December has a reputation for being an expensive month, and around our house that definitely holds true. There was budget Christmas gifts to gather, additional travel costs (to visit the Grandparents), and even some New Years celebrations.
That all adds up to a very expensive month … except we didn’t exactly break the bank. Yes, this is the post where I discuss our dividends and expenses for the month of December.
And yes, it’s all real. I copy the numbers straight out of our bank account statements and paste them right into my spreadsheets. None of this is made-up or fudged for the internet.
As really real as Mr. Tako can really make it.
Expenses For December
Expenses for December totaled $5448.19. Like I said earlier, it was an expensive month. But, if you check out the table below you might notice something missing. Can you figure it out?
Missing from table is Christmas gifts, and we didn’t hide them in the “Other” category!
While many parents shower their little princes and princesses with expensive presents, we’re big believers in keeping our holiday spending minimal. We’ve been collecting frugal Christmas gifts since the beginning of 2016. Other than a few stocking stuffers from Daiso (which fell under the Food category), all of our gifts for the kids were either free, purchased from thrift stores, or homemade.
Utility costs were significantly higher in December…mostly because it’s cold.
When the winter months hit, we fire up the furnace to 69F and we use the dryer instead of line-drying clothes. We’ve tried drying clothes indoors during the winter, but it doesn’t work. Our clothes end-up smelling moldy if we don’t use the dryer.
Sorry all you frugal-laundry Natzi’s, there’s just too much humidity and not enough heat in the Pacific Northwest.
The “Other” category in December was actually take-out from a Chinese place. We purchased this as a holiday “thank you” for friends. Yes, we purchased food from a restaurant… Try not to fall out of your chair.
Before you get on my case about spending $64 at a Chinese place, please remember: This fed 7 people. We also live in a very expensive area, with high sales taxes (10%-ish). Eating out is a very expensive proposition. (Even at Chinese places)
Like other months, daycare was our biggest “optional” expense. I consider it optional because we could have the kids stay home with me everyday and save ourselves that two thousand dollars. Unfortunately, I would probably also lose my sanity…which is likely to be worth more than two thousand dollars (in the long run).
Anyone who thinks taking care of two rambunctious young boys is easy, really needs to meet my kids.
Without daycare, our “core” expenses were only $3,313.19 (and does include our mortgage).
Annual Expenses for 2016
I think it’s only fitting that we also review the entire year’s expenses. Here’s the monthly breakdown for 2016:
Total expenses were $54,936.86 for the year, which could be considered high by some standards.
When you think about it, that level of spending closely matches what the U.S Bureau of Labor Statistics says is the average expenditure per consumer unit — $55,978.
I think we did a pretty good keeping our spending under control in 2016. If you subtract out daycare costs ($2135 after September) and our mortgage ($2270), we only spent about $1200 per month. This includes our wonderful vacation to Hawaii (part 1, part 2, and part 3), as well as numerous family road trips.
Dividends For December
OK, now for my favorite part of the post — Dividends! Where the actual dollars come in!
As expected, dividends in our taxable accounts were substantial in December, at $8,288.35.
This went a long ways toward making-up for the pitiful dividends in November. They more than covered our December expenses. It was our biggest month yet (for dividend income). Wahooo!
So how much did we collect for all of 2016? Slightly under what I projected at the beginning of the year — $47,428
I originally predicted we’d collect about $48k in 2016. We fell a little short.
To be clear: I don’t try to optimize my portfolio for the highest dividend yield. On the contrary, I believe that optimizing for high dividend yield can result in lower long-term dividend growth. What I’m attempting to do is match our 3% withdrawal rate with income from dividends. This means no frictional costs from selling stock (or mutual funds) to fund our lifestyle, and very little portfolio turnover. It also reduces sequence of returns risk.
If we pull this off, dividend yields from our assets are supposed to average out to 3% for the year.
Remember: This is only dividends from our taxable portfolio…we aren’t touching our tax-advantage accounts right now. For all you peeps handy with a calculator, that must mean we have at least $1.6m in taxable accounts. More on this in our upcoming “Net Worth” post.
Portfolio Changes in December
In December, we made no portfolio changes. Honestly, who has time to monkey around with a portfolio in December? Family, the holiday’s, and this blog sucked up 95% of my time.
After the election in November, I just kind of “let things ride”. Thankfully, most of our portfolio responded in a positive manner. In 2016 we made some big bets in the chemicals and energy industry; those investments responded positively to the election.
It’s a whole new ball game out there folks, and I’m still learning the rules. Anyone who thinks they know how to win the investing game in 2017 is probably fooling themselves.
Income Vs. Expenses
Things didn’t exactly go according to plan in 2016. Expenses ended higher than I projected, and dividend income ended slightly lower than projected. The net deficit between the two was: -7,508.52.
That’s a tiny portion of our overall net worth, but I still give myself a poor grade for annual planning. I’ll try to improve for 2017.
The difference happened because of two major decisions:
- We couldn’t invest excess cash fast enough in 2016. I don’t believe in putting money to work in bad investments. If I can’t find a good investment with business like returns, I won’t invest. That turned out to be the case for much of 2016. We have roughly 15% of our taxable portfolios sitting in cash right now.
- Daycare costs were higher than projected in 2016. Back at the beginning of the year, I planned to take care of our youngest son full time. Normally childcare centers have waiting lists for new kids, and that was exactly the case for our fancy “language immersion” daycare. In September there was an opening. Mrs. Tako and I talked, and it seemed like the right long-term decision. Despite the short-term economic challenge (daycare costs doubled), we decided to take the open spot.
Could we have avoided these high costs and lower income by making different decisions? Absolutely. But we might have sacrificed long-term success for short-term financial gains to “make” our numbers.
Sometimes the best long-term decisions aren’t ones made for financial reasons. Quite the opposite in fact… Which is exactly why I don’t work a regular 9 to 5 job anymore.
Next Time: We’ll take look at how our net worth grew in 2016!
[Image Credit: Flickr]