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75% February Savings Rate – Here Is My Breakdown

Last month, my savings rate ended up at 75%! This marks one of the lowest savings rate months I have had in awhile, but I am extremely proud of it! There are months where you should always expect your savings rate to go down. Whether this is from a vacation or some extra fun you decided to have, you should celebrate every month!
2020 Savings Rate Feb
 
Time to go through a breakdown of February!
 
February Total Money Earned
February brought a little dip in my income. The main reason for this is how I breakout my W2 income when looking at earned income. For me, I take my pay and determine how much money I earn per day and then multiply that number by the number of days in the month. For that reason here is the breakdown of my income I generated. Note I exclude any investment income as I track that separately.
 
Income Breakdown:
  • W2 – $13,543
  • House Hack Room #1 – $900
  • House Hack Room #2 – $800
  • House Hack Room #3 – $650
This brings my total income for the month $15,893.
 
Not a bad income month. Now time to look at expenses.
 
February Expenses Breakdown
February brought some expenses that were definitely not planned for. I ended up taking a last minute trip to Vegas to celebrate a friends birthday and we went all out. Between VIP at Omnia ($5,500 for the night) and a suite at Planet Hollywood, we definitely didn’t hold back on expenses.
 
Breakdown of expenses:
  • Housing – $2,207
  • Entertainment – $1,329
  • Food – $234
  • Transportation – $123
Total expenses for the month ended at $3,895. The rest of my money went straight to investment accounts.
 
Investing For February
What a wild market we have been seeing the last couple months. This wild market doesn’t stop my investing strategy. In a singular statement, I would outline my investment strategy as follows:
 
Setup automatic investments in the market and retirement accounts while continuing to add income streams through real estate and other investment vehicles.
 
With that in mind, I had two paychecks for February. I have been automatically sending 50% of each paycheck to my 401k. This puts me at $13,076 sent to my 401k so far this year. I am close to maxing out my 401k. Only two more paychecks and I will be there.
 
I also maxed out my HSA with my first paycheck this month! Now that this account is maxed out, I can work to invest that money elsewhere and save for my next property!
 
From a taxable account perspective, I continue to invest $1,200 each week in my Vanguard account into VTSAX. At some point I think I am going to transition this investment strategy to buy a few other index fund. For now, I am going to continue investing in VTSAX!
 
All in all, it was another great month! House hacking and earning a great income at my W2 have been incredible ways for me to continue with my high savings rate.
 
Key Takeaways:
  • Have some months where you spend! Be just as proud of the months where you spend a little extra on doing some fun things!
  • House hacking continues to be an incredible way for me to have a high savings rate. If I wasn’t house hacking, my savings rate would be around 70%. Still not bad, but there is nothing better than living for free.
  • Automating your investments is extremely helpful! Don’t worry about what the market is doing. You can’t time the market. Trust me. You might hit the right timing once in a while, but over a 10 year period, you don’t beat the market.

Don’t forget @TheYoungRetireeBy33’s 3 Core Principles:

1 – Your money should make money for you⠀⠀⠀⠀⠀⠀⠀⠀⠀
2 – Start early to realize the power of compound interest⠀⠀⠀⠀⠀⠀⠀⠀⠀
3 – Eliminate your largest expense by house hacking

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How to Eliminate Your Largest Monthly Expense – Different Ways of House Hacking

The typical American spends 30% of their take home pay on housing. This isn’t a bad thing, but it is the simple truth in America right now. To eliminate your largest monthly expense, opens you up to many investing opportunities. Want to have a high savings rate and be able to invest more? Eliminate your largest expense. For 99% of Americans, the largest expense is housing.

How To Cut Your Largest Expense

There is one very simple way to cut the largest expense you have every month. House Hack! No reason to over complicate things. Let’s keep it simple.

What Is House Hacking?

House hacking is a term coined by Bigger Pockets that describes living in a home and renting it out. There are a few different ways to go about house hacking. Let’s highlight each one of them.

Strategy 1: Purchase a Duplex/Triplex/Quad

The first strategy involves purchasing a multi-family property. The goal is to buy a property where you can live in one of the units and rent out the other unit(s). This allows you and your family to have your own privacy in your unit. I highly recommend this strategy if you have a family and privacy is important to you. Many markets have multi family properties where this strategy will be effective. If you are able to either cover your mortgage, or come close to it, you are winning.

Strategy 2: Purchase a Single Family Home and Rent Out by Bedroom

This is a little different of a strategy more commonly used by a younger professional. It is also commonly used by someone just graduating college and used to living with roommates. This is the current strategy I am implementing in my first house hack. There are a few things you need to ensure before implementing this strategy.

First, you need to ensure there are no restrictions from your HOA to rent out by the bedroom. There are certain HOA’s that have clauses in their contract to prevent people from doing this. If the property has an HOA, make sure to read through their documentation.

Second, make sure there is enough parking space at the home. It is important everyone has enough parking at the home. Ensure you have enough parking where you wouldn’t cause a nuisance to neighbors. This will help ensure you and your neighbors get along.

Third, try to find an optimal floor plan to prevent more than two rooms sharing a bathroom. Convincing someone to share a bathroom with more than one other person is difficult. It is possible, but just more challenging. Having three people share a bathroom would also cause rents to be lower.

These are all important things to think about if you want to implement this strategy.

Strategy 3: Purchase Single Family Home With Mother-In-Law-Suite

This is a strategy I am looking into for my second house hack. I would prefer a multi-family, but I can also look at properties having a mother-in-law suite. The thought here would be to rent out the Single Family Home and live in the suite. This would be great for markets where many are looking to rent out an entire home and it’s common to have a mother-in-law suite.

Key Takeaways:

  • Focus on the elimination of your largest expense. Housing.
  • House hacking is the single most powerful tool you can use to be able to invest more money. The more money you don’t spend on housing, the more you can invest.
  • There are many ways to eliminate your housing expense. Explore the different options that might work for where you live.

Don’t forget @TheYoungRetireeBy33’s 3 Core Principles:

1 – Your money should make money for you⠀⠀⠀⠀⠀⠀⠀⠀⠀
2 – Start early to realize the power of compound interest⠀⠀⠀⠀⠀⠀⠀⠀⠀
3 – Eliminate your largest expense by house hacking