I’ve always read that when you buy a home you should plan to budget about 1-2% of the home’s value a year for home repairs and that definitely rings true as a first time home owner.
We’ve already had a few fixes here and there but we had our first bigger one when our garage door started dying and we had to replace the entire mechanical system and get a new door opener. Often these home repairs end up being much more than you’d expect because you’re not only paying for the materials(which cost more these days) but also for the labor.
It’d certainly be better if we knew a lot about this stuff but we’re pretty inept on that front and have to hire out for most things. While I think that 1-2% number is on point, I don’t think it covers other things you need to account for like regular home maintenance.
Think about something simple like your yard. If you have a bigger piece of land and some garden beds then you’ve got expenses when it comes to lawn maintenance and keeping your landscaped areas free of weeds. You can do most of that stuff on your own but likely still need some tools or chemicals every so often or you can also hire out.
How about your heating & air-conditioning, even if those don’t break you might want to have someone come in yearly to maintain them so they don’t break as often.
We have a plan that covers some HVAC stuff but it’s important to note those things when you’re first buying your home. It’s certainly true that home ownership can be a great wealth building tool but it also comes with a lot of side expenses that aren’t there when you rent. On the opposite side of that though, your payment with a house is pretty much locked in outside of property taxes and you can often get more space and land than when renting at least in my neck of the woods.
As an example, while our mortgage payment was ~$500 over my rent, we got half an acre of land and double the space in a nicer neighborhood for that. Since then the rent at our old place has gone up by nearly $150(for new renters) and our mortgage hasn’t changed.
Overall, home ownership has been a great experience so far but it has also hit the pocket book a bit more than expected and led to some pressure on my savings. I’ve already had a few bad savings rate months this year due to my health expenses and it’s possible I have another one here in August driven by housing and health.
Some of these pressures will be temporary especially on the house front since there’s some upfront costs of buying machinery and furniture but I can certainly expect that 1-2% in home repairs to re-occur any given year on top of any improvements we might want to make.
Speaking of furniture, we’re finally getting around to setting up our fireplace room and have gotten some carpets, a table, a bench and a nice big swivel chair both of us can sit on. I think we just need a few chairs so we can host people for board game night. After that, we’ll likely be done with updates for this year and try to squirrel away more money in our cheeks for next year.
Wayfair has been a great spot to get decently priced furniture although they have been a bit sloppy. They sent us the wrong filing cabinet once and then also sent us a carpet with a stain from the glue on the wrapping that was between the rolled up carpet. The good thing is that they were quick to send us a new carpet at no cost(telling us to keep/donate or toss the other one) and did the same for the filing cabinet.
Even when the furniture isn’t high end, those costs start to add up especially if you’re moving from a small apartment to a space double the size. Certainly there’s no need to rush with getting new furnishing for that space but given the supply constraints, we wanted to get ahead on some of these things as the wait can be quite long.
Those costs put pressure on any savings rate you’re aiming for and that’s on top of the unexpected costs for home repairs and the regular maintenance that comes with a home.
Still, home ownership is very A-OK and I’d buy this house again in a heart beat.
On the dividend side, August is one of the small months but we are heading towards September which is a big month for anyone that owns index funds, ETFs or mutual funds. Those are certainly my biggest holdings but I’ve also been lucky to grow my individual stock holdings that pay in these off months.
I just did a portfolio update that spoke of that and I will continue to add dollars to those accounts to help these off months grow. I think I’m nearing a spot where I’ll be north of $300 in these months soon as I was just $9 short of that mark last month.
I’ve been on a growth streak so I’m hopeful that can continue this month as well. That’s the beauty of continued investing, even if you don’t put a ton of money into the market in an expensive personal year such as this one, continued dividends being re-invested and individual stock dividend growth will help these totals grow.
Last August, my dividend total was $249.72 so let’s see where I am this year.
My dividends this August came in at $336.79. Woohoo, broke that mark!
That’s a nice 34.9% bump over last year and the first time I broke the $300 barrier outside of the quarter-ending months.
It’s always nice to see growth especially after last year where I saw a little bit of a dip. That was due to bond yields falling, selling some stocks in my individual accounts in a move to growth and cash yields moving to 0% after the pandemic.
Now I’m seeing more growth this year as things get a little bit back to normal and with August behind us, I’m now up 21.1% over this time last year.
More recently, on the investing front, I’m starting to move back into dividend paying securities a little bit more in my individual accounts as I like the valuations there a bit more. As I said above, most of my money is in index funds and I only actively trade with 20% of my overall portfolio at max and even there, I’m mostly buying stocks as long term investments instead of short term trades.
That means September will be a nice big month due to those index funds being the majority of my portfolio.
You can see that in the graph below. I’m not sure if September will see a big bump as growth in these bigger months has slowed a bit as my lack of substantial investing has caught up with them but I’m still hoping to see some growth.
Overall, given the weak savings rates I’ve had this month, I’m very happy with these results.
The best part is that even when I’m not saving much directly, all these dividends get re-invested into dividend paying securities and this month’s income will push my forward dividends up by $9.77 annually. It’s not a lot but every bit helps as compounding can take these small amounts and take them to much higher totals with time on your side.
Steve, my dividend employee, continues getting raises and earned himself $2.02/hr this month brining his annual wage to $5.41/hr. It’s still far from a living wage especially with inflation rearing its ugly head but it’s growing.
In fact, the $2/hr in this off month is the first time good ol’ Steve has broken that mark!
I think I’ll also be in a spot where I can start saving a bit more again soon which will hopefully mean good things for dividend growth going forward and into next year.
August Total : $336.79(+34.9%)
2021 Total : $7,207.27(+21.1%)
Portfolio monthly hourly wage : $2.02/hr
Portfolio annual hourly wage : $5.41/hr
August Expenses – Home Repairs
Home repairs are the name of the game here but I also had some more medical expenses to take care of as it seems like those never end.
Those came in the form of two MRIs I had for some of the issues I’ve been having. They didn’t show much(which is a good thing sometimes as it rules out certain diseases) BUT they did cost a pretty penny(thousands per). Luckily at this point, I’m past my deductible and into my coinsurance phase so I only cover 20% of those costs but it’s still quite a bit when you’re dealing with a ~4K bill.
I’m assuming this is another one of those negative months due to all these expenses but let’s take a look. Last year’s August came in at 26.1% and August has historically always been a lean month as my record here was 32.7% in 2019 and I had a negative month here in 2018(part of my wedding expenses).
My savings rate for August was -2.61%!
That’s the third negative month for the year and a continuation of the worst savings rate year since I started tracking this. I think I’ll do a Q3 analysis with my September report to see where I am at that point in the year and what I have to do to reach a decent savings rate before year’s end.
That -2.61% becomes a 4.25% with employer contributions.
Since I own a house now and a mortgage, I’ve also started tracking my savings rate with equity. On that basis, my savings rate was 7.6% with all equity involved(2.9% with just extra equity) and 14.5% with both equity and employer contributions.
Those both certainly make the number look a bit better. It’s also nice to build net worth with each monthly payment especially when you consider the path home prices have taken since we bought this house. We’re here for the long term so rising prices just mean higher potential taxes but I guess I’ll take that paper net worth growth.
On a gross income basis, I saved -1.9% of my income with that number shooting up to 11.1% with employer contributions and equity.
Where’d that money go then?
Well, I mentioned the garage door repair already. We basically replaced everything outside of the door itself so it was cheaper than it could have been if the door had to go. The maintenance/repairs budget includes some other stuff like hiring someone to clean out the gutters after we had some water enter the basement through a window well and then a few other tools and items for dealing with the lawn.
After that came health expenses which included those MRIs and some meds I’ll be taking regularly from now plus some supplements recommended by my doctor. At least the health stuff seems to be coming around at this point with a diagnosis and treatment plan but it certainly took a lot to get there.
After that we have the mortgage. I’m actually feeling pretty good about the purchase now given the inflation worries and how much rent has gone up in this area in the last few months. This isn’t even that desirable a state in terms of jobs and taxes and yet homes and rent have shot up along with other costs. It’s good to have that mortgage locked in at a favorable rate and not have to worry about the uncertainty around housing costs as much going forward.
There’s certainly still a concern with where taxes will go if these housing prices don’t slow down but I assume they will given the risk of rising rates in the future.
After that, there’s furniture. We ordered a nice big chair from crate & barrel back in February and it finally shipped in August. We used a gift card and a coupon to get the price down quite a bit but it was still a relatively expensive item. However, it’s super comfy and looks great in our 2nd living area which we’re working on finalizing before the year is through. However, chairs are ridiculously expensive so we might wait for some sales on that front.
Groceries were next and another place where inflation is clearly impacting costs. Certain things have gone up in price quite a bit especially meat and fruit which are quite a bit higher than they were last year. I’m seeing up to 50% inflation on certain things I’ve bought before and that’s just crazy to see. Other things like gas are also up quite a bit but it’s nice that I can still work at home for the foreseeable future which saves quite a bit of money on that front.
After that you’ve got the usual suspects like equity, health insurance, and utilities. We also had a small outdoor birthday celebration for my nephew which included a few gifts and I also picked up a small item or two for my wedding anniversary which just actually happened the other day. More small expenses to come on that front in the September and maybe October update.
Overall, while it was a negative month, I’m knocking on wood and hoping this is the last of those for the year. I know winter is ahead which means higher utility expenses(heating oil is expensive) but it’s also offset but less outdoor activities and less spending on other things on our end. We’ll just hole up in our new-ish warm home and play board games or something.
I’m writing this late so September is already over(think it was decent but haven’t done the calculations yet) and then October is ahead with 3 paychecks which should be nice. Hopefully we can get back to positive rates on the regular and maybe even hit a 50% savings rate for the first month this year. It’s unlikely I’ll hit many of my 2021 goals but maybe I can eek out something before the year is through and a Q3 analysis should help see where I can make ground.
Thanks for reading and let me know how your August went.