Retirement Preview – 2nd month
As some of you may know, I am taking 3 months off to be a stay-at-home dad and preview early retirement. I’ll take this opportunity to track all income and expenses to see if we can live on one paycheck. I know one income won’t cover all our expenses and we need to see how big of a shortfall we have.
Here are the numbers from May
| Income | May | April |
| Mrs. RB40’s paycheck (after tax and 401k) | 2622 | 2622 |
| rental income | 1700 | 1334 |
| side income | 52 | 266 |
| dividend and interest | 98 | 59 |
| irregular – $2 Nielson survey, won $15 GC | 17 | 60 |
| Total income | 4489 | 4341 |
| Expense | ||
| Housing | -1992 | -1992 |
| rental debt service | -1367 | -1367 |
| cash allowance | -600 | -400 |
| transportation | -36 | -46 |
| pet | -20 | -66 |
| baby | -54 | -229 |
| bills (electric, insurance, internet) | -261 | -293 |
| medical | -115 | 0 |
| misc (USPS, cable splitter) | -46 | -142 |
| Total expense | -4491 | -4535 |
| saving (Income – Expense) | -2 | -194 |
All right, we are moving in the right direction!
Income
Our income went up a bit because I fired our property management company (they were very unresponsive.) The monthly rental income went up from $1,334 to $1,450. We also received our $250 operating fund back so that inflated the rental income up to $1,700.
The side income went down a bit because we didn’t make a big sale on the blog. We also received $25 income from Google Adsense and another $45 that hasn’t been paid yet so those will be booked in future months. Assuming we get paid, the online income is around $120. That met my goal for now.
Expenses
On the expense side, the cash allowance went up from $400 to $600 because there were 5 Mondays in May and we got allowance every other week. Realistically, $50 per week isn’t really enough for us. We spend most of that on groceries and can’t really save much for other things. We’ll go back to $100 when I return to work.
Baby RB40 didn’t spend much money in May, just diapers and a few other small things. All in all, our total expense stayed under $5,000 and met my goal.
Plan for improvement
I started my dividend portfolio with some investment in AT&T. I’ll keep working on this portfolio with a target income of $400 to $500 per month.
We are also working on acquiring a 4 plex and it looks like the deal might work out. That income will be pretty unstable depending on repairs and maintenance, but it should contribute to the positive cash flow every month. It’ll probably start off at a few hundred dollars in the first few years.
Online income. My target is only $100/month and it looks like we are meeting that goal. For 2012, I’ll raise my expectation to a few hundred dollars a month. 🙂 See my detailed post on Retire By 40’s May Blog Statistic and Income.
Our goal is to have $5,000 income/month.
On the expense side, it looks like we won’t go much below $4,500/month. May was also a good month and we didn’t have too many unexpected expenses. The one big bill that’s missing is the property tax. I’ll have to budget it in…
If you need some help keeping track of your finances, you should try using Personal Capital to manage your budget. It’s a great free budgeting tool. You can keep track of your income, expenses, and net worth, all in one place. Personal Capital is geared for investors and have many great tools. See my review of Personal Capital and how they helped me reduce what I’m paying in investment fees.
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Joe also highly recommends Personal Capital for DIY investors. They have many useful tools that will help you reach financial independence.
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I am so impressed with how closely you are able to track your expenses. I try my best to predict our, but I am always wrong. This month I was hit with 2 pairs of cleats that needed to be replaced, my husband needed new work clothes, and I will have to give endless graduation presents over the next 6 weeks.
Great job!!
Great post. Even if there is a few rough patches on your road to financial independence it is the direction that makes all the difference.
But as rightly mentioned – kids are expensive : -) As for the rest – you are keeping your expenses after control.
I look at our last three years, analyzed them and these are steadily going up.
How are you enjoying your time with the little one? Do you only have a month left at home with him? If so, will he go in day care after that? Day care crushed us financially, which is why I stay at home now. For our two youngest (2.5 years & 13 months), it would have cost almost $2,000 a month! to put them in day care.
I love being a stay at home dad, but I only have a few weeks left. He’ll have to go to day care when I go back to work. 🙁
Looks very similar to my budget in that expenses and income are canceling each other out. That’s also a pretty nice income from the adsense. I’m still debating whether or not to use the 250 block but it seems like everyone who is generating good income from Adsense is using it.
You can try the big block and see if it gets more clicks. It makes a difference for me although I don’t like the big blob up top.
I’d imagine that when you have good, stable tenants, the property management is easier to do on your own. As you return to work or have to deal with a disaster tenant, the property management company may be worth its weight in gold. However, since you intend to make this your retirement income, it’s important that you get every ounce out of it. It may make sense to find another property management company when you return to work, and then take on the work yourself when you officially “retire”. Either way though, I’d say you’re getting pretty close to making it happen, nice job!
Our tenants are going to stay for 3 more years so I think it will work out pretty well. It’s been good so far and I hope there won’t be any issues.
Good job collection more rental income! If property managers are useless, seriously get rid of them for sure!
A good trend is starting here! Include the property taxes and insurance. It is not a bad idea to factor in a vacancy and maintenance factor into your budget. Setting up reserves is important in managing income property. Setting up reserves is similar to savings for emergencies. Also, you may want to report net income (gross rents less expenses).
Thanks for the good advices. I’ll need to beef up my reserve fund if the 4 plex deal goes through. I’ll increase rent a little bit every year as you recommended as well.
You are moving in the right direction! I hope your investment in the 4plex complex goes smoothly and gets you on your goal to $5K a month!
Good luck and congrats on being on top of things!
You’re well on your way to hit the objective. a Minor increase in your online income will push you into positive territory. On the other hand, costs associated with your kid might not have appeared yet in your budget and they will appear!
I think you’re right about the kid expense… We’ll see how it goes. I was a pretty cheap kid to raise though. 🙂
I think a 4-plex would be an excellent idea! Property management will decrease severly because of the close proximety of all of your units. Good luck in your future decisions! 🙂
You have done a great job of detailing this. Now when you go back to work, you should continue to live off the one income which it looks like is very close and see about paying off that rental in less than six years. That would eliminate a major expense and make your budget look a lot better. I assume you might be blogging more in retirement so that might increase the income side of the equation also. I don’t know your timing, but I would say it could be done in the next 3 years based upon what I am seeing. Remember though that kids are costly.
Our expense will go up a bit when I go back to work, but it should still be pretty close.
Yeah, I keep forgetting about the kid. 😉
We are in a pretty good public school district so I don’t worry about it much.