Income/Expense Reports Are Making a Comeback

Happy New Years, everyone!

Performing a detailed and regular analysis of personal finances sucks.  It’s also indescribably important if you want to retire early and with confidence that you’re really ready.

So after a 2 year hiatus and many requests from the awesome and loyal readers of this site, I’ve decided to bring back my monthly financial reports that I used to write.  I quit writing them in January 2012 because, well, they were boring for me to write and they started to all look the same.  At the time I didn’t think much of the decision, but it’s been two years and I still get requests from both new and old readers to bring them back. The public has spoken.

With that said, I do plan on making a few changes to the content and format.

First, I’ll no longer be publishing my salary from my 9-5 job. This is because it varies so much from month to month that it can be misleading or confusing.  Some months I get 2 paychecks, others I get 3.  Other times I’ll get bonuses or vested stock option.  And while all this variation occurs, it means absolutely nothing towards my real goal of retiring and living comfortably on my passive income.  This is why I only want to focus on my passive income and any money my wife and I make on the side doing things we enjoy.

Second, I’ll no longer be publishing my total net worth.  When I started out this early retirement journey, I published my net worth because I had just read Your Money or Your Life and Early Retirement Extreme, which mostly concentrated on the 3% Safe Withdrawal Rate strategy (SWR).  In other words, my ability to retire was directly proportional to my net worth, not my passive income.  In the past 2.5 years however, I’ve spent a lot of time transitioning my investments to dividend stocks, interest yielding bonds, real estate investments, and other income generating investments. So now I prefer to track my actual passive and enjoyable income, rather than a fictional (although empirically reasonable) SWR.

This change in approach is heavily inspired by my revised model of wealth, and something you might want to research and consider if you’re on the same path.  I won’t and legally can’t recommend this same strategy for you, it’s just a model that I’m most comfortable with.

I’ve also found this investment model of looking at passive income to be a lot more fun. I take great pleasure watching my passive income grow and see investments cover specific monthly budgets.

Hey look honey, Aflac (AFL) is now paying our monthly electric bill!  And Pfizer is paying for our electric, gas, and water!

Better yet, this doesn’t just start once you have hundreds of thousands of dollars or you reach FI.  Even after you invest your first $5000 into a dividend yielding stock at a 4% yield, that’s still $200/year and $16.67/month!  That alone can be put into real terms!  You could make that your monthly alcohol budget, covering two $8 six packs per month.  You now have a lifetime supply of beer.  But it gets better.  A few months later, you might see the dividend rise 10% even though you haven’t invested any more into that stock.  This means your income rises to $220/year, $18.33/month.  Now you’re drinking the $9 import beers.  :)

Tracking income and forgetting net worth also increases the significance of side income created from various entrepreneurial venture.  This makes those side gigs more immediately enjoyable to watch grow, it also motivates your desire to make them grow. Maybe this isn’t for everyone, but it certainly is for me and anyone else born with an entrepreneurial spirit.

The Challenge

You can watch as many football games you want, you’ll still be a terrible quarterback.  You can watch every youtube clip of great public speeches, you’re still gonna suck at the podium if you haven’t done it before.  And when it comes to finances, I can’t stress enough how writing these income & expense reports changed my financial health and perspective.  It helped me drive down my expenses by over 50%, and put some real focus on my income growth – all while improving my happiness in life.

Reading my progress may be motivational and give you ideas, but it won’t make you a great quarterback or an exceptional public speaker.  And so my challenge to you…

If you have a goal to achieve financial independence, start tracking a similar monthly report.  You are free to do this anywhere you want – start your own blog (and send me the link!), create a Google Doc, or keep it in a notepad and let us all know how you’re doing.

I’d also like to offer up my own space here at BNL if there’s interest from people here.  I could set up a lightweight forum for people to track their progress using a similar (or different) format than I’ll be using to track my progress.  You could update your monthly reports, and have others see it as well.  I think it would be a lot of fun if we got enough people tracking their own progress, learning from each other, advising each other with new money saving ideas, and encouraging and motivating other’s to continue their journey.  If this interests you, let me know in the comments below or by clicking on the “Contact Me” link.  If there’s interest, I’ll set something up before the end of the month.


FYI, I only spend about 2 hours at the end of each month to track my finances.  That’s all it takes because I do all the tracking automatically through Quicken Home and Business.  I just bought the new 2014 edition a few weeks ago, and prior to that I’d still been using the 2011 edition of Quicken (and prior to that the 2007 edition). In other words, the price looks expensive at first, but it’s pretty cheap if you only buy it every 2-3 years. Alternatively, is a free web-based version. Mint is good too if you’re on a tight budget, but I definitely prefer Quicken and I’ve found that it pays for itself simply by helping me reduce my expenses (not to mention saves me a ton of time).

So let me know if you’re interested!  Whether you’re $20K in debt, or have $1M saved, I’m confident this could help you improve your financial health.

45 Responses to Income/Expense Reports Are Making a Comeback

  1. Alexandra says:

    Please set up the forum! That sounds fun and helpful.

  2. Steph says:

    I would also like to see a forum for this. I think it would be motivation to stick with it and keep doing it, and helpful to get ideas from others.

  3. Rachel says:

    I’d definitely be interested in participating in a forum. It could also be a great place to share tracking spreadsheets/ideas. Love your blog! Thanks!

  4. I started dividend investing last year (Nov 2012?) and decided I’m never going back. I love waking up in the morning to find out I made a few extra dollars that I didn’t otherwise work for. Now the major obstacle my husband and I need to overcome is cutting back and investing more which has *felt* nearly impossible but I think we just need to make little changes to get ourselves there.

    I used to have trouble with Mint getting it to read my American Express and hubby’s REI credit card info so all my budgeting numbers would be off constantly. Have you had any troubles with Quicken?

    • Cutting back costs becomes a lot easier if you track it compared to your dividend income. Watching your dividends go up by $20 each month is fun, but if you’re spending 5K/month, that’s still 250 months! I don’t know about you, but 21 years seems like a long time!

      But if you start looking for opportunities to reduce expenses, and take $5K/month to $3K/month, then you drop from 21 years to 12 years. That’s 9 extra years of freedom in your prime… :)

      As for Quicken, I’ve never had any problem with any banking, credit card, or brokerage account. That includes Wells Fargo, Chase, 1st bank, BoA, Visa, MC, eTrade, Wellstrade, UBS, Merril Lynch, Fidelity, and others. The only accounts I have that don’t sync with Quicken are Lending Club and Prosper.

      I know American Express is definitely supported in Quicken, although I don’t have an Amex account. I did read that the Amex high-yield savings account is not supported, but the credit card accounts are. And I believe REI credit cards are Visa-based, so that should work fine. Quicken does not have a trial version, but they do have a 60-day return policy, no questions asked.

  5. Well, I for one am looking forward to the return of the monthly financial reports, as I quite enjoyed reading them. After all, you inspired me to do something similar on my site, and I just finished one full year of tracking all my income & expenses. The results have been eye opening, and I can comfortably say that I easily spent a few thousand less in 2013 than I did in previous year(s). In other words, I accepted your challenge a year ago, and am glad I did. I will continue it for this year as well.

    I used a custom Google Spreadsheet for my purposes, manually entering all the transactions. The “manual” bit was important for me, as it gave me extra pause to consider the necessity of each purchase before swiping my card.

    So, for anyone on the fence, I encourage you to accept BNL’s challenge. The results are worthwhile.

    • Yeah, I could see the Google spreadsheet as a great tool for really questioning every expense. That’s more inline with the “Your Money Or Your Life” approach of detailing every penny spent and determining the “life energy” something costs, and whether it’s worth it.

      I’m just not that detail oriented, so I did things in budget buckets, and let Quicken do 90% of the work.

      Glad this is working out for you. I just checked out your 2013 results and they look promising. Cut a few more costs and pay off those mortgages, and you’ll be home free!

      By the way, how are your property taxes so low? My 2010 TX property taxes before I moved were over $12,000! City of Austin + Texas state taxes totalled over 2.7% if I recall correctly. Colorado us much MUCH lower.

      • Thanks for the feedback, BNL. As for my “low” TX property taxes, that’s easy! Rule #1: Don’t live in a McMansion. I live in a decidedly middle-class house. Also, don’t own a pool.

        Rule #2: Live in a city with a low cost of living. For me, that’s San Antonio, which is a generally low-income city with a few clustered pockets of affluence. Don’t live in one of those affluent pockets.

        If you follow that last part of Rule #2, then you’ll almost certainly meet Rule #3: Live in a part of the city with a “less-desirable” or even “terrible” school district. I didn’t have children when I bought my house, and now I regret not paying more attention to the school district, which is “average” for San Antonio, which means “needs improvement” for Texas, which means “abysmal” nationally. My school district may be chock full of thugs and other degenerates, but at least my property taxes are low! Yay?

        Anyway, that’s my secret to “low” lone-star taxes.

      • Hmm, so what you’re saying is that my idea when I was 24 to move into a 3100 square foot house (with a pool) in the city boundaries of Austin in one of the top schools in the entire state (despite having no kids and moving before they ever got to school age) was a bad idea? Cuz we thought it was a damn good investment at the time.

        Prior to that, I was in a small house in Pflugerville, Texas. It would be interesting to see what my taxes were there, but I purged that data years ago.

        As to #3, I think I found a good balance now. I’m in a nice area, but not “too nice.” In other words, I’m in a neighborhood where I live a lifestyle that matches the socioeconomics of the people around me. Although for me it’s by choice, and my neighbors it’s more of a necessity. Still, I like living by people that have reasonable budgets and don’t hire people to mow their lawn. :)

  6. I’m glad it’s back! We similarly do a monthly budget and net worth update, and I concur that this sort of analysis is hugely important to making progress with our finances. We went from a 40% savings rate to topping 80%, mostly, I think, from that process (and from the external motivation of being publicly accountable for hitting our savings goals).

  7. Evan says:

    I think you just inspired me to share my dividend income! Do you think it beneficial to share a forward projection or on a month by month basis? I glad to see that you are going to get more active again. Your site is fantastic – if I had to guess on a reason, is that it avoids the crap/fluff out there (CC Reviews, extreme thrift, etc)

    • Evan,

      For my calculations, I use the current dividend yield and project forward assuming it will remain constant. The vast majority of my dividends are in dividend growth stocks, so this is fairly conservative considering they are more likely to increase over the next 12 months than to decrease. This might not be very wise if you have a bunch of high yield REIT’s in a low interest rate environment. I prefer this over month to month because many stocks are are on the same quarterly schedule so I’d have really high months and really low months, and since I don’t plan on living “paycheck to paycheck” with my dividends it’s better to smooth this out. I’ve seen people that actually choose specific stocks to balance the payments each month, but this seems like a terrible driving force on which stocks to choose.

      And thanks for the compliment about the site. The only advantage to the “fluff” you mentioned is that those guys will pay pretty good money to me if I let them write an occasional CC review fluff piece. Don’t get me wrong, I’d like this blog to make more money, but not at that cost. Just another advantage of being FI. :)

  8. Mikek says:

    I’d be interested in a place to share information as well. We seem to have fallen off the wagon in last few months and some new ideas/motivation would be helpful!

  9. Lisa says:

    I would love to see a forum! Thank you for the great material and motivation. Love the site.

    • Awesome, looks like we have a quorum. I’m excited to see some interest in this. I write here to try to make a difference, and anytime an idea latches on it makes me smile. :)

      Everybody else – keep letting me know if you’re interested. The more people, the more effective this can be with a strong community of supporters and collaborators.

  10. No Waste says:

    Very interested to see the updates.

    Do you get three tons of mail each year from owning that many individual stocks?

    • Ha!

      Actually, I turned off paper notification years ago. Then about a year ago, I turned off all notifications by email because, frankly, I don’t read them. They sit in my “inbox” within my eTrade account, but go unread. The only thing I do is an annual checkup (which I wrote about, but haven’t published yet).

  11. Justin says:

    Since you own so many individual stocks, how do you manage to not get crushed by trade commissions?

    • I only rebalance once, sometimes twice, per year. Trades are $7, and unless I am moving a few thousand dollars then I don’t bother to make a transaction. So if I’m moving $5,000, then $7 is only 0.14%.

      When I had significantly less money, I rarely rebalanced, and I set a $5,000 minimum purchase for myself. So I would save up cash in my account until I had $5,000 or more, then analyze where I wanted to invest it.

  12. […] a related note, the challenge I laid out in a previous post starts at the end of January.  I’m challenging you to sign up for the new forum (this link […]

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