From 0 to 90% savings rate in 12 months (goal tracking)

[Finntastic]

Hey all,

I'm new to here and new to savings. Having been penniless pretty much all my life I have recently started cumulate some wealth thanks to my work in software industry. However you know what they say about new money, yep been pretty much spending it all. Now its time to start. Since May I've started tracking down my income and expenses and will report there monthly on my savings rate. Goal is to hit 90% in 12 months!

Little background: I'm 40 years old living together with my 41 years old wife and we both bringing income to the family. We got house paid for (here in Thailand), and few investment properties which of one has pretty much 100% mortgage to pay (with 6.25% interest). I'm about to pay off my student loan last payment next month. Besides us in the family there is 2 dogs and my adult daughter who has moved out, however I'm paying for my 4 years old grand daughters international school which adds to the expenses.

As of now I got some expensive hobbies like motorbikes, personal trainer (cross-fit) and wines so there is a lot to cut from. Now in a weeks time I should have my numbers crunched from May and see where my starting point is, but its not going to be much over 0. I will try to divide both income and expenses into "normal" and unexpected, but will take any guidance on this from those who are further in the game. I did install mobile apps for both our phones (Money Lover) which helps to track the expenses better.

I only starting now but goals are set high:
- 90% savings rate in 12 months
- FI: in 24 months
- RE: in 36 months (at the age of 43)

Comments welcomed and appreciated.

[Candace]

Just chiming in to say excellent work in making a goal and working towards it. Sounds like you have a lot of potential to cut expenses without giving up quality of life. Why don't you update the thread as you make changes in your cash flow? Then you can see your progress here and get encouragement.

[Finntastic]

Thanks for the comment I’m planning to make monthly reports here so I can keep myself on the right track. First one coming next week when I crunch the numbers from May into spreadsheet and see the ugly truth

[Finntastic]

Ok here's the first goal tracking report:

5/2018

Income
Dividends:   $16,952
Salary: $16,262
Rent Income: $998
Total: $34,211*

Expenses
Bill & Utilities: $371
Shopping: $218
Health & Fitness: $1,813
Food & Beverage: $841
Transportation: $85
Gifts: $62
Stationary:$12
Home improvement: $24,537
Other misc:$312
Student Loan:$236 (182$ to go)
Mortgage: $9,355 (109,000$ to go)
Total: $37,843**

Savings rate: -11%

*There where some bonuses that will not be happening for awhile so our combined income next month will most likely be around 30k$ mark.
**Some unexpected expenditures. We both spent some time in hospital which cost some money (no insurance). Also we are currently building swimming pool at home and that added a lot of extra as well as we paid more of the mortgage than normally.

Next month numbers will be different and should be both done dramatically, hopefully savings rate will be higher though.

[tomsang]

To figure out your savings rate you would typically not include selling the motorbike or dividends on stocks that you own. Those two areas are just converting an asset that you own into cash vs. buying additional assets.

Home improvement may not be an expense if it is improving the value of your house. You are converting cash into increasing the value of your house. If the value of your house only increases by $10k and it cost $25k for the improvements then you would expense the $15k.

I am looking forward to seeing your progress.

[Finntastic]

To figure out your savings rate you would typically not include selling the motorbike or dividends on stocks that you own. Those two areas are just converting an asset that you own into cash vs. buying additional assets.

Home improvement may not be an expense if it is improving the value of your house. You are converting cash into increasing the value of your house. If the value of your house only increases by $10k and it cost $25k for the improvements then you would expense the $15k.

I am looking forward to seeing your progress.

Thank you tomsang for your tips. I get what you saying about the motorbike and agree with it. I will go and fix that number, however regarding the dividends I'm not sure as I do consider these dividends as part of my salary. It will be paid monthly, will vary depending on how we are doing, but for me I do consider it as my income. Also if there wouldn't be any dividends I would most likely be looking elsewhere for work.

When it comes to home improvement (in this case building swimming pool and sauna in the back garden), how do you know if it increases the value and how much? I assume it would have to come from a real estate agency appraisal? We don't have such things here or if we do they are far from reliable. However in this case I assume it will hardly increase the sales value of the house, but it would for sure increase the opportunity to rent the property out, not sure if the actual rent would be dramatically higher though.

Anyway I really appreciate your help and will adjust the numbers by the motorbike selling as of now and will need to think further on how I should work on these. This was my first attempt to calculate savings rate, so hopefully this month looks better.

[force majeure]

You do realise that dividends are a fallacy - its your own money they are giving back to you.

[Finntastic]

June 2018

Income: 32,912$
Expenses: 13,037$

Savings Rate: 60%

[Zamboni]

This is a lofty goal. Congratulations for striving for it!

[marty998]

You do realise that dividends are a fallacy - its your own money they are giving back to you.

Only if he hasn't counted the capital growth in the book value of the business yet. And only if the market value of the business is equal to the book value.

[Finntastic]

This is a lofty goal. Congratulations for striving for it!

Thank you... got into good start, but its going to get harder soon... but I'm not aiming for its because its easy =) so we shall see will give it a go.

[Finntastic]

You do realise that dividends are a fallacy - its your own money they are giving back to you.

Only if he hasn't counted the capital growth in the book value of the business yet. And only if the market value of the business is equal to the book value.

This is difficult one. We have a little bit special case, first of all the company is privately owned, I'm minority shareholder with little to say about the dividends policy and even the dividends are related to last years income, we pay them monthly and will stop paying immediately if there's a bad month. So say for example July we don't make any profit then in August I will receive no dividends, hence its almost like a bonus based on previous month results?!