Net worth update – October 2014

October was quite the rollercoaster ride with the S&P 500 losing nearly 8% of its value from its high on September 18 to October 16. It then went and promptly regained the losses, ending the month at an all time high. Aside from that drama there was little excitement in my world – so here’s my net worth update and progress towards my goals, October 2014 style!

My Score for October

Living Expenses $ 3,960
Security Ratio 7.45 %
Expenses 56 %
Investments 28 %
Savings 14 %
Retirement 0
Wet Worth $ 24,210
Work Freedom Day 21 Nov

Living Expenses – this is my monthly budget for living expenses and it includes both essential (e.g. groceries, mortgage, insurance), and non-essential (e.g. music, travel) purchases. $3,650 is the amount from my last budget adjustment; budget v2.0.

I actually only spent $3,216.91 so I was $743 in surplus this month. There were no irregular expenses this month so the surplus builds up the available balance I put aside for future payments on insurance etc.

Security Ratio – this is the percentage of living expenses that my dividend income would pay for this month.

This month’s value of 7.45% is lower than last month’s because of the much larger dividend income in September. But compared to July’s ratio of 6.96%, this month shows an improvement in the right direction.

Living Expenses % – the percentage of net income that’s spent on living expenses.

This month’s 56.54% is higher than last month’s 54.29%. Since my living expenses are a fixed amount, any change in this number is either higher income or a revised budget level, and this month it was the lower dividend payments.

June currently holds the lowest value at 53.42% so I’m looking forward to seeing if I can beat that record in December.

Savings % – the percentage of net income spent on savings.

After living expenses, I put aside a set amount for savings that came to 14% of my month’s income – similar to last month. This covers mid and long term goals (any large expense due a year or more in the future). I put about $500 aside for general savings as well as $547 for my car payment. This pays an interest free loan for the next 3 years (1 year down, 3 more to go). I’m usually fighting inflation but with this loan, inflation is working for me.

Investment % – the percentage of net income that I invest.

Any spare money left over after savings, retirement and living expenses are paid goes into my current income portfolio. This month it was around 28% of my income, down from 31% last month.

Retirement % – the percentage of net income spent on retirement.

This would represent any taxable contributions towards my retirement account, but I don’t have any plans to do so at the moment. Originally when I first realized that maxing out my 401(k) wouldn’t cover my retirement, I was putting extra aside in tax-efficient funds in my taxable accounts. But I included them into my dividend portfolio after learning that financial independence was possible.

My pre-tax retirement plans are intentionally boring investments that I leave alone, so nothing to write home about – I follow a Boglehead approach for these accounts. They contain several low expense index mutual funds and I pay a total of 16% of my gross income into my 401(k), thanks to an 8% match from my employer.

Wet Worth $ – my liquid assets minus all debt (excluding retirement and assets).

My wet worth increased $2,542 this month to $24,210. Most of this was due to the stock market increasing – there’s a more detailed breakdown of this amount further below.

Work Freedom Day – the day in the year that I’ll have earned enough dividends to pay for the remaining year’s budget.

I’m estimating my Work Freedom Day to be 21st November this month again, after accounting for budgets and revised dividend income for the year. That’s only 19 days away!

Dividend Income

Income from dividends was $295 this month. This makes a year to date total of $4,122 or 83% of my target of $4,950. This is a 7% step towards reaching my goal and I’m very confident of beating it based on expected income in December.

You can see the current and projected results on my goals page. I’m currently on track to exceed my target by about $220.

Dividend income from stocks

October and the other first months of the quarter are generally the lowest dividend income months. This month 8 stocks paid dividends: DOW, JPM, UNP, KO, ADP, KMB, RTN and CB as shown below.

The yield calculations are annualized, or extended forward a year based on the current dividend payment against the cost basis or market value respectively.

Last month my dividend stock portfolio was valued at $24,546. This month it’s $26,753 – a gain of $2,207 or 9%. However I added $1,520 in new capital and I now have a 16% unrealized gain, down 1% from last month’s 17%.

Dividend income from funds

I also hold several mutual funds in my taxable account that I consider part of my dividend income portfolio.

I added a total of $1,900 to my fund investments, $1,000 in VHDYX, $200 in VTIAX and $70 in VWEHX.

Overall my portfolio increased from $146,608 to $152,291; a gain of $5,683 or 3.8%. I added a total of $3,420 in new capital in September, and my unrealized gains increased from $10,884 to $13,080 resulting in final unrealized gains of 8.5%.

Other investing activity

I did sell out of some positions in my stock portfolio this month. I sold CDK around the middle of the month and bought LMT instead, as I wanted a dividend paying stock instead.

The market order of TAP I mentioned briefly in an earlier post also triggered at a preset level of $74, so I have an extra $152 to invest in November. While TAP pay a dividend, it was on the cusp of 2% yield and I think that money can be better used elsewhere. I bought the stock in March this year, adding to it again in May. The sale locked in a capital gain of $26.78 or 20.29%.

Wet Worth

I’m showing my Wet Worth in this post – this is the cost of my liquid assets minus debt, I exclude assets and retirement accounts from this number. I prefer this over Net Worth since the equity in large assets (house, car) and retirement funds is hard to get at and not always predictable. I find this is a more honest view of where I’m at on my journey.


Here are the numbers for October.


The change in Wet Worth is caused by

Cash -$740 Most of this was due to capital investment as I’m slowly reducing the cash reserves I’ve put aside for investing.
Debt -$3,491 Overall debt increased because of our upcoming trip back to the UK; the tickets were quite expensive ($2,500). This was charged my credit card but I won’t pay the bill until November. Next year I’ll be buying them with credit card miles!
Savings +$829 Monthly savings; some of which is now held in stock funds.
Emergency Fund +$260 I switched some cash to a stock fund which increased the value of my emergency fund.
Portfolio +$5,683 My overall portfolio grew this month as noted above
Total +$2,542

October 2014 Summary

October was a nice increase on the whole, with no unplanned expenses and everything seems to be ticking along nicely.

I’ll be reviewing my budget again this month however as I made some changes to my employee benefits and maxed out my tax-free HSA contributions which may reduce my income a little, but hopefully not enough that I’ll need to change anything.

 

Quote of the Day

You know, people talk about this being an uncertain time. You know, all time is uncertain. I mean, it was uncertain back in in 2007, we just didn’t know it was uncertain. It was uncertain on September 10th, 2001. It was uncertain on October 18th, 1987, you just didn’t know it.

0 thoughts on “Net worth update – October 2014”

  1. Looks pretty good to me. $650+ in dividends and coming in under budget will definitely help you out towards FI. Congrats on almost being through “working” for the year, just 19 days! What was the cause for the big jump in your wet worth in May? That’s a huge swing for one month.

      1. Hi JC,

        Congrats! That’s a great achievement! We’ll both be celebrating this month!

        We’ll be flying back to the UK to my visit my parents on my work freedom day which is a happy coincidence!

        Best wishes,
        -DL

    1. Hi JC,

      Thanks! My wet worth includes my debt (credit card, mortgage) but not any assets (house, car value etc) and at the beginning of the year I had two mortgages. In April / May I sold my old house which significantly reduced my debt and made my wet worth positive.

      So my wet worth of $24K means that if I sold all my investments and raided my savings, I could pay off my remaining mortgage with cash and have $24K left over.

      I had $295 in dividend income this month – I only reach $600+ amounts in the third months of the quarter – another reason to look forward to Christmas!

      Best wishes,
      -DL

  2. Nice month, and of course continuing to increase your wet worth month over month is pretty awesome. My wife and I have a similar metric juxtaposed with our regular net worth, and it is great to see how both change each month, and how far we want/need to go.

    1. Hi Writing2Reality,

      Yes I’m always happy to see it go up, although as more of it is now tied to the stock market it’s getting more volatile. But so far so good!

      Net Worth is nice because it’s a higher number (includes house and retirement accounts) but I get much more out of seeing and knowing if I’m in debt overall as assets can be hard to sell quickly and retirement money may not be readily available.

      Thanks for stopping by and best wishes!
      -DL

    1. Hi DFG,

      Thanks! Yes, having a positive wet worth is almost like not having a mortgage. It’s one of the reasons that I don’t aggressively pay my mortgage down but invest the money instead.

      My trip to the UK coincides with my Work Freedom Day so I’ll have two reasons to celebrate!

      I’m looking forward to reading your October updates.

      Best wishes!
      -DL

  3. Hi Dividend Life

    Greetings from Singapore 🙂

    This is probably the first blog that I saw had started accumulating frkm the negative to becoming positive and rising up pretty fast. AMAZING!!!

    This should be a good inspiration to many others.

    Cheers for you from the other side of the world.

    1. H B,

      Thank you! It’s awesome to hear from so far away! I spent a month or two working in Singapore over 10 years ago and it was a great place to be. I returned to the US a little overweight from visiting too many hawker centers, adding “lah” to the end of every sentence and with a dislike for Durian fruit that my co-workers made me eat! 🙂

      The rapid rise in my wet worth this year was largely from the sale of my first house but now my savings and investments are higher than my remaining mortgage which I’m very happy about.

      I think reaching Financial Independence is very simple but yet very challenging at the same time as it takes patience in a world that’s very impatient: Live below your means.

      Thanks for stopping by and great work on your blog! I don’t know any of your investments but it looks like you’re well on your way to reaching FI – congrats!

      Best wishes lah!
      -DL

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