January 2016 Dividend Income And Expenses

Now that our dividend income has stabilized from the big lump-sum we received in 2015, we’ll begin regular updates on our 2016 dividend income.  We aim for a monthly income from investments of $4k.  More income is always better, but I don’t want our portfolio too optimized for short-term income.  That’s a dangerous game that can move you into poor investments.

Ideally we’re looking for a balance between growth and income.  $48k a year is 2.4% of our $2M portfolio.  I think that’s pretty achievable through dividend income alone, and should give plenty of room for growth.  Being able to live off just the dividend income is an important part of our plan:  This has an advantage in declining markets (like this year), we won’t have to sell investments “to eat” when everything is down.  Instead, we can buy at lower prices with higher returns. 


Does Not Compute

You are probably wondering why we have a budget of $48k a year, but last year our regular dividends were only $43,500.  Isn’t that a problem?

I don’t think so.  Based upon my projections we should be just fine.  Here’s why:

  • Cash to Invest.  We still have significant cash from 2015 we need to invest this year.  Once we do that, we’ll be a lot closer to our goal of $48k per year.
  • Long Term Plans.  This is just our first year at FI/ER.  We’re taking things slow and feeling out how it’s going to proceed.  Once we get through the first few years of our FI/ER situation we intend to sell our house in our High Cost of Living (HCOL) area, and will move to a Lower Cost of Living area (LCOL).  Once we do the “sell/move” we then reinvest the difference.  This difference will ensure our long-term success at FI/ER.  This is still a long term plan, but over half our current budget is consumed by the house.  Yikes!  With any luck we can free up close to $800/month.
  • Safety Net.  We still have a safety net in place.  Mrs. Tako has not quit her job (yet), and can contribute what’s needed if we don’t meet our goal.  This affords us a lot of wiggle room while we work out little things like healthcare (yes, that’s sarcasm).


Dividends for January 2016

Our dividend numbers for January 2016 ended up like this:

January 2016 Dividends

As you can see, we’re only looking at the taxable accounts here.  Our plan is to let our tax-free accounts continue to grow and live off of our taxable accounts (for now).

In the table above, you can also see we had to pay foreign taxes for some of those dividends.  This is not an optional adjustment, but a mandatory one.  Fidelity automatically subtracts that amount from our account when the foreign dividend is paid.


Expenses for January 2016

In January 2016 our expenses were $3539.11.  I’m not going to give a line-by-line breakdown of every banana or cell-phone this month…mostly because I’m too lazy to do it by hand!  

Once I get my blogging-act together, I’ll have something like Personal Capital, Mint, or maybe YNAB setup to help track it all.  Automation is a fantastic thing….but that’s coming soon.


Getting there from here

Obviously $4385.35 is higher than our goal of $4k per month.  Our expenses were $3539.11 for the month of January.  This gives us a positive difference of $846.24.  Fantastic right?  Not really…it’s great only on a cash basis.  There are several reasons to be cautious:

  • This is only one month.  Dividend income can be lumpy!  February might not be so good….
  • Depreciation. We didn’t have any house maintenance or car maintenance expenses in January.  Long term I would calculate these to be at least $6k per year in house maintenance (1% of house value) and $2k per year for the car (6% of car value).  If I consider these amounts, our spending needs to be a couple hundred *lower* than it was this month.
  • Healthcare.  We had no health care expenses this month.  That’s definitely an “elephant in the room”.  More on this in upcoming posts.
  • Travel.  With our spending this high we have no room for travel.  That’s no fun!  How are we going to handle travel costs?  More on this in upcoming posts also.

That’s it for January 2016.  I think we did OK at least on a cash basis, so there’s nothing to worry about (right now).  

We still have a few questions to answer, but… Our “long term plan” should free up some additional cash flow for things like maintenance, so I’m not too worried.  We still should keep a close eye on our expenses and try to keep them in check.  No crazy parties in February!  We wouldn’t want to jeopardize our millionaire next door status.


What do you think – am I being overly conservative?

[Image Credit: Flickr]

8 thoughts on “January 2016 Dividend Income And Expenses

  • February 7, 2016 at 5:05 AM

    Solid overview and dividend income Mr. Tako (and fam). Little bit jealous about the $4.4K income to be honest 🙂
    Considering your various plans (very smart move on the relocation portion) we have no doubt you will end up just fine. Good luck with the plans and further growing of your dividends!

  • February 8, 2016 at 3:23 AM

    Thanks Team CF. It certainly took many years to get to this point! As long as we can keep the snowball growing, I don’t foresee any major problems.

  • February 8, 2016 at 10:11 AM

    Wow, that’s a great monthly dividend income. I’m sure it would be even better once you invest those extra cash. Are you looking at certain dividend stocks?

    • February 8, 2016 at 12:44 PM

      Hi Joe. Blood isn’t in the streets yet, but it looks like the Energy and Banking sectors are the ‘hardest hit’ the last few weeks. For the banking sector, the thinking there is that Energy loans will be defaulted on, and the banks will take a hit. That’s just a temporary problem…in fact several of the largest U.S. banks have already started adding to reserves for just this case. We’re looking to add to our existing positing in WFC.

      Production in the Energy sector continues to exceed demand, so the pain could continue for some time. The chemicals and refining sub-sector is still profitable and appears to have continue demand growth. There are probably some good opportunities there. Thinking about adding some PSX and LYB.

  • February 9, 2016 at 6:47 AM

    Hey MR. Tako,

    That is an impressive passive income you have. Kudos to you.

    There are 2 interesting elements that you mention
    1- house costs. They can indeed be very high. In our long long term plan, we also move out of a house with a garden to a smalleer house, maybe in the city that costs less. For now we love living here, the kids like the garden in the summer. But once in my 60_70 it might be just too much
    2- travel…it is indeed expensive. we also have an adapted plan to manage the costs of our travels going forward.

  • February 14, 2016 at 5:29 PM

    Dang! That’s some BIG BUCKS dividends there! Well done. Have you noticed any of your dividend companies cut their dividends? Or are you focused primarily on dividend index funds and stuff? I’ll check out the fund.


    • February 14, 2016 at 5:49 PM

      Nobody in my portfolio has cut dividends this year (yet). Typically I don’t optimize for dividends in the short-term, so no dividend index funds in our portfolio. Some investments, like preferred shares or REITs tend to be a bit dividend heavy. I won’t hold it against them.

  • February 15, 2016 at 9:59 AM

    Wow that’s absolutely amazing dividend income! I wish we will get to that level in the next few years.


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