Net Worth Update – November 2014

I’m settling back into my usual routine now that I’m back after my recent trip to the UK, and it’s time to see if I major another step towards Financial Independence last month in November.

November was the month of low oil prices as a result of OPEC decisions and the stocks of oil companies such as XOM and CVX dropped quite a bit as a result, since they make less profit when oil prices are low. Chevron in particular took a big hit and my position there is currently showing a loss.

My Score for November

Living Expenses $ 3,960
Security Ratio 8.53 %
Expenses 52.5 %
Investments 33.3 %
Savings 14.2 %
Retirement 0
Wet Worth $ 29,998
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. $3,960 is the amount from my last budget; budget v2.0.

I spent a total of $7,327.20 this month; mostly on account of my UK trip. This is $3,347.73 more than my budget amount so this number means that I reduced my cash reserves. $365.80 of the excess was from mandatory expenses – I had some health related expenses for vision, and the remainder was primarily from my UK trip. I’ve been saving for the trip for the last 12 months so I had enough money put aside to pay the expenses.

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

This month’s value of 8.53% is higher than last month’s because of higher income in November – I earned $338 in dividend income this month compared to $295 last month but also had higher income from my paycheck as I reached the social security payment limit.

Living Expenses % – the percentage of net income that’s spent on living expenses. Lower numbers are better here.

This month’s 52.5% is a new record for me and it’s the lowest percentage for a normal month this year. Last month’s value was 56.5%. Since my living expenses are a fixed amount, any change in this number is caused by higher income or a revised budget level, and this month it was higher income since my budget remained constant.

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

After living expenses, I put aside a set amount for savings that came to 14.2% 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 33% of my income, up from 28% last month. This number is at the mercy of my dividend income; my Living Expense budget and Savings amounts are fixed, as is my Income; so higher dividend income means a higher investment percentage and lower Living Expense / Savings percentages.

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 (I have a 401k, Roth IRA and Traditional IRA) 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 $5,722 this month to $29,998. About half 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.

My Work Freedom Day is in the rear-view mirror now, as it was reached on 21-November.

Dividend Income

Income from dividends was $338 this month. This makes a year to date total of $4,460 or 90% of my target of $4,950. This is a 7% step towards reaching my goal and I’m very confident of beating my goal 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 $180.

Dividend income from stocks

November and the other second months of the quarter are generally the middle dividend income months with my portfolio. This month 7 stocks paid dividends: T, AXP, PG, APD, LNT, GIS and VZ 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 $26,753. This month it’s $28,381 – a gain of $1,628 or 6%. However I added $1,200 in new investments and I now have a 20% unrealized gain, up 4% from last month’s 16%.

Dividend income from funds

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

I made some changes to my fund holdings in November – I sold out of VFCIX and added the proceeds to VWEHX. I then converted VWEHX (0.23% ER) to its cheaper version VWEAX (0.13% ER) after reaching the minimum requirements ($50,000) for the fund. This is a tax-free one-way conversion even though my investment had made some capital gains. Going forward I won’t be adding much new money, if any, to the bond funds – they do provide a safety net of monthly income at a reasonable yield.

I added a total of $1,200 to my fund investments, $900 in VHDYX, $200 in VTIAX and $100 in VWEAX. This is in addition to the $1,200 I invested in dividend stocks.

Overall my portfolio of both stocks and funds increased from $152,291 to $155,235; a total gain of $2,943 or 1.9%. I added a total of $2,400 in new capital in September, and my unrealized gains increased from $13,080 to $13,483 resulting in final unrealized gains of 9.51%.

Note: The cost basis of some of my funds has been adjusted higher due to fund conversions mentioned above which changes the capital gains percentages compared to previous months. The conversion tends to lower the overall performance percentages and unrealized gain amounts.

Other investing activity

Nothing much to mention here. I’m still waiting on the proceeds from my newly found Pension to arrive this month. The money will go into my Traditional IRA but won’t show up in my Wet Worth calculations.

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 November.


The change in Wet Worth is caused by

Cash -$4,026 Most of the negative cash flow was caused by paying the credit card charges for the flights to the UK. I had some medical expenses too.
Debt -$5,799 Overall debt decreased because of paying for the UK flights, as well as ongoing payments to the mortgage.
Savings +$885 Monthly savings; some of which is now held in a mutual fund for better tax efficiency. The fund increased about $300 in value from capital growth in addition to the money added to my savings bank account.
Emergency Fund +$121 My Emergency Fund now consists of cash, a stock fund and a short term bond fund. I switched more cash to the stock fund so the $121 increase this month is from capital growth.
Portfolio +$2,943 My overall income portfolio grew this month as noted above.
Total +$5,722  Total change in Wet Worth.

November 2014 Summary

November was a great month, with solid investment performance and a new record for my living expense percentage. My Wet Worth increased again for the six month in a row and that’s always something to celebrate!

In December I’ll be reviewing my budget again in time for the new year and I’m planning a few changes to save some money.

 

Quote of the Day

Happiness is not something you postpone for the future; it is something you design for the present.

0 thoughts on “Net Worth Update – November 2014”

  1. DL,

    Congrats on the great month. As you mentioned on my article, you definitely have a different way of calculating your savings rates. I like the different methods that you use, they are simple and easy to compare on a monthly basis. It seems that your ratios are all moving in the right direction, only supporting the fact you had a great month. Congrats on improving your wet worth while taking a trip of a lifetime to the UK!

    I am excited to read and follow your new worht update on a regular basis now. Keep it up!

    Bert, One of the Dividend Diplomats

    1. Hi Bert,

      Yes I keep my budget constant (unless circumstances change) so any delta between my actual spending and my budget rolls over into the next month so I can save a little each money towards yearly expenses for example. Speaking of which I need to get on with determining my updated budget for 2015 as I’m planning to reduce spending in a couple of categories.

      Keep up the great dividend diplomacy! I love the enthusiasm that Lanny and you both have, as well as the friendly competition between the two of you!

      Best wishes,
      -DL

  2. Nice update, and I hope you enjoyed your trip! I can certainly appreciate your multifaceted approach including both dividend positions and the funds. While I only talk about P2P lending and DG investing on my blog, my wife and I operate a similar approach with assets diversified in funds as well as individual holdings.

    1. Hi W2R,

      Thanks for your support! As much as I like dividend stocks, I do like the diversification I can get from cheap Vanguard funds.

      I’ve looked into P2P lending at Prosper and LendingClub but I think that Michigan doesn’t allow direct investing right now. Hopefully Michigan will change its laws to catch up with the other states allowing P2P.

      Best wishes,
      – DL

  3. You’ve done really well for yourself since last year. Congrats on the positive steps and getting closer to achieve FI. Thanks for sharing and best wishes for the future

    R2R

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