October was a scary month, and I’m not just talking about Halloween. It was a month of big changes for our family…and change is often expensive.
Sometimes very expensive, and this month was no exception to that rule.
Expenses For October
Expenses for October clocked-in frighteningly high, at $6,796.61. This is over two thousand dollars higher than our monthly average!
“Aaaarrrgh!” is the word that comes to mind when I look at October. So where did we go wrong?
The answer to this question is easier to explain after showing you the monthly expense break-out:
The main culprits this month were Childcare, Insurance, and Other. The remaining categories, Food, Fuel, Mortgage, Utilities & Internet were largely the same as previous months.
The big expense in the Insurance category was our annual car insurance renewal. Yes, we pay 12 months of car insurance (for two cars) in one big lump sum.
This reduces the overall annual cost by roughly 10%. Unfortunately we suffered a 20% premium increase due to Mrs. Tako’s car accident.
The Other category clocked in higher because of several purchases —
First, we purchased a shikibuton mattress (and mattress cover) for Tako Jr. #2. He is officially moved out of his crib!
We like this Japanese style fold-up mattress (called a shikibuton) for the kids. They’re cheap, comfortable, easy to clean, and easy to move. Amazon has a variety of different options, but we like the 4″ thick version.
Second, with winter fast approaching, I needed to finish our outdoor landscaping project before rain made it impossible. While the manual labor didn’t cost anything, I needed to purchase soil, landscaping bricks, and gravel to complete the project.
Here’s a few before and after photos…
Our front yard as a gigantic pile of dirt, rocks, tree roots and holes large enough to swallow children whole.
We now have a perfectly level front yard with landscaping rocks and drain rock preventing mud splashing up on the house. We’ll install plants next spring when the weather improves.
The big elephant in the room with this month’s expenses is the Childcare category. Lots of people have been asking questions about our childcare situation, and wondering why we don’t just keep the kids home with us. It would save us a HUGE amount of money and put us back to living within our dividend income.
Well, Mr. Internet, you are completely right…but life is sometimes about more than optimizing for current cash flow. Sometimes we need to invest for the future.
This month’s childcare expense was $1,000 higher because we started sending our youngest son (Tako Jr. #2) to the same language immersive daycare as his older brother.
What’s a language immersive daycare you ask? This is a daycare conducted entirely in a foreign language. There is absolutely no English spoken for the entire day. By its very nature, this forces the children to become rapidly fluent in a second language at exactly the right time — when their little brains are most adaptable.
For our oldest son, it took 3 months before he developed a comfortable level of second language proficiency. After 8 months, his second language ability exceeds mine, and he’s now working on fluency.
During the past year, Tako Jr. #2 stayed-home with me, and it worked out well. Learning a second language wasn’t a big deal because he didn’t speak at that point. He mostly filled diapers.
But, when a spot opened up for him at the same daycare, Mrs. Tako wanted to take it. She and I had some long serious talks about this situation. Another kid in daycare is a significant expense that falls well outside of our established budget and dividend income. Could we even afford it? Would this put our FIRE plans in jeopardy?
I was perfectly happy keeping him at-home with me, but Mrs. Tako felt he needed:
1. The same second-language immersive opportunity as his brother.
2. More socialization with other young children.
Ultimately the two of us worked out a compromise: Tako Jr. #2 would attend the language immersive daycare 3 days a week, and I would continue to watch him the other 2 days.
This means paying a lower rate than a full-time child, but also requires Mrs. Tako to keep working longer than we planned to pay for this added expense. So far, she seems perfectly happy to do this, and she’s pleased that both boys get the opportunity.
For now, we’re going to forgo our plans for things like traveling, and just let the boys learn.
Dividends For October
Dividends for October were a reasonable $4,168.85. Not our best month ever, but not too shabby either. This roughly matches our average monthly expenditures.
Obviously with the large increase in daycare expenses, we won’t be able to live entirely within our dividend income. Life changes, and so do our goals.
The goal of living off dividend income for 2016 is officially dead. No, not just dead….taken out back to the woodshed and a bullet put through its head.
So how is dividend income looking for the entire year?
We’re a few thousand behind what I planned back in January. Investing our excess cash proved to be more difficult than expected in 2016.
My projections for the entire year suggest we’ll hit $48k in dividend income for 2016. Expenses are expected to come in around $55k (inclusive of daycare costs). That’s a $7,000 deficit. Yikes!
October Portfolio Changes
In October, there were no portfolio changes. We neither bought nor sold any investments, mainly because I didn’t like the valuations.
With the S&P 500 having an earnings yield of only 4%, and economic growth rates being really low, I’m not going to be randomly throwing cash into the general market.
However, we did have one notable thing happen in October: One of our largest holdings decided to jump 40% in a single day. I wrote about it in our September Dividend And Expenses post, but it actually happened in early October.
This caused a significant boost to our net worth.
I’ll take it, but it also means I need to find even more smart places to invest our cash…
[Image Credit: Flickr]