January 2019 Income Fund Update

June 2018 income fund update report graphic

My first update for 2019! Here’s my January 2019 Income Fund update, following on from last month’s (and last year’s) December update. Click on for the details…

Dividend Income

Total income from my Income Fund this month was $58, a 55% increase to the $37 that I received in January 2018.

The following chart shows the cumulative dividend income this year compared to previous years. I’ve removed 2013/14 from the chart to save some space.

So it’s hard to see because of the scale, but there’s a tiny red bar about one pixel high for January 2019. Dividends in 2015-2017 were higher because the Income Fund contains bond funds which paid monthly dividends.

Income breakdown

The chart below shows a breakdown of the income this month.

The largest contribution came from dividend stocks funds paying $54.

Interest from the Income Fund cash reserves made up the remaining $4. I keep a little cash in the portfolio to smooth out withdrawals.

Dividend income from stocks

Five stocks paid dividends this month for a total of $54 as detailed below.

Last January my individual stocks paid $34 from four stocks so income increased 58% year on year.  The main difference is that RTN paid dividends in February 2018 whereas this year they paid out in January. Otherwise, not much has changed since then although I bought 5 KMB shares in June 2018.

Dividends increased by a simple average of over 12% all on their own. JPM and ADP had the biggest increases with 28% and 20% respectively. WMT had the lowest increase with a 2% increase.

Income from funds

No US stock funds paid dividends this month. They pay quarterly so won’t show up until March.

Asset Allocation

My Income Fund asset allocation is shown in the chart below.

I hold 100% stocks in the Income Fund Portfolio which is held entirely in Taxable accounts. Cash is virtually zero as I just keep the minimum amount to manage cash-flow.

Detailed Allocation

The following table shows the details.

Individual stocks are a little over my target as usual. International and US stock funds are a little under. Not enough to worry about however.

Purchases & Sales

I added $12,801 of new money to my Income Fund in January.

Fund purchases

Total purchases this month were $400 in in VTSAX, $1,966 in VTIAX and $10,731 in VTMSX.  $295 of the purchases came from cash inside the portfolio.

I decided to boost my Income Fund a little more to help meet my income targets this year by transferring $10,131 of VTMSX from my Savings accounts into my Income Fund. I also purchased an additional $600 later in the month. VTMSX is a “tax-managed” small-cap US Stock fund which basically means it tries to be more tax-efficient by selecting small-cap stocks with lower dividend yield which pay qualified dividends. 

Funds sold

None.

Stock purchases

None.

Stock Sales

None.

Distributions

I transferred $875 from Fund Cash into my Living Expense account. This is an automatic payment and represents about 21% of my Living Expenses that my Fund pays every month.

Money is fungible, so a dollar in one account is no different than a dollar in another account (although an argument can be made that tax-deferred money is different). The withdrawal from the income fund simply allows me to invest more of my salary than I otherwise would be able to.

Withdrawing money gives me experience in managing cash-flow from the Income Fund because one day I won’t have a salary. There’s no additional tax impact since the money is already in a taxable account.

Fund Cash

Fund Cash is now at $2,077 and held in the VMFXX money market account which is where all dividend distributions are paid into. $1,807 of this amount is reserved for two distributions of $875 to cover the next two months of the quarter. The remaining $270 is spare and not yet invested.

Portfolio Performance

My Income Fund increased in value from $428,069 to $468,018 this month. This increase of $39,949 includes $12,801 of new capital, however, and so the overall  capital gain was $27,147.

In terms of market value, the portfolio has exceeded November’s high and is about $3,000 short of the record high market value from September 2018.

Retirement Accounts

Although most of the financial information I describe is about my Income Fund, I should point out that I consider this one piece of the bigger picture. Ideally I’d like to reach Financial Independence based solely on my taxable accounts which is 100% stocks, but I still have Retirement accounts in case I can’t. I am maxing out my 401(k) contributions to reach the full $19,000 contribution for 2019.

Financial Independence

Here’s a chart of my living expenses as a percentage of income. As income from my investments increases, the living expense percentage decreases. However other factors such as changes in net salary or salary deductions affect the results too.

My net income in January 2019 was higher than in 2018 due to higher net salary. So the percentage of my living expenses to net income decreased to 56% from last January’s 60%.

Outlook

Reducing my Savings balance by transferring VTMSX is part of my tilt towards cash-flow than large savings balances I mentioned in the new changes that I’m making. Originally I was using this for really-long-term-saving targets but I decided that I didn’t have any. And so I’d rather account for these assets as part of my Income Fund instead.

I’m keeping the $875 monthly withdrawal until the first quarter dividends have all been paid in March. In April I’ll recalculate the new withdrawal rate based on the first quarter dividends.

My net income this month was artificially higher than usual because I forgot to reset the 401(k) contribution amount that I make. I usually start the year with a 14% contribution and reduce that to 13% towards the end of the year to reach the maximum contribution limit. However in January I forgot to reset it back to 14% so less money was withheld from my paycheck this month.

Next month I’ll hopefully receive an annual bonus from my job. This amount is variable and not something I plan on receiving.

Summary

January was a good month after December’s drop. The dividend increase over last year hopefully points to a solid increase for the year as a whole.

How was your latest month? Are you one step closer to Financial Independence?

Quote of the Day

Choose not to be harmed — and you won’t feel harmed. Don’t feel harmed — and you haven’t been.

2 thoughts on “January 2019 Income Fund Update”

  1. Hi Dividend Life!

    Nice new money invested in January!

    Unfortunately, I do not have access to Vanguard funds living here in Europe. I use to have some Blackrock ETF’s that now are untradeable for new buys, which will make me close the position on them soon.

    Talking about your quote of the day, I have heard good recommendations about the book Meditations, from Marcus Aurelius. Have you read it?

    All the best.

    Cheers!

    1. Hi Odysseus,
      Yes it was a nice boost – I just wish I could add that much every month!

      Hopefully you’re still able to find some low cost index funds / ETFs in place of Vanguard’s – there do seem to be more lower cost alternatives around of late.

      I’ve not read Meditations but I’ll certainly add it to my list, so thanks for the suggestion. I’ve been reading the Daily Stoic lately.
      Best wishes,
      -DL

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