Dividend and Expense Review – April 2020 – Stimulus Check

April was my first full month of quarantine. It was also the month I got that nice stimulus check. I was surprised when it came so quickly. I heard people were having trouble getting it. However, my stimulus payment showed up right on tax day without a hitch.

It’s always nice to get extra money. For me, that stimulus check like most of my extra money went right into savings. After all, expenses weren’t really killing me this month.

Our state started to locked down around the middle of March and my job followed suit right after.

Suddenly, I was at home almost all the time and really couldn’t do much outside. Sure, we still could go for a walk or get groceries but that was about it. After all, everything else was pretty much closed.

Part of that change was reflected in March. However, the early part of that month still had some weird expenses. That meant it didn’t really reflect a full month of low stay indoors all the time expenses. There was a root canal and I had to change my battery. Plus, we were still out and about for a good portion of that month too.

That all changed in April. April was the first month of a full on lock down. My wife still had to go to work but my hermit life was in full swing. I started to grow a terrible quarantine beard, hung out at home all the time and found that my quarantine saving was in full swing. It was nice to see that stimulus check but it sucked that we couldn’t actually spend it and stimulate the economy.

After all, April is the start of spring. Most years, we’d be out there taking some nice weekend trips to the shore and enjoying some fancy brunches at our favorite restaurants.

This year, we sat at home, wore masks the few times we headed out to places where we we had to be close to others and washed our hands way too often. It was a weird month for sure!

I’m already a saver and we don’t spend too much but this month took it to the next level. After all, if we’re not heading out then what are we spending money on? Most of our variable expenses come from experience type things like restaurants. That was all gone now since everything was closed.

Sure, we got some take-out pizza here and there. However, our weekly fancy meals and day trips were suddenly gone. On top of that, since I was working at home, my car expenses dropped too. Plus, given the uncertainty around the length of this situation, I cancelled my work parking mid month as well.

I guess I could have taken that stimulus check and spent it on something random but we don’t really need anything.

The stimulus check went straight into savings and probably led to a decent savings rate! I’m very lucky to be employed and able to actually save money in this climate. It’s not something to take for granted.

However, I’m also aware that I’ll potentially have to pay back my stimulus check. We haven’t filed for 2019 yet and our income in 2019 was a good deal higher. That’s because I sold a lot of my company stock holdings in 2019. Those long term capital gains really bumped my income up and while I would still qualify for a stimulus payment with my 2019 filing, it’d probably be a bit smaller.

I guess we’ll see what happens next year when I file my 2020 taxes but for now I’m not worried about it. I already sold some stock in 2020 and am paying a bit extra in taxes just to get ahead of that bill so hopefully that will cover this as well.

On the dividend side, things seemed OK as well. Sure, there were some cuts here and there but none had a major impact on my holdings. There were even some unexpected ones like Disney and a variety of others. I’m sure my S&P 500 holdings will be impacted but we won’t see that until June when most of my ETFs and mutual funds pay out.

I did sell a few stocks which impacted my March dividends and will likely impact my April dividends but I’ve been re-allocating that money quickly. I also sold a few bonds to buy stocks and get back to my target allocation. Since those pay monthly, that will likely be a negative here too.

My cash holdings and their yields became a negative as well.

Sure, it was great to hold cash during all these great deals. However, the yields received from that cash suddenly went from 1.7% to 0% which was kind of a bummer. All of that likely means mediocre dividend results. Sure, that’ll likely turn around soon as that new money gets to work but this month might be a bit slow.

The good thing is that most of it just due to lower yields and a few sales. It’s not permanent loss of capital and I hope to catch up with better results toward the latter part of the year as the money I re-allocated starts working for me.

Historically, April is a slower month as it’s dependent on bonds, money market yields and my few monthly payers. I have been putting more money into my M1 Finance account which holds a lot of individual stocks and while that’ll help, it’ll likely be offset money market yields being wiped out and my bond sales. However, in the long run, it should help grow these months that don’t have a lot of ETF or mutual fund payouts.

Last April, my dividends were $240.00. Let’s see where they ended up this year.

April Dividends

My dividends came in at $212.90.

That’s a 11.3% reduction from last year. That’s a bummer but it was expected.

After all, some of my monthly income comes from money market and bond funds. I sold some bonds and money market yields tanked after the fed cut rates. Still, most of that money went into stocks and will be reflected in higher dividend payments in the future.

The money will be re-invested and improve my forward income by about $6.17. It’s not a lot but every little bit counts! After all, the power of compound growth is great and re-investing dividends is a big part of that.

My M1 Finance account grew from $7 in April dividends to $37 this month and I’m putting more money into that account each week. That means these off months should quickly return to growth as that cash is re-invested.

It’s never good to see a pause in growth but it’s not a big deal here. I do worry that there’ll be more dividend cuts in the future that could impact future income. However, as with all things, there’ll be a recovery eventually.

Y/Y, I’m still up 1.4% in dividends and expect that number to grow as the bigger months come. After all, I’ve re-invested a good chunk of my bond and cash funds into stocks when prices were lower and that should mean good things for dividends in the future.

There’s still the realistic risk of further dividend cuts to come. We’ll see how much impact those will have on my income in 2020. It’s quite possible that my dividends won’t grow that much this year due to those cuts even with extra money flowing into the market. Hopefully they won’t shrink but who knows. This whole thing will certainly have a big economic impact that is still to be determined.

Steve, my dividend employee, earned himself $1.28/hr this month. That’s not a great month and it brings his annual hourly wage to $4.09/hr.

That’s not a lot but Steve’s biggest months are still ahead of him as you can see by the graph below.

It’s true that I’m on a streak of reductions. However, these are driven by some stock and bond sales and to be expected.

I’m hopeful that continued buying will get me to growth again in May and definitely by June. There’s always the specter of dividend cuts on the horizon. I’m sure those will impact my mutual funds and ETFs. After all, my holdings there are total stock market driven and there’s been a bunch of cuts around.

It’s not all bad news though, Apple one of my small May holdings actually raised their dividend recently. Yay!

Growth will likely be muted this year but this is a long term game. I feel like even if I can grow at all this year then I’ll see that as a success and I’m on pace to do that right now. I’m sure some stormy waters lie ahead but that’s to be expected. Stocks do that sometimes and it’s in times like these that good opportunities are found.

I do feel like we’re a long way away from being all clear with this situation. However, I’m also a longer way away from needing this money so I’m not worried about waiting it out.

I’ll make sure to take that stimulus check and any additional income I can find and keep investing because in the long run, I’m sure it’ll pay off. What else am I going to spend my money on anyway? I’ve already got most of the things I need and I can’t do anything outside right now anyway.

April Total : $212.90
2020 Total : $2727.67
Portfolio monthly hourly wage : $1.28/hr
Portfolio annual hourly wage : $4.09/hr

April 2020 Expenses – Impact of The Stimulus Check

April is generally a decent savings month.

It’s the start of spring so we do have some day trips but it’s not a month that has any major bills. As such, I’ve been able to maintain a savings rate above 50% for the past two years.

This year was a bit different as I got some money from the government in the form of a stimulus payment.

Add that to the fact that I didn’t really do much due to the quarantine and it’s a recipe for a good savings month.

Last April I had a savings rate of 58.35% so let’s see where I ended up this year.

My savings rate for April was a ridiculous 75%. Adding in employer contributions brings that number to 80.8%.

On a gross income basis, I saved 60.2% of my income. Adding in employer contributions brings that number to 64.8%.

That’s huge and while it’s not a record month(I’ve had a higher savings rate in months where I get my bonus and save most of it), it’s by far the biggest regular month. It wasn’t even a 3 paycheck month either!

It’s driven by two things. First, was the stimulus check which went entirely into savings. It’s always great to get some cash and just have the ability to stow it away for the future. Since I’m naturally frugal, it was easy to direct that money where all my extra money goes, into savings.

The second part was that my spend this month was the lowest it’s been since I’ve started tracking my spending. I spent 31% less than last April and 42% less than my average monthly spend for all of 2019.

More money in and much less money out = big savings.

If you look at my expenses this month you’ll see why my spending was down. It’s simply because most non-essential spending was gone from the equation.

There’s rent, health insurance, groceries, internet and home bills and that’s about it.

Parking was still there for half the month but I cancelled that mid-way as the work at home situation seemed to extend. On top of that, we didn’t eat out and didn’t really go anywhere. We went for a few hikes here and there and visited the grocery store a few times but that was really it.

All that driving did mean I had to get a tank of gas this month which was the first since February. I also had to buy a battery for my car key fob as it died. Real big expenses there!

So how was it? Did all that cutting back on spending ruin my quality of life?

Eh, not really. It helps that both my wife and I are real introverts. It  also helps that we already have most anything we need. After all, we can’t go out and do stuff. We have everything we need at home. What the hell are we supposed to be buying?

Sure, that stimulus check is supposed to stimulate the economy but for me it was just extra savings. The truth is that I’m super lucky to be in a position like this. I’m a natural saver and experience 0 negatives when living like this. This is just the way I am and it’s a real nice spot to be in, not having all those wants that sometimes drive others.

One thing I’m aware of is that this position could change really quickly. I’m glad to be able to save so much right now but jobs can be a fickle thing in an economy like this one. While I believe my job is safe, I can’t take anything for granted so saving the stimulus check and all this extra money will just help me cushion that blow if it ever happens.

As such I am holding a bit more cash than usual. Truthfully, the market position worries me a bit. I’m obviously not a market timer and have no plans to sell. However, the market recovery was pretty swift and while we’re still down from all time highs, things seem expensive given the uncertainty around everything.

There’s also the other side of the coin. Interest rates are low and fiscal stimulus is up the wazoo which should lead to more expensive equities in theory. Maybe with that mindset, things really aren’t that expensive.

In either case, I’m not really doing anything beyond holding a bit more cash and investing it slowly.

Dividends are less important now too. This is one of those rare situations where cuts may become a lot more common. I do believe and hope this will be a short term situation though.

Sure, my payments are temporarily lower but I’m able to buy more at lower prices and that’s not a bad thing for a long term investor. However, if the economy does take a turn for the worse(and it’s already bad), I’m in a solid spot and being able to save so much in any given month is a sign of that. Holding some extra cash gives me peace of mind, dry powder to buy when opportunities arise and more of a down payment for a house if I never deploy or need the cash.

We’re a few days into May and while things do seem to be opening up a bit, I’m thinking this might be another low cost month as we’re still mostly indoors.

We were supposed to be in Spain this week but that trip was cancelled a while ago. That’s bad for my life experiences but a good thing for the pocket book. I’d choose to be in Spain if I could but I guess I’ll take the cash instead and spend it another year.

On top of that, May is a 3 paycheck month which will more than offset the lack of any stimulus check from the government. Combine 3 paychecks with low expenses and it might be another solid month.

Right now, my dividend goals are not looking so hot but my savings goals are right on track. You can see by the graph below that my savings rate this year has been killer.

After all, we’re 4 months in and my lowest savings rate was 44% with three months above 50% and that ain’t bad. I’m in a real good spot and as long as my employment remains steady, this could be a great year when it comes to savings.

On the dividend side, who knows, but does it really matter? I don’t count on those dollars right now so any cuts and lower prices will probably mean better long term returns for any purchases made today. That’s usually how it works, the worst economic times are often the best times to buy from a long-term perspective.

It might not look great on a graph but if we look back on it a few years from now, it’ll likely prove out to be true. Still, it certainly sucks while we’re in it and I’m hopeful we get through it faster than not. Even as an introvert, I hope things get back to normal sooner than later and we can get path this dreadful health scourge.

Hope your April was safe and you’re staying employed and strong through this tough time too!