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This December 2021 budget review is part of a monthly series of posts in which I share our family’s real budget and real spending so that you can follow our journey toward reaching our financial goals. I find these budget reviews to be a useful time of reflecting on our past month. They are also a source of motivation to keep working toward our financial goals.
As I’ve introduced in past posts, we are a multicultural family living in South Korea. My husband is Korean, earns in Korean won, and is in the process of switching careers to get into real estate. I’m American, and I run a private test prep tutoring business online back in the US. My income is in US dollars. I focus primarily on the LSAT (to get into law school), but also do some work with SAT/ACT students. This time of the year is typically a bit slow for my tutoring business, although I do sometimes find students who want to cram during the holidays.
December as a whole was a month with unusually high spending. Not only Christmas but also a short trip to visit my husband’s hometown, as well as some over-budget categories and some unexpected medical expenses.
Christmas and the trip were both fully funded by money we had set aside in sinking funds.
The medical expenses were higher than what we had in our medical fund, so we ended up having to redirect some of our budget that way. We have extra health insurance, though, so we’ll be able to be reimbursed for a large chunk of it eventually.
Nevertheless, we still ended up with a bit of a cushion in our budget. Because December marks the end of Q4, I paid myself a small bonus from the money I have been setting aside as profit from my business. Great timing, since without that bonus, we wouldn’t have been able to reach our financial goals for the month.
Here’s the complete story.
As I’ve explained in previous posts, I use the Profit First system for my business. Twice a month, I divide up all the revenue received during that period. It goes into separate accounts set aside for Owner’s Comp, Taxes, Profit, Operating Expenses, and Professional Development.
December can be a bit of a hit-or-miss month for my tutoring business. It’s traditionally pretty quiet, unless I make an effort to find students who want prep extra during the time they have off from school. My previous few Decembers ranged from $2500 to $5600 in revenue, so I didn’t really expect too much more than that.
My target was a doable $5000 for the month, but I actually ended up with $9633! Even more than last month, which was also a record-breaker.
- Business Revenue: $9633
- Profit: $96
- Owner’s Comp: $6262 (of which a much smaller portion was paid out as my salary – although I have enough of a buffer and enough confidence that I’m now comfortable giving myself a pay raise for 2022)
- Taxes: $1445 set aside for federal income taxes
- Operating Expenses: $867
- Professional Development: $963 (still building this up so that I can invest more heavily in business growth during 2022)
It’s worth noting that even when our household expenses get a little out of hand, I try to stick to the salary I’ve deemed appropriate for what my business can handle. I was tempted to give myself my pay raise early, and I honestly could have, but I personally think that runs the risk of leading to lifestyle inflation.
I’m fine with reassessing my salary periodically and adjusting based on the health of my business so that we can meet our financial goals faster, but I want to make sure any increases in my salary would primarily be used to hit our goals harder, rather than to make up for blowing our grocery budget, for example.
As I have done previously, I’ve blocked out below our individual incomes for privacy reasons. And as with previous months, this month included a $300 child tax credit from the US (which we may actually need to pay back – I’ve read conflicting information about Americans living abroad). We also received a 250,000 won (about $213) benefit from the Korean government for our toddler.
I pay myself a quarterly bonus out of the money I set aside into my “profit” account for my business. I expected the amount to be around $400, and with the large month I had, the bonus ended up nearly $418. Maybe not as impressive as some other people’s bonuses, but still a nice little cushion for our budget.
We also received a $75 gift, which I’m including as income because, well, we kind of needed it with the way this month turned out.
Major Financial Goals
I keep our major financial goals at the top of my budget spreadsheet because I believe in committing ahead of time to the minimum amount I want to save toward these goals. As the month progresses, we then revisit those amounts and make adjustments. The goal is usually to devote every extra penny here.
This month, thanks to our additional income, we were able to exceed our goals in these saving categories. However, our mini-vacation still did end up using up a bit more of the money we contributed to our vacation fund.
- Retirement savings: $700 into my Solo 401k
- Emergency fund: We aren’t actively adding to our emergency fund at the moment, except to add the interest generated in our High-Yield Savings Account. This month, that was $2.78.
- New apartment deposit: $400 into saving for a deposit on our next apartment
- New car: $150 into saving for a car
- Vacations/flights: $300 into saving for vacations. We spent $350, so our total vacation sinking fund decreased by $50.
I’m grateful that we had the vacation sinking fund, since that meant we didn’t have to cash flow our entire trip this month. Our vacation fund is mostly targeting a trip to visit family in the US in 2022, but since we aren’t exactly sure when that trip will be, we’re generally content to just save a little bit each month toward that goal and to dip into the fund as needed for smaller trips within Korea.
Debt Pay Off
This month was our last payment on the air conditioner unit we bought last summer. We had 0% interest, so we were in no rush to pay off the debt, but it’s still nice not to have it. We’ll be able to redirect that money toward other things (i.e. childcare) in the future.
- Air conditioner: $213
Our budget for our normal expenses was really tough to stick to this month, and we ended up going over in quite a few categories.
Some notable points:
- Gas for our apartment: Our gas bill usually comes on the last day of the month, but this month it didn’t come until a few days into January. It always bugs me that I can’t anticipate how to close out our budget until we get that bill, so I’m using this as an opportunity to just shift the gas bill over to the next month. So even if it arrives on the last day of the month, we’ll pay it with the next month’s budget.
- Phones: My husband had just switched over to a super cheap phone plan. I mistakenly though his bill would be about the same as mine is (6,500 won = less than $6), but it ended up being about double that. Still a good deal to spend $18 for phone plans for both of us!
- Groceries: Yeah, we went over here. Part of that came from a shopping trip late in the year when we made use of a car rental to actually shop in person. That led to some impulse buys…
- Coffee: Our trip out of town led to our increase here. It’s a reminder to me of how much we are saving by having an espresso machine in our home and making our own coffee. As a native Seattle-ite, that’s important to me!
- Babysitter: While still very reasonable by US standards, our babysitter expense was larger than expected this month. My husband is experiencing back pain and a hurt disc in his neck, so we ended up increasing the number of days we had our son’s babysitter come each week. The last thing we want to do is for the injury to get worse.
- Miscellaneous: This was far more than expected because of some training that my husband had to do for his career change into real estate. We knew he had a training coming up, but didn’t realize it would be this expensive.
We use sinking funds for expenses that are more discretionary and that vary from month to month. Notable items:
- Christmas/gifts: We were under budget on our Christmas spending, so instead of contributing the full $200 I had intended us to put in, we ended up only contributing about $58 to bring our Christmas fund to $0 for the year. That starts 2022 with a fresh Christmas sinking fund. (We’ll actually be splitting it into two sinking funds – one for Christmas and one for gifts/holidays.)
- Healthcare Expenses: My husband’s back and neck pain ended up increasing our expenses unexpectedly in this category. We have private insurance that will reimburse for a lot of these expenses, but what I learned here is that we should have a bigger cushion in this sinking fund. Because we anticipate these higher medical expenses to continue in January, we directed any extra money in our budget into this sinking fund to make sure it didn’t go negative.
Even though this month had some over-budget categories and some extra expenses, we were still able to reach all of our goals for the month. This month is a testament to the power of using sinking funds to set money aside for specific purposes ahead of time.
To check in on the goals I set for December:
- Continue saving $700 for retirement, $150 for a car, and $300 for the apartment deposit. – DONE!
- Use only the funds in our Christmas sinking fund for gifts, decorations, and Christmas experiences – DONE! We actually were under budget, so we didn’t need to add nearly as much as anticipated into this sinking fund this month.
- Use our vacation fund to take a two day trip to my husband’s hometown, but replenish as much as possible in that fund through any extra money in our budget – DONE! We replenished $300 out of the $350 spent on the trip.
- Business: $6500 in revenue – EXCESSIVELY DONE! I’m proud of myself here.
Money Goals for January 2022
Since my husband will be making his career change official in the next couple of months, we’ll soon have big changes in our budget. We’ll have a bigger childcare expense, and we’re also planning to buy a car soon. With that comes a host of new line items in our budget. I’m planning to give myself a raise from my business, but we don’t know yet what my husband’s new salary will be. Nevertheless, we’re setting bigger goals for this new year.
Our main goals for January include:
- Save $1000 for retirement and $600 for a car (prioritizing the car over the apartment deposit since it’s more immediate)
- Stay under budget in groceries, eating out, and coffee
- Create more cushions in the budget to account for unknowns regarding my husband’s job search and our car purchase
- Business: $5000 in revenue (traditionally my lowest income month of the year)
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