August – The Month of Insurance Bills

August has always been my weakest savings rate month. In fact, last year’s savings rate of 32.8% was the highest I’ve ever hit in August. The reason for that is simple. All of my insurance bills come due and that means the expenses spike up. This includes car insurance(which is now combined with my wife) and renter’s insurance. They’re not massive or unexpected expenses but they do add up.

This month also came with some additional car expenses beyond the insurance bills. I had to have my 60,000 mile service(my car is getting up there!) and also had to replace my front breaks and rotors which isn’t too cheap. That means August is likely to be a mediocre one when it comes to savings again.

Speaking of car expenses, I’m also due for some new tires pretty soon. I haven’t been using my car too often lately but I’ll probably want to get new tires before winter since they’re starting to get to the end of their lifespan. It’s surprising how much a car can cost even when you don’t have a car payment. It can certainly have a pretty big impact on any given month.

On the dividend side, I’ve continued to see anemic growth this year. That’s not unexpected for a variety of reasons and the economy is the obvious one. There were plenty of dividend cuts earlier in the year and while that has slowed down, it still has an impact on payouts going forward. On top of that, the reduction in rates has heavily impacted my bond/money market payouts that pay monthly.

I’ve also changed out a few dividend paying stocks earlier in the year and replaced them with some growth stocks. While that has meant good things for my portfolio, it has shrunk the dividend payouts on average. However, my M1 Finance portfolios have helped on the dividend side especially in these smaller months where my mutual funds and/or ETFs don’t have a payout. That portfolio has continued to grow and throws off monthly dividends that are growing as well.

At this point, I’m pretty sure I’m not going to meet my dividend goals I set out earlier in the year. However, that’t not a surprise given what’s going on in the world. I knew payouts would be impacted and I’ll be happy if I see any growth this year. I think I’m still on pace to do that this year but we’ll see how the year progresses. I don’t think the economic hurdles are behind us and we still likely have some pain ahead.

August is a smaller month but has gotten bigger throughout the years. Last year, I saw $255.52 in dividends so let’s see where I am now.

August Dividends

August came in at $249.72. That’s a 2.3% decrease from 2019.

It’s never great to see a fall in dividends but it’s not unexpected this year. This is the 5th month this year where dividends have actually shrunk from the prior year. I was hoping July(which grew at 14.3%) would put an end to that but that month included more stock dividends while this monthly didn’t have many.

Why are my dividends dropping this year? Well, the answer is pretty simple. Bond rates have fallen off a cliff and the stocks that I own that don’t pay quarterly haven’t kept up.

My total bond market fund had a 2.7% yield at this time last year. This month, it’s down to a 1.9% yield. That’s a pretty big drop and really impacts the monthly payouts that I get. It might not seem like a lot but it easily means I’m getting $50 less per month from bonds. On top of that, I also sold some bond funds in March during the market drop to buy more stocks at really good valuations.

That’s the point of asset allocations and when stocks got out of whack, I transitioned some money into growth plays from bonds. That was great for my portfolio but bad for these monthly dividend updates. However, now that stocks are pushing record levels again, I’m buying more bonds as that allocation is underweight now.

I have put more money into my M1 Finance portfolios which have really have helped offset those drops as I hold a variety of stocks there that pay in various months. However, that portfolio is still quite small in relation to everything else and hasn’t caught up to the lower bond yields yet. Still, last year’s M1 payouts were $13.31 and I saw $42.06 this month so that’s certainly growing.

I’m still ahead by 0.2% this year and I think(as evidenced by July and the small drop this month), I’m near a spot where that growth will offset the drop in bond payouts but it’s not quite there this month.

Steve, my dividend employee, hasn’t been too happy with the lower payouts. His wage this month was $1.50/hr and that brings his annual wage so far to $4.46/hr.

That money all gets reinvested and this month’s payout will boost future annual income by about $7.24. That’s not a huge amount but every little bit counts and helps me take advantage of the power of compounding.

The best part for Steve is that he’s still got his best months ahead of him as evidenced by the graph below.

As you can see, September is a pretty big one and then December is still ahead.

It’s nice to still see some growth this year as I’m ahead of where I was last year(by 0.2%) despite the dividends cuts and bond yields falling. I’m hopeful that the additional money flowing into the market will mean I see some growth in September and can get back to growing again each month after that.

We’ll see how it goes but it’s certainly been an interesting year and to see growth despite all that is still good. I’m not specifically a dividend investor as I have a lot of growth names that don’t pay dividends but it’s still nice to see this number tick up as I invest more money.

August Total : $249.72
2020 Total : $5950.85
Portfolio monthly hourly wage : $1.50/hr
Portfolio annual hourly wage : $4.46/hr

August 2020 Expenses and Insurance Bills

July was a pretty solid savings month for me due to a flight refund and that’s great as I knew August was going to be tough.

It’s the month of insurance bills and last year’s August was actually a record setting August with a 32.79% savings rate. That might be tough to beat so let’s see where I ended up this year.

My savings rate for August was 26.19%. That number jumps to 33.8% after employer contributions.

On a gross income basis, I saved 18.3% of my income or 23.59% after employer contributions.

It’s not a great month but hey, I’m saving money during a rough year and that’s something to be thankful for. My job isn’t impacted too much right now and I can handle random expenses and still save money any given month. That’s a great spot to be in in a year like this one. Hell, I’ve already hit a 50%+ savings rate 5 months out of 8 so I won’t complain about that.

Expenses this month jetted up as they do every August.

Car expenses were driven by a 60,000 mile service, new breaks, resurfaced rotors and car insurance bills.

Rent was there as usual but that also included my small renter’s insurance bill this month.

Beyond that, I didn’t do anything crazy.

The grocery bills were a bit high as we continued to eat in pretty much every meal and stocked up on a bunch of non perishables. Health expenses were a bit higher this month as a I refilled some prescriptions and supplements. The prescriptions on the pet side jumped those expenses up a bit as well.

I also bought a few small gifts for an upcoming anniversary and my niece’s birthday.

Oh and I bought a pair of shoes too, the first time I’ve had a clothing expenses in a while this year. There’s certainly no need to get new clothing when I’ve worn nothing but shorts and a t-shirt the last few months. Not having to get dressed up to go to work is pretty great.

Overall, this month went as expected. All of the expenses that showed up weren’t out of the blue and I knew that August was going to be a tough month to have a killer savings rate because of all the insurance bills I have to pay. After all, even though this wasn’t an amazing month in comparison to some of the others I’ve had this year, it was still my second biggest August ever.

Beyond that, it was a month where both me and my wife stayed employed and healthy and that’s a success in my mind.

Now, we look ahead and hope things go just as well in the future months. Winter isn’t that far off in the northeast and that brings with it a whole new set of challenges in this current climate. On the expense side, in general, winter months are better for us since we rarely go out but that’s really been the case all year. However, I do know I have some expenses coming up as I have to put on two crowns on my recently finished root canals and that won’t be cheap. Why is dental work so expensive! I’ve also got to get some new tires soon as well.

On the dividend side, I guess we’ll see. I expect bond yields to continue dropping as the short term yields remain low and total bond funds start to reflect the reality of those newer short term yields.

Stocks are hard to gauge these days but I’m not a market timer so I’ll keep buying whenever I have extra cash. They won’t always been dividend payers but most of my money goes into ETFs or mutual funds that will at least pay on a quarterly or annual basis which should help September and December results. However, it’s hard to see what kind of impact all the dividend cuts earlier in the year will have on ETFs and mutual funds so we’ll see if growth is muted due to those.

Still, even if growth is muted, I’ll be happy to get anything and re-invest it and wait for that growth to return again as it always eventually does.

Thanks for reading and here’s hoping your August was a solid one too.