tell you all about it .
When my husband took the job with the state, it really complicated the way we track our finances. Well, I guess I chose to complicate things so that I could give you a clearer picture of what’s going on. Instead of just reporting the amount of his paycheck, I wanted to add the benefits back in and then show what they are taken out for (plus, we pay tithing on the gross amount before benefits are taken out). That way it would be more comparable to how my reports used to be back when he was at the small firm where there weren’t any benefits and we paid for health, dental, etc out of pocket. What I realized, though, is that I haven’t been reporting all of those benefit numbers anyway (just our portion of insurance that comes out of pocket). Maybe that means I can simplify my own crazy system now!
Still in going back over the numbers to find the reason for the discrepancy between April’s income and May’s expenses, I did find a few items missing from my expense list. We pay $90/month to our tax preparer, breaking up the cost of our plan over a year (that was buried in my taxes category with all of the boring withholding details I have been tracking). We started a new blog (unrelated to personal finance) and invested $162 in the set-up. (I haven’t gone very far with it yet. It’s very hard to set up a blog when you don’t have internet at home). I also somehow missed that we spent $7 for taking trash to the dump (not a big expense, but it’s still one that was missed).
The main reason for the discrepancy is that we overspent back in April when we had to come up with the money to pay our big tax bill. Since we didn’t have the whole $15,705 for our tax bill, we had to push the remainder into May’s expenses (though I didn’t enumerate that in May’s report). In other words, we paid the entire sum of taxes in April (since we’re a month ahead of our expenses, we have the flexibility and cash on hand to do that), but YNAB subtracts what you overspend in the previous month from your “available to budget” in the next month. So that’s where the major discrepancy lies and why you may have thought we had some extra thousands of dollars that went unreported.
I really was hoping to find a huge clerical error or budgeting oversight that meant we really did have some spare thousands to squirrel away.
It looks unlikely that financing is going to come through for our investment property in time. Our mortgage broker sat on the paperwork for weeks and weeks before she submitted it, was missing some information, and now there is probably not enough time to approve the loan. So it looks like we’ll have to pay cash for the settlement on our investment property next Friday. It’s disappointing, as it has meant we’ve had to sell our investments and it’ll pretty much wipe out our savings account; but it’s a better option than losing our deposit and missing out on a home that we’re buying for $65,000 under fair market price. The house is a solid, well-built brick home in a good neighbourhood in a beautiful coastal town; the idea is to rent it out until we’re ready to retire there in 20 to 30 years.
We have enough money to pay for the house; but don’t want to wipe out our savings entirely, which we would have to do to also finance the closing costs and renovations (about $7000 all up.) We’re keeping a healthy buffer in our savings account, putting closing costs and renovation costs on two 55 day interest free credit cards, and will pay them off well before they come due. We won’t be putting any money on the credit cards that we don’t already have; but by putting them on the cards it gives us a bit of leeway with cash flow.
It means postponing the kitchen renovation and postponing the purchase of a sailboat. We do hope to obtain partial-financing after the fact so that we can buy back our investments. Having all of our money invested in property just doesn’t feel balanced. (And for those of you who are saying, But why borrow and pay interest when you don’t have to? – Our interest rate will be about 4% and we are currently getting a return of about 10 – 15% a year on the other investments. We don’t want to miss out on that other investment income.)
However, I am also somewhat sneakily using this as an excuse to get out of some obligations that feel burdensome to me. For instance there are a couple of people who used to be close friends, who are no longer close friends, but we still exchange Christmas gifts each year. The gifts themselves are not expensive but because it also involves postage we’re looking at $500+, to gift things that feel like clutter rather than anything useful, wanted, or needful. I just don’t know them well enough to know what would be useful, wanted, or needful to them anymore; and their gifts to us feel the same – just more unnecessary clutter. It’s not a joy, it’s a burden; and I was looking for a way out of it. So, I’m using the fact that we have to pay cash for this house as an excuse to no longer exchange gifts: “We’re really needing to focus on building up our savings account so this will just not be on the cards for us this year.”
Nice score on the car! and what a coincidence in timing.
I would have never thought of buying a 100K good used car (like Toyota, Honda, etc…). But now I completely would (and probably will for my daughter). to think of all the money that could have been saved.
I’m usually a “Buy American” kinda gal, but I’ve got to admit the most long-lived vehicles I’ve ever owned have been Toyotas & Hondas. I live in Idaho & almost anywhere you go requires driving. Lol Right now I’m driving a Honda van with almost 250,000 miles on it.
What a steal on the car! I love that he read about it on your blog. That’s amazing! We are also working on beefing up our emergency fund. 80% done! Yay!!! I do want to say one thing about your past two months being so off. Last summer, I quit my full-time job to homeschool and only work part-time. The summer before that, we moved into our new home. All that to say, both of our big changes brought a couple of irregular months before we figured out our new normal, budget-wise. Don’t get discouraged! You will soon find your balance again.
I am excited for all your new changes. My teenager is driving a Camry to college and it has 200k miles. Hoping it lasts for a while. Our exciting news is that I made an 8k payment on our house and we are down to owing our last 18k on it. I CAN’T wait to be debt free!!!!
Thank you for the wonderful blog you have, it is clear and isn’t constantly trying to sell me something. The renter is truly a blessing for your family.
What nice surprises! Congrats on being landlords. That’s be a nice income addition once you recoup the repaid fee. I’m glad you guys found tenants so fast, and that those are the ones you know, so you feel better about the whole security situation. =)