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Budget Review - December 2018
This has to be one of my favorite months. Holiday songs play on the radio, family gets together, and I get a much needed break from the hustle and bustle of my day job.
On the downside, it's often a big-hitting month in terms of spending. Between holiday shopping and infrequent expenses such as property tax, December is often one of the most expensive months of the year.
Good thing we plan for it!
I'll once again mention how important it is to establish a budget. If not to curb your spending, a budget (especially one that looks far into the future) can help plan for large expenses you might otherwise forget.
So what large expenses did I not-forget in December 2018? Let's take a look:
December 2018 Budget
Nothing major to report with our W2 job earnings in December. We grossed slightly less than in November, but that was mainly due to timing and the way my company handles incentive rewards.
One point of interest is that I have accepted a new position with a different company, starting early January. While my main reason for accepting the position was proximity to our home, we should also gross a bit more each month.
A major goal for 2019 will be to max out my 401k (unfortunately Mrs. Firefly does not have access to one with her company), so the additional gross income will make that easier.
As I mentioned last month, traffic for my personal Etsy store more than tripled in the lead-up to Black Friday. I received my most consecutive sales in a given month, which was nearly more than I could handle since the product requires so much time to manufacture.
December, those sales paid off with income nearly doubling from November. While the percentage is nowhere near our W2 incomes, it is nice to see our investments paying off. The business is actually only a few sales away from breaking even, which should happen in less than a year in business.
That being said, sales trailed off following the Black Friday rush, so I do not expect to see the same income boost in January.
Last month, I reviewed the 7 Top Cash Back Apps, which I've actually expanded to 10 at this point.
Maybe I should get around to updating that post...
Anyway, one of the difficult realities of cash back apps is the requirement to have a certain amount earned before you can cash it out. This means the benefit will come in waves. And while I have earned as much as 10% with regularity on normal purchases, most of this earning is tied up until I get $10, $25, or even more.
My new favorite cash back opportunity comes from Chase. In mid-November, Chase released cash back offers on their credit and debit cards. Earnings are actually very high, at around 10-15% depending on the offer.
After linking the offer, cash back is automatically tallied when using the particular card and added to your account as statement credit. There's no fuss, no minimums, and it takes very little time to set up. Getting rewarded for the spending you're already doing? That's definitely the Frugal Firefly way!
Most of the typical expenses in December were very similar to previous months. The percentages changed slightly due to a different gross income, but otherwise there is not much to not about them.
Here are the categories that warrant additional discussion:
Food & Dining
We actually overspent on food in December, which is easily done around the holidays. Travel and celebration often result in a bit more dollars going toward dining out, so this percentage came up from November's numbers.
Health & Fitness
This category includes doctor bills, which we knew would hit hard this month as we paid off most of the medical bills from the birth of our twin girls.
Although these took a large chunk of our gross pay (35.3%), it could have been much higher. Let me explain.
Warning: short rant incoming! Be advised.
In early December, we received a rather large bill (to the tune of $7,600) from our hospital for one of the girls. Considering this came after we had met our out-of-pocket maximum (not to mention it was, by itself, higher than our out-of-pocket maximum), I knew there had to be a mistake.
What followed was an exercise in frustration as I called the hospital...
Then I called insurance...
But the patients are my newborn daughters. And while I think they are advanced for their age, asking them to address insurance claim issues seems a bit unreasonable, doesn't it?
Maybe we'll revisit when they're 6 months...
Finally, I was able to convince our insurance to get on a conference call with myself and the hospital. Turns out the claim had been submitted with one of my daughters as male, which did not match insurance records. The expensive bill was actually a reduced "non-insured" rate, and there is no mechanism to catch this mistake.
If I had not been paying attention, and quite frankly if the size of the bill had not been so large, I might have paid it without questioning.
And it gets better - this type of issue happened two more times in the coming weeks. With 64 total claims in 2018 for IVF and medial expenses, I have to wonder if any other mistakes were made and I simply paid them.
Our medical system needs help, folks.
Okay, end rant.
As luck would have it, the day we brought our daughters home from the hospital was the day our 28-year old furnace decided to give up the ghost.
Between normal mortgage costs and a new furnace + A/C unit, our home expenses nearly took our entire gross pay by itself.
The good news is that our heating and cooling costs should be lower moving forward, but it is unlikely we will ever fully recoup the cost. Utilities are simply too inexpensive to realize material savings from the new system's better efficiency. But that's the cost of home ownership.
Retirement & Savings
Savings took a bit of a hit this month - 17.2% vs. more than 35% in some months.
We still contributed the same amounts to my 401k and our IRAs, but we could not contribute any extra as with the last couple of months. Hopefully January will be back on track.
Shopping spiked a bit due to holiday gift purchases, but was actually less than budgeted. We struggled on "general supplies" a bit, but otherwise this was mostly expected.
The last major spending category for December was taxes, boosted by annual property taxes. Again, we had planned for the large expense by saving in preparation, but this was yet another large expense in December.
December was a difficult month financially when you combine medical bills, home repairs, and property taxes.
Total expenses were 219% of gross pay requiring us to absorb over a month's pay in excess of earnings. Two concepts helped us survive the hit.
The Power of Overage, Demonstrated
One of my earliest articles was on a concept I call overage. This is our working capital, margin of error, and short-term emergency fund all rolled into one.
Essentially, we try to maintain a minimum amount in our main bill-paying account at all times. This prevents us from worrying about overdrawing in the case of an emergency.
Based on our predictions, I knew we would dip below our minimum threshold in December, and I began more aggressive saving in the months leading up to the heavy spending.
If you're looking for a way to track your spending the way we did, check out Personal Capital!
December was a textbook month for why we believe everyone needs an emergency fund. Back in October, I wrote about jump-starting an emergency fun with bank account bonuses.
This fund came in handy when December's bills began piling. One immediate goal of 2019 will be to replenish our emergency fund and grow it to 3-6 months of normal expenses.
"In like a lion, out like a lamb."
Wait, that's March. How about "in like a snowstorm, out like a..."
You know what, forget the metaphors. December was rough. Fortunately with extensive planning and a healthy dose of saving, we made it out alive.
How did your December go? Did you have large end-of-year expenses like we did, or was it just another month? Let me know in the comments below!
Really quick, before you go...
If these articles give you value, here are a few ways you can help out at no additional cost to you.
I appreciate the help!