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 %|
|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!
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%.
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|
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.