February 2016 was a pretty standard month for us, but we did have a few surprise expenses. They threw our usual expense numbers out of whack. In 2016 our stated budget goals are: A monthly income from investments of $4k, and monthly expenses under $4k. That monthly figure is $48k per year in dividends. Using our intended ‘3% rule’, that requires a portfolio value of $1.6 million. We’re pretty close to that, so we should be OK.
Expenses for February
Expenses in February were a crazy $7,076. Wow! Did Mr. Tako throw-out frugality and go full-on spendy pants? Maybe!
This month saw us eating out three times, a family trip to the zoo, Comcast raised the price of our internet connection by $5, and I repaired the baby stroller for $0.55. It was a spendy month.
Yes, our expenses significantly exceeded our budget of $4k per month. No worries mate! It’s all going according to plan…
This was an unusual month because we stomached the cost of airfare to fly our extended family to Hawaii. This is a temporary expense. The costs amounted to $3,540 that will be reimbursed to us sometime in March.
We’ll end up paying our portion for things like lodging, food, and rental cars – in March also. I estimate our portion of the Hawaii trip to be around $2,000. We’ll see. There is family involved, so I’m not 100% certain who will be paying for what expenses, or when we’ll get the actual money.
Expect me to provide a full run-down here after our Hawaii trip is complete.
If we subtract out the Hawaii expenses, our actual expenses for February were $3536. Almost exactly what we saw in January. Only $3 dollars less. It’s almost like we planned that. A complete accident, I swear!
Note: I still need to get you guys a better expense report than just this simple summary. I had intended to setup a tool like Mint or Personal Capital, but I haven’t yet had the time. Working on it!
Dividends for February
As you can see, dividends only amounted to $453.73 this month. There were no foreign taxes that needed to be paid either.
Why were dividends so low in February, when they were so high in January? Simply put, it’s just when our stocks pay dividends. January was a great month. February worked out to be a very dry month. March is going to be another $4k+ month.
That’s just how the dividend-income boat floats.
On the very last day of February, we invested approximately $40,000 of our excess cash into a stock. It was a large bank that we’ve owned for many years. This new investment increased the total value of that holding by 33%.
Why buy a bank on the last day of February?
My investment thesis was pretty simple… Values of large U.S. banks have been depressed for the last couple months (due to expected loan defaults in the oil and gas industry). For most banks, this is mainly a temporary problem. It would not permanently kill their business. Wall Street was thinking very short-term when it depressed prices of these banks.
Now, I can’t predict what the price of oil is going to do (only make educated guesses). But, as oil prices began to rise above the sub-$30 range, there were a couple possible outcomes:
- Oil prices rise high enough to minimize risk of large loan defaults. Result: I do pretty good on this investment.
- Oil prices drop back down to sub $30 and defaults happen as expected. Result: Sub par performance for a year or two, but in the long term the company will do OK after the air clears. In the meantime, I still get to collect dividends, and long term ROI should still exceed 7%.
As I watched the price of oil creep up, world leaders began to make noise about limiting output. I decided that the probability of either scenario happening was about 50%. I was happy with BOTH outcomes (see: The Dhandho Investor for more details).
So, we invested, and it’s looking good. “Super Tuesday” (March 1st) happened, and the value of our new investment rocketed forward 5%. Yeah! I’ll take that!
How did your February go? Did you purchase any stocks in February?
[Image Credit: Flickr]