It’s been said that most of major stock market gains happen on just a few fateful days of the year. Miss those few days and you’ll miss-out on most of the gains in the stock market that year. Hence the common advice to always stay invested in the market.
Well, I happen to believe that real-life operates a bit like this too. Sudden big changes occur in life that happen extremely rapidly, followed by long periods of “sameness”.
That “sameness” can go on for years and years, only to have life flipped upside down by rapid change in a matter of a few days. Followed by long periods of sameness again.
August was one of those “big change” months for the Tako household. We finally changed-up our childcare situation in preparation for Tako Jr. starting school this fall, and the impact on our expenses was significant!
Dividends In August
First off, let me state that I’m changing how I write this monthly financial update post. Instead of writing about dividends near the end of the post, I’ve decided to shuffle things around so the dividends happen at the start!
(I think this might flow a little better, but let me know if you prefer the old format.)
For the month of August, our dividends totaled $539. This is a rather small monthly sum, but please remember that most of our dividend payments happen in March, June, September, and December.
Monthly dividend fluctuations like this are perfectly normal, and we make no attempt to “smooth out” these dividend amounts. Our focus is on holding the best investments that we can, so dividend income will always be a little lumpy.
For the year (so far), we’ve received $27,173 in dividends. This is roughly on pace to reach our dividend income goal of $53k.
While July was a big month of traveling for the Tako family, August turned out to be a quiet month at home. As you would expect, our monthly spending was low … really low actually! It was our cheapest month of the year, at $4005. Core expenses (not including mortgage and childcare) were a mere $559 for the month.
So exactly what did we do during this quiet August? Well, we tended the economic garden, spent a lot of time with the kids outside at our local parks, and just enjoyed the fruits of summer… (mostly zucchini).
Food costs were $329 in August. Just like last month, our food expenses were significantly lower than average due to food production coming from our economic garden. We still had a TON of zucchini to eat!
Even after putting zucchini into nearly every single meal in July, we still gave away a large amount of it to friends and family. Don’t fret though — I still incorporated it into our meals as often as possible.
Our local supermarket had a great sale on pork loin in August, so I decided to try my hand at making a classic Japanese dish called tonkatsu. Basically, it’s like a breaded and fried pork chop. It’s very popular in Japan, and when we visited Japan last year I must have eaten tonkatsu a dozen times.
Even though I’ve eaten it many times, I’ve never actually tried cooking it. So, I gave it my best attempt and the results were pretty good.
I’ll definitely need more practice to get that perfectly crispy exterior and ultra juicy interior I’ve come to associate with “restaurant quality” tonkatsu.
Mrs. Tako also made-up one of her Japanese favorites in August called okonomiyaki. This is another classic Japanese dish which originated in the Kansai region of Japan.
Okonomiyaki may look something like a pancake, but it is most definitely NOT a pancake. For one, it’s a savory dish. (And yes, I believe there was zucchini in it.)
Fuel costs in August amounted to $179, which kept gas in our two cars. This monthly fuel amount is considerably higher than previous months, but we didn’t do any different driving. I attribute the change mostly to higher gas prices and the timing of fill-ups.
Other than one short weekend road-trip, our driving level was pretty much the same as always.
Internet expenses in August amounted to $0 … exactly like it was in June and July. Rest assured we still have very speedy internet service despite a non-existent bill.
How does this happen?
We prepaid our internet expenses back in May to reach a credit card sign-up rewards. Usually our monthly internet bill is $49.95, but we prepaid $500 toward the account.
I don’t expect to see a real internet bill for a long time.
Mortgage And Childcare
Mortgage and childcare expenses are usually our biggest bills in any given month, and August was no exception. Our mortgage remained at $2,180, but the childcare situation changed dramatically.
First off, we completely pulled Tako Jr. #1 out of his language immersion daycare program. He stayed home with me all month and we had a ton of fun hanging out together. This was sort of a last blast of 1 on 1 father-son time before he starts kindergarten.
This alone would have saved us around $1000 a month, but we decided to move Tako Jr. #2 to attend full-time. (They were part-time before) The result was a monthly savings of around $900, and a total childcare bill of $1265.
Oh, and Tako Jr. #1 starts kindergarten this Monday! This is going to be a HUGE life change for both of us!
Not only does this mean I’ll have a lot more free time to do stuff during the day, but the impact on our monthly finances is going to be like a breath of fresh air.
Finally! I don’t regret putting both kids into the language immersion program, but the additional financial freedom we’ll have with an extra $900 is BIG.
Our total utility bill total for August was…. [drum roll please] Zero dollars! Yep, we had no utility bills to pay in August. Either we paid our bi-monthly utility bills in July or the amounts were prepaid earlier in the year to get those sweet credit card sign-up points.
Other expenses in August amounted to $50. This amount includes one small expense ($8) from our July camping trip (which oddly wasn’t charged until August), a trip to Home Depot ($12) for home repair parts, and a few school supplies ordered from Amazon ($20).
Our big “consumer purchase” for the month was a set of Uni Posca paint pens ($9) we ordered from Amazon. Yes, I said paint pens.
Why do we need these fancy paint pens? To paint rocks of course!
Usually I raise an eyebrow about frivolous spending, but Mrs. Tako and the kids had a really fun time painting all kinds of rocks around the house. I was pretty impressed by the results too.
Not too shabby. I can handle $9 of frivolous spending in a month.
Cumulative Expenses For 2018
For the year so far, the Tako family’s expenses have reached $46,215. This is around $700 less than we spent by this time last year, so I feel pretty confident about our 2018 spending level.
With Tako Jr. attending kindergarten very soon, our expenses should remain low for the rest of the year.
Before you make fun of my large expenses, please remember that we live in a very expensive part of the Pacific Northwest. We do our best to be frugal, but it’s definitely not cheap here!
In keeping with my tradition investment updates, August contained no changes to our portfolio. Yep, nothing changed!
Although I continued searching for new investing ideas in August, nothing really “struck a chord” enough that I wanted to plunk down a pile of cash.
I actually came pretty close to buying a little more LYB, but share prices remained stubbornly high. It didn’t happen. Unfortunately this means our portfolio remains at roughly 20% in cash. Yes, this is considerably more cash than I prefer to keep around, but Mr. Market isn’t providing me “business-like” deals that make a lot of sense right now.
So cash it is.
Everywhere I turn I see speculation and extreme optimism about the future when investors are buying into stocks at these levels. This makes no sense to me. Investors seem to be willing to pay 25 times earnings just to own the S&P 500. That feels like unbridled optimism!
Is the future really going to be much more awesome than today?
If we compare to a time period in American history that had low interest rates similar to today (the 1950’s), PE levels were in the 10 to 15 range. That’s a lot lower than where we are in 2018, but we can’t just look at PE’s and interest rates alone… we have to also consider growth.
When you’re paying a PE of 25 you’re mostly paying for future returns, not current returns. Growth is hugely important at these levels. So how much growth can we look forward to?
It’s a difficult question to answer (because I can’t predict the future), but historically GDP growth rates averaged 4.36% through the 1950’s. Those growth numbers are nearly double this decades GDP growth numbers (between 1% and 2.89%).
And yet, PE levels were half as high in the 1950’s. I find these facts concerning, and it’s one of the reasons why you won’t find me overpaying for growth right now.
This doesn’t mean I recommend everyone else keep 20% in cash, but it’s the situation I find myself in today.
[Image Credit: Flickr]