2016 : Year in Review – dividends, savings and portfolio

This makes me value the tax-advantaged accounts that I use like the 401k and the HSA because this tax number would be even higher if I wasn’t maxing those out. It’s really eye opening to see how large taxes are as a chunk of my overall income. The federal tax rate may not be huge in the lower brackets but adding FICA and state taxes to the calculation really makes that number balloon.

The good news is that taxes during my post work years will likely be a good deal lower as I can better control my income, take advantage of 401k and ROTH distributions strategically and benefit from favorable tax rates for long term gains and dividends if staying under certain income levels.

The bad news is that my benefits(healthcare) will likely go up quite a bit since my employer subsidizes that now and that might offset some of that tax savings.

My gross savings rate this year ended up at 28.2%. If you add in employer contributions then that number goes up to 33.2%.

My goal here is to get this number before employer contributions to 33% or above on a consistent basis. I think I’ll be closer to that next year once January and February are included and my higher pay rate is reflected through the entire year.

The ideal situation would be to have this pie split right down the middle but I think I’m still a good deal away from that level as my savings rate this year came in at 38.5% which jumps to 45.3% when I add in employer contributions.

That’s not too bad and shows how important employer contributions are when it comes to your retirement savings since my savings rate shoots up almost 7% thanks to the employer contributions to my 401k and HSA.

Once again this annual savings rate misses out on January and February which are typically solid savings months. I generally bump up my 401k contributions early in the year to get a head start on maxing it out but also to get a big contribution in February once and if my bonus comes in which helps me boost my savings rate and avoid a big tax withholding that month due to the way bonuses are taxed.

Overall, I feel happy with my savings rate this year. I know there’s room for improvement and hope to see this number be higher next year. I plan to see incremental increases to my income next year that should help with this but also hope to add a few extra dollars every month from my writing side hustle. It won’t be big money but every little dollar helps as all of it(aside from taxes) will go into savings!

It’s clear to see where most of my money goes and that’s towards my rent and my car.

I live in an expensive state and choose to live in one of the nicer towns in the area since it affords me a lot of benefits like safety, good access to parks and walking trials and a solid commute.

That means my expenses on that end are a bit higher than I’d like but the reality is that apartment costs in my area; even in questionable areas that aren’t an hour away from work are a good deal north of $1000 so it’s hard to find anything super affordable. Also note that this percentage includes my g/f’s contribution to the rent so I’m not even paying full boat here and it’s still that high!

I’m starting to consider purchasing a home and that may an idea that gains steam in 2017. That doesn’t necessarily mean lower expenses for rent and I’ll also have to buff up my home savings fund(which I’ll track as a separate expense like short term savings) but it would be a big change in my life and is worth mentioning.

My car expenses are also surprisingly high and are a function of extra payments towards my loan to get that paid off faster.

It’s a low interest rate so it doesn’t really hurt me to make the minimum payments but I’d like the advantage of the extra cash flow if I can get it. There’s also mental benefit of knowing you have no debt that I like. I’ve thought about using some of my cash to pay off the loan right now but I’d rather have the safety buffer of cash on the side and would prefer not to dip into my home savings either with a potential house purchase on the way.

I’m still about two years away from the loan being gone but more than a year ahead of the 5 year loan schedule so hopefully I’ll get that paid off by 2018 and gain the extra cash flow by then. The costs also include any routine maintenance as well as car insurance.

It certainly costs more to buy a brand new car even if it’s not a high end model. Subaru Legacy for me – base model.

It’s definitely cheaper to get a lightly used one. That’s something I may consider with my next car. However, I hope this one lasts me for some time so that the next car purchase is way, way in my future. I’m the type of person to drive something until it’s not worth driving anymore. That means I don’t plan to buy a new car anytime soon if I can help it. I do like some of the benefits of new car ownership. The stress free years where the warranty is still in place and the potential for a longer lifespan. I am glad to have chosen a car that has a good resale value as well. That was something I considered when I bought the car brand new.

Gifts/Short term savings are next in line. A large portion of that is savings I had to make for quarterly tax payments. I sold some stock in 2016 and that won’t be a problem in 2017. However, that area might get replaced with savings towards a down payment for a home.

On the gift side, I don’t mind giving gifts to my family and girlfriend. They’re certainly worth spending money. I am lucky enough to be surrounded by people who don’t require super expensive gifts to exist so I’m not breaking the bank here.

A decent amount of money goes to food whether it comes to groceries or restaurants.

I did make an effort to cut out Whole Foods as an expense early in the year. I moved all of my grocery shopping to Trader Joe’s which I found saves me a ton of money.

Whole Foods does have some cool items but their prices on the basic items are far too high and while I’ll still drop in there every once in a while; it’s no longer a weekly visit like it once was.

I find that Trader Joe’s has food that’s almost as high in quality but it is much much cheaper. I’ve also heard good things about what’s happening at Aldi recently and may check that out to see if there’s any potential to reduce my budget there.

I do however like doing all my shopping at one store as it saves me time even if it’s not the most cost efficient way to go about it. I don’t plan to chop down my grocery budget heavily as I feel it’s important to buy high quality food. I’ve mentioned before that I have a specific diet that I try to stick to due to some medical conditions and if health is important to you(and it should be) then you don’t want to skimp on food quality.

I will say that living with a girlfriend is very helpful in splitting costs as beyond helping with rent, she does help with groceries about half the time and that’s really helpful on the savings rate side by limiting those expenses. Any time you can split costs with someone, it’s probably worth doing.

I also love good food so I generally go out about once a week and try a nice restaurant with my girlfriend.

I guess you could say I’m a foodie and I totally believe the money spent there is worth it since some of the most memorable moments in my life are great meals with friends and family I’ve had at restaurants. One of the best experiences in the last year was a meal at Blue Hill at Stone Barns and I’m planning on checking out some of the Michelin star restaurants in NYC whenever I can get out there.

Yes, it’s expensive and yes it’s not worth it to some people but to me; it’s worth every penny. I did find myself going out a bit less and eating in more towards the end of the year but that’s more of a function of winter than anything else as getting outside when it’s below freezing and dark at 5pm is a hassle during those weekends.

The one good thing about my love of food is that I’ve become a bit of a food snob. That means I don’t spend a ton of money on lunch or coffee or anything small. I would rather save my restaurant choices to one high quality meal. We don’t go out too often either as I want it to be a special event. That also allows me more chances to cook and make food at home. I make sure to eat breakfast at home, bring lunch to work and eat dinner at home almost every night. We only go out a few times a month.

There’s not a lot to say on the other expenses. I had some medical tests done this year towards the end of the year that spiked my personal health expenses. I spent a bit more than expected on my pet. There was an emergency vet visit or two. I was also surprised by how much I spend on my internet/phone category. However, there aren’t many options on the internet side here. I spend a ton of time on the net so I want to make sure I get great speeds.

Parking is high because I work in a city and have to pay for parking in a garage. The annoying thing I found out with my first paycheck is that my bi-weekly payment for parking increased about 14% this year. That is quite annoying and makes me wish I could work at home.

Travel expenses were low this year. I only took one vacation although some of the restaurant expenses happened during that trip so it’s a mixed category. This area may be higher in 2017.

Entertainment was low. I generally don’t spend a ton on that area as most of my hobbies are free. There’s things like writing, hiking or gaming. I do spend some money seeing movies and plays and musicals. There’s also other doing fun things with friends like puzzle rooms. However, those expenses are generally relatively low when it comes to my overall spend.

All in all, I’m not surprised with what I see in the year end wrap up of expenses. I do think I spend a bit too much on rent and my car. I am considering a home purchase if it makes sense financially. My high car expenses will mostly be an issue for another year and a half at most. The cash flow I get from removing payments then will help me increase my savings rate going forward.

I do think there’s some chances to limit spending in certain areas. However, I want to make sure that I’m still living the life I enjoy while going through this journey. That is why I’ll likely try to attack improving my savings rate by improving income(raises, side hustles) rather than cutting spending to the bone.

I don’t believe my spending is excessive. However, I do have some relatively expensive tastes. Those include food, groceries, my car and where I choose to live. That’s because I think those things are important. I want to live in a safe location; want to drive a safe comfortable car and want to eat high quality healthy and well-prepared food. That means not skimping on that in order to retire earlier. The point of this journey is to afford me a similar or better life after I choose to stop working. It doesn’t make sense to me to limit myself now in order to enjoy these things later. I want to enjoy them now and enjoy them later even if it means working a bit more.

It was a good year and I’m glad to have all this information to set a baseline for the future.

Portfolio growth was awesome! It was great to see a combination of contribution and market growth drive an 80k+ increase in portfolio size.

Steve my dividend employee got to work. He earned over $7000 in dividends for the year with more to come next year.

My savings rate wasn’t where I wanted it to be. However, it was respectable. I know I can improve upon it going forward. I already have plans for 2017 to do just that. I’ll improve my income by trying my hand at a side hustle(self-publishing). That will hopefully boost my savings rate a bit.

I’m more motivated now in regards to this journey than I ever was. I hope 2016 is just the start of something great for both my portfolio and myself as well. I hope your 2016 was just as good as mine for both your portfolio and personal growth.

Thanks for reading! 2017 goals are up next as well as the first post about my side-hustle. That will set a baseline of what my December earnings. That’ll be before I started writing again that month and publishing again this month.