August 2014 Summary

It’s Labor Day today, a holiday dedicated to the social and economic achievements of American workers. It’s also another day closer to Financial Independence.

The Good

I received $312 in dividend income this month, which makes a year-to-date total of $3,148 or 63% of my target of $4,969. Similar to last month, this is another 6% step towards reaching my goal. You can see the current and projected results visually on my goals page. I beat my projected dividend income of $3,129 for August due to higher dividend income from the mutual funds I hold in my Portfolio.

I’ve made some further adjustments to the projected dividend income values, and I’m currently on track to exceed my target by about $100.

The Bad

There is some bad news this week although it won’t take effect until October. We pay our property taxes out of the mortgage escrow (home insurance is not part of the escrow), and the estimated tax payment for this year was apparently way off when we took out our mortgage. The actual taxes this year were 45% higher than the escrow projection, so we now owe about $1,350 in our escrow account.

So starting in October, we can either pay the shortfall or escrow the shortfall over the year. This means either a $100 or a $200 increase in our monthly mortgage payment respectively. I’ll post the revised budget later this month but it makes no sense to pay the shortfall upfront since it’s essentially an interest free loan if we distribute the payments over the year.

The Score

Living Expenses $ 3,975
Security Ratio 7.85 %
Retirement 0
Savings 15 %
Expenses 57 %
Investments 28 %
Wet Worth $ 21,140
Work Freedom Day 18 Nov

Living Expenses – this is essentially how much I pay myself and it includes budget for everything I spend money on, both essential (e.g. groceries, mortgage, insurance), and non-essential (e.g. music, travel).

Of my $3,975 total budget, I actually spent $3,754.91 so I was $192 in surplus this month overall. It was a pretty normal month all in all, with no major purchases.

Security Ratio – this is the percentage of living expenses that is paid for by dividend income.

The number is actually 7.85%, so a little higher than last month’s 6.96% although it looks the same as last month due to rounding. In February this year it was 5.26%, in May it was 6.13%, so this month is another full percentage point higher, although the increase was helped by a higher monthly budget in May’s number. We’ll see if November can reach about 8%!

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

Nothing to see here this month. I don’t have high savings goals at present, although included in this category is my car payment which is paying 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.

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

I don’t cover my retirement accounts (a 401(k) and Roth IRA) in this blog. They’re 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).

I added $5,500 to my Roth IRA this month from my investing cash reserves; it doesn’t show up in the percentage numbers since the payment didn’t come out of my income bank account.

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

This month’s 57.47% is a little higher than last month’s 57.3%. I paid a little more into savings and the dividend income actually paying into my income account was lower than last month.

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.

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

My wet worth increased $1,237 this month. 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 18th November this month again, although the date may be changing for the worse when I adjust the budget for the mortgage payment, so we’ll see. In the meantime, that’s only 78 days away!

Dividend Income

August is the middle month for dividend income, better than the 1st month of the quarter but not as good as the third month. This month 6 stocks paid dividends: T, AXP, PG, APD, LNT, GIS & RTN 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.

RTN’s yield is lower as the stocks I added recently did not count in the dividend payout this month.

Last month my dividend stock portfolio was valued at $21,141. This month it’s $23,452 – a gain of $2,310 or 11%. I added $1,524 (8%) in new capital and I have a 19% unrealized gain, up 3% from last month’s 16%.

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

I added a total of $2,650 to my fund investments, $1,600 in VHDYX, $200 in VTIAX and $850 in VWEHX.

In total across stocks and funds, my portfolio increased from $139,623 to $146,249; a gain of $6,626 or 4.7%. I added a total of $3,783 in new capital in August, and my unrealized gains increased from $12,117 to $14,960 resulting in final unrealized gains of 11.4%.

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 August.

The change in Wet Worth is caused by

Cash -$7,143 Most of this was due to the $5,500 Roth IRA investment; the rest due to capital investment
Debt +$873 Overall debt reduced by $873 (mortgage + car loan payment)
Savings +$2,428 Monthly savings plus additional money ($1,595) from my Emergency Fund that’s going toward paying my mortgage.
Emergency Fund -$1,547 I’m reducing the size of my Emergency Fund and moving the amounts into Savings. I have about 11 months’ of expenses currently.
Portfolio +$6,626 My overall portfolio grew this month as noted above
Total +$1,237

I was expecting a negative Wet Worth adjustment this month since the Roth IRA addition doesn’t factor into the value, so I essentially ‘lost’ $5,500 from my Wet Worth. But the investment portfolio increase really lifted the number up which was an unexpected surprise!

August 2014 Summary

So overall I think it’s been a great month. I can’t wait forward to September when I receive a much larger dividend payment. I’m not looking forward to a higher monthly budget in October though!


Quote of the Day

Wealth consists not in having great possessions, but in having few wants.

22 thoughts on “August 2014 Summary”

  1. Solid month here, and the portfolio gains were nice enough to overcome your cash losses. I love the concept of ‘Wet Worth’ and utilize something very similar for my own tracking for my wife and I in additional to regular net worth.

    1. Hi W2R,

      Thanks for stopping by!

      Yes I do calculate my net worth too, but because house / car prices are so subjective, I found myself playing with their resale value to avoid showing a drop in net worth. So I find the liquid asset worth more valuable and real.

      Best wishes!

    1. Hey Henry,

      19 dividend payments? Wow, it’ll be nice watching those tick in! I’m expecting 8 or so, but they get a big boost from my mutual funds which pay out in September, it’s like 3 dividend months rolled into one.

      Best wishes!

  2. Hi DL. Love how you call it wet worth. That made me laugh. Also sorry about the tax miscalculation, that sucks. I’ll be in a similar situation from October or November, when my council tax (equivalent of property tax I think?) will revert to full price, due to not being a student anymore.

    1. Hey M,

      Yes I have fun with the name on account of it being so liquid 🙂

      It’s great that you got a discount as a student – did you have to take out a student loan too? They were phasing in as I was graduating out if I remember. That was back in 1993 so a while ago now.

      When I lived in the UK, the council tax was the Poll Tax I think, although I never had to pay it as I lived at my parents house.

      Here in the US, the property tax is determined by each local (city) government. It’s a lot higher here in Michigan compared to Alabama where I lived previously, since there’s no need for e.g. snow removal in AL among other things.

      I’m behind on answering your email too; sorry about that – I’ll have more time to work on it tonight.

      Best wishes,

      1. Hi DL, cheers just replied to your email.

        poll tax, wow that brings back memories. why so many people hated Thatcher who previously may not have had a care about her. it was a flat rate version of council tax, so the poorest got hit hardest. bad idea. thankfully, we are back to a more relevant way of calculating it, based on size of house or value of house. our council tax also pays for things like snow removal, gritting, refuse collection, and the fire service.

        i did take out a student loan, but it is not tied to council tax. you just needed proof of being a student for 15+ hours per week or full-time equivalent.

    1. Hi DGJ,

      Thanks! Yes, I’m confident to reach my goal currently and I’m looking forward to seeing the September dividends get me even closer.

      Thanks for stopping by, I appreciate the support!

      Best wishes,

  3. DL,

    That’s a great looking month. I’m extremely happy when I know I’m collecting hundreds of dollars that are rolling in completely passively. Life doesn’t get much better than knowing you’re getting richer while you’re sleeping. 🙂

    Keep up the great work!

    Best regards.

    1. Hi DM,
      You had a great month too in August from your recent post, so congrats for that!
      Totally agree with you on the working while sleeping part; dividend growth is like a chain-reaction but in slow motion – it’s great watching the numbers tick higher and higher each month 🙂

      Thanks for stopping by – I really appreciate the support!

      Best wishes,

  4. Over $300 in dividends for the month is great. Happy to be a fellow shareholder with you in a coupe names from your list. Look forward to your next update.

    1. Hi Tawcan,

      Thank you, I appreciate the support! I enjoyed reading your August income report and look forward to when my income is at a similar level! $842 is an awesome achievement!

      Best wishes!

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