With the post-Tim spending decrease, I’d hoped to be able to chronicle a journey about living on 50% of my income. Looks like that ain’t happenin’.
Between paying regular income tax (which is going up almost $500 a month thanks to my now-single status) and paying both halves of my FICA, my taxes will take 30.5% of my pay in 2019.
Add in estimated utilities and my $595 mortgage, and we’re at 43%. Then there’s my health insurance and life insurance at $375 and $53, respectively. That brings us up to 48.7%. That doesn’t include Internet or cell phone, which would put me over 50%.
There are a few places I can trim. My Internet just went up, and it was already ridiculous (I need a business line to get a static IP). So it’s officially time to see if I can get a comparable, cheaper plan on DSL.
I’m also going to try to check out Mint Mobile, which would take my cell phone bill down to $45 for three months (and $15 cash back through Mr. Rebates). And once I get a better feel for my post-Tim spending, I’m hoping to lower how much money I keep back for the weekly budgets.
But even with those trims, there’s no way I could live on 50% of my pre-tax income. In fact, I’d be looking at saving barely over 1/3 of my gross income — and that’s not including unforeseen expenses.
When people talk about half of their income, are they talking about their gross income or their take-home pay? Because my post-tax income is a completely different story.
My basic expenses come out to 50.7% of my post-tax income. And that’s estimating utilities. Now that I’m the only one living in the house, I expect the electric bill to go down in three months. (Averaged-out billing means quarterly adjustments, so I won’t see the effect right away.) Water and gas should also go down now that there are fewer people taking showers. And again, I can probably trim the weekly spending once I get a better feel for singleton expenses.
So 50% of my post-tax income is more than feasible. Excepting, of course, unexpected expenses. You quite literally can’t plan for those, so all I can do is shoot to put away 50% and deal with the expenses as they come in.
In other words, the answer is that yes, for all intents and purposes, I could live on 50% of my (post-tax) income. But I doubt I’ll ever make enough to live on 50% of my pre-tax money.
I’m going to try to chronicle each month how I’m doing putting money away and give my percentage savings rate. I can always do two rates — pre-tax and post-tax — to satisfy everyone’s metric.
How much can I save?
I’ll automatically put $500 into my Roth IRA each month, $300 into the car fund, $100 into the vacation fund and $100 into the emergency fund. That alone is a 19% savings rate.
Then come the question mark “savings.”
First of all, I’m not sure how to treat the money I put aside each month for car insurance. On the one hand, it’s going to go back out once a year. On the other hand, it’s still being saved now. Plus, the same could be said of the vacation fund and I count that as saving.
So I guess we’ll just consider that monthly $150 savings. That brings us up to a 22% savings rate.
Then there’s the question of saved savings. It’s going to go toward the mortgage from now on, and I’m not sure whether to count extra mortgage payments as savings. It’s not going into a savings account, but on the other hand, it’s being put to work to save me money (in interest) over the long-term.
So… Not sure what to do with that. Again, I suppose I could always provide multiple rates, but I don’t want things to get too confusing. Your input here is appreciated, since you’ll be the ones I’m updating.
After all those are accounted for, I’ll be left with a little under $1,300 a month. Of course, that doesn’t include unforeseen expenses, so call it $1,000 in an average month (hopefully). The idea will be to split that mainly between my SEP-IRA and the mortgage, with small amounts also going into savings each month.
Ideally, I’d focus all of my attention on retirement. But competition in my company’s industry is still heating up, and I’m a nervous gal even in the best of situations. Apparently the company is still quite healthy (I got a small raise), but just in case, I want the house paid off within the next decade.
I calculated that if I put an extra $500 a month toward the principal, the mortgage will be gone in seven years. My normal payment plus saved savings each month will be at least $245 extra a month.* So I just need to have at least $255 to put into the payment.
Of course, when I finally get the guest house rented** I want to put the full $450 a month into the mortgage, but time will tell how realistic that is.
So that’s (roughly) what my 2019 spending/savings plan looks like. It should be an adventure!
What’s your spending/saving/payoff plan for 2019? Could you live on half of your income?
*Saved savings is $140 minimum, but some months it will be higher as I save at the grocery store, use coupons, redeem rewards, use GCs from Swagbucks, etc.
**Which could be awhile. I just found out they’re going to be drilling a well for three months starting in January. It’ll go 24 hours a day, seven days a week. I’m praying that the sound walls they’re using do a good job.