With the S&P 500 down about 20% YTD, its been a rough year for those with money invested in the stock market. Other asset classes have done just as poorly. Inflation has laid a solid roundhouse punch on household budgets this year, leaving many aspiring savers to wonder if financial independence is even still possible.
Keep your chin up folks! It’s still possible, but it’s going to be a little tougher to achieve. This is why I regularly post these monthly dividend and income posts — In the hopes that people can learn from how tightly I track our family expenses, where I spend the money, and finally to see how I map that spending to our dividend income levels.
Generally speaking, the Tako family tries to keep our spending under our dividend income levels. I don’t plan to sell any shares for daily-life expenses in order to preserve capital.
In times like these, the stock market is unlikely to provide positive returns during this current interest rate tightening cycle. It’s time to tighten our belts and cut costs!
Dividend Income In September
Despite markets being down in September, dividend income was excellent at $16,465. This is 10% higher than the September 2021 total, which means our dividend income is keeping up with U.S. inflation. This increase in dividend income occurred primarily due to healthy annual dividend raises from our investments.
In my opinion, having passive income from sources other than capital market trading is one of the major keys to unlocking financial independence. This is income from a business, not from trading shares. It’s an important distinction I think many people forget.
As you can see in the table below, dividend income has been very good this year, despite financial markets being in the crapper:
Obviously dividend income can drop if an economic recession gets bad enough, but our investments have very reasonable payout ratios; I doubt this will happen anytime soon.
Things have to get really really bad before dividend cuts happen.
Expenses in September totaled $3,761. This is roughly inline with our spending last year. (Which means we’ve been able to hold back the forces of inflation to some degree.)
As you may be aware, we recently moved from Washington to Arizona. This move was very costly, despite DIYing most of it ourselves (Although I did hire some help for loading and unloading the moving containers).
The good news is that our expenses have finally “normalized”. These September expenses will be fairly indicative of our expenses going forward in 2022.
Here’s the breakdown of each expense category:
Grocery spending was high in September at $683. I thought we were doing a little better on our grocery spending, but it looks like I still have some work to do. In the past we spent around $500/month on groceries, but it appears inflation is having a big impact in this category.
Our higher grocery spending may also be a symptom of “Super Center Shopping Disease™“. Lately we’ve been shopping at the local Walmart Supercenter (it’s close by), and have a tendency to throw things other than groceries into the shopping cart. It’s a bad habit that masks how much we actually spend on groceries.
So, what did we eat in September? Plenty of simple delicious home cooked meals! We cook 99% of our meals at home. This ginger pork with okra soup we ate in September is a great example of the “simple but good” food I’m talking about.
A lot of what we eat is fueled by the deals I find too. This karaage (Japanese-style fried chicken) was once such ‘deal’ recipe. When I see expensive protein like chicken go on sale, I jump at the opportunity to make delicious stuff like this.
Trying not to waste food is an important way to keep the grocery bills low. Fried rice is one of my favorite ways to clean up leftover odds-and-ends from the refrigerator. You can literally put anything in it and it turns out great!
Eating plenty of vegetable-heavy foods is a good money saver too. Why? Vegetables tend to be much cheaper than protein or prepared foods. A simple salad, like this lemongrass pork salad can be surprisingly cheap!
In general I avoid prepared foods. They tend to be WAY too expensive and unhealthy. But I will make an exception for something quick and easy to heat-up like this edamame. It makes a fast, easy, and healthy addition to any meal.
Don’t get me wrong, sometimes we splurge on fancy stuff. A trip to Costco one day resulted in this wonderful salmon ceviche. Expensive, but delicious!
Generally speaking, I’m not a baker. I don’t bake bread, or cookies, and there’s no particular reason why. Occasionally though, Mrs. Tako will bake bread or whip-up a batch of dinner biscuits. These are “Red Lobster” style biscuits. Simple and cheap.
Then of course there’s my personal recipes. The recipes that I’ve created or modified from others. I make these things a lot. My “garlic-butter yaki-udon” was one such recipe this September. It’s *super* easy to make and delicious too!
Fuel spending on gasoline was $117 in September. This is one expense category where we’ve been doing excellent. Despite driving more miles in Arizona, our fuel spending has remained very stable due to the lower fuel prices in this area. (Gasoline is roughly $1/gallon cheaper here than in Washington.)
Going forward I expect fuel spending to remain around this $120/month range, unless we go on long road trips, or gas prices rise significantly.
We are renters now, and our monthly rent comes to $2212.50, which also includes the required renters insurance. While I don’t enjoy being a renter, this situation is most likely temporary. We’re currently shopping for a house, but it isn’t easy.
Hopefully we can find a house in the next few months and have a big fat ZERO in this expense category going forward. That’s the plan anyway. Keep on reading to find out if we succeed.
Internet expense for the month was $39.99. This is for 200Mbit down and 14 Mbit up service. This is our normal contracted monthly amount, and it should remain that price for the next 9 months.
For the record, this is slightly faster internet, at a slightly cheaper price than what we were paying in Washington. It’s the same company too, the difference is just our zip code. Go figure.
Mobile phone spending in September was $0. Yes, again. I know it’s boring to have a zero here every month, but I really do feel this is a significant point to make: Our mobile phone spending is far lower than your average American family.
We choose to use a pre-paid mobile service, and pay for our mobile phone service only once a year. We last did this in May, and you won’t see mobile phone spending again until next year. (Note: This cheap service does not include a data plan)
When we do need a data plan (such as during a family vacation), we typically use Tello. Pre-paid data plans from Tello are an extremely low cost way to go. Sometimes as low as $5 per month (with 2 gigs of LTE data)!
If you’d like to find a similar low-cost plan — watch the Tello website for promotions. They seem to run new promotions every couple of months. You can then go sign-up using my referral code: p3s4bkgq to receive $10 off. (That’s basically 1-month free just for using my referral-code!
Utility spending in September was decidedly average at $312. This amount included the following bills:
- Electricity (monthly) – $140
- Natural Gas (monthly) – $20
- Water (monthly) – $89
- Trash & Recycling (trimonthly) – $62
To make a generalized statement about our utility bills here in Arizona, they are roughly similar to what we were paying in Washington. Electricity is more expensive, but trash collection is a little cheaper.
Insurance spending in September was $0. We just started a new 6-month auto insurance polity in August. I don’t expect to see any new insurance premiums until January 2023.
Why do we pay our insurance in one large sum? Usually it’s cheaper to pay this way, and we can easily afford the lump sum due to our accident and ticket free driving record. Generally speaking, it’s much cheaper to be a good driver.
For clarity’s sake I’m now breaking out ‘kid’ expenses separately. I though it might be helpful to break-out how much we’re spending on our kids each month. This month includes one ridiculous “activity registration fee” at $51.
Normally I try to avoid paying these ridiculous stupid fees that are a money grab by the school, but I couldn’t avoid it in this case.
‘Other’ spending in September was $343. This category is typically where I put expenses that don’t fit into any of the other categories. September was a busy month in this regard:
- $22 for oil change supplies from Amazon
- $110 from Direct Tools Factory Outlet for a hedge trimmer.
- $50 Airbnb taxes in San Diego (for a small family vacation).
- $35 to order a new car title from Washington state.
- $123 at Home Depot for some oil change supplies, pruning shears, and other yard work necessities.
Cumulative Expenses For 2022
Total yearly spending for the Tako family (so far) is $62,154. In the past, we’ve spent around $4,000 per month. This means our expenses are considerably higher this year vs. last year.
Primarily I believe our higher spending is due to moving expenses and home selling expenses. Our move ended-up being far more expensive than predicted. I’ve said it once, and I’ll say it again: Moving is expensive!
Thankfully this year’s dividend income has kept pace, and we’ve still managed to spend less than our dividend income. Here’s the breakdown of our YTD expenses by month:
As you can see, the process of financially “righting the ship” continued in September. As long as we’re able to keep expenses under $4,000 per month for the remainder of the year, we should be able to maintain the goal of spending less than our dividend income for the year.
Any remaining cash will be reinvested into stocks, ensuring that we keep compounding capital during down markets.
This is the section of the monthly post where I typically wax poetically about being a long-term investor, and then proceed to make no changes to my portfolio.
Except this month I do have some changes to report! Surprise!
In mid-September I took advantage of falling stock prices and picked up 200 shares of one of my favorite small banks — which is an investment of roughly $57,000.
Unfortunately I should have waited a bit longer. These small bank shares have continued to fall over the last month. Oops! My timing was bad.
Who would have thought that small bank stocks would fall so far in 2022? Small banks shares have generally performed much worse than large money-center banks. And that makes no sense. Small banks can have excellent credit quality and make good loans too. I believe the market is making a mistake here. Right now, there are a number of great bargains in small bank stocks if you believe the vast majority of homeowners are going to keep paying their mortgages (which I do).
Only time will tell if I’m right, but I call them like I see ’em!
Thanks for reading everybody!
[Image Credit: Flickr]