Buying a Home and Record Dividends!

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It’s the end of the year and we capped off a pretty shitty year with a home purchase. Yes, December was all about buying a home. It was weird timing and a bit stressful but I won’t go into the details since I wrote about it here.

Due to the home purchase and some other unexpected expenses, it was an expensive as hell month and will likely mean my savings rate will be totally in the toilet.

Buying a home was the biggest transfer of cash we’ve ever done and likely will ever do in our lives. It meant taking a ton of our cash savings and transferring them into home equity. We put 20% down and then had to deal with closing costs so it was a pretty big chunk of change.

The down payment was saved in the past in separate accounts so it won’t impact my monthly savings rate. However, some of the moving expenses, closing costs, lease breakage fees and stuff we bought to furnish will negatively impact the savings rate.

This was one of the most expensive months in my life even if you exclude the big transfer of cash for the down payment.

Buying a home for us was more of a lifestyle decision than a financial one although given rising rents in the area and low interest rates, it might end up being a great financial decision too. However, that’s certainly not going to be the case to start since we had a ton of expenses that were front loaded here.

We needed some furniture for certain rooms, I got a new(and awesome) standing desk for my office. We took multiple trips to Lowes to get a bunch of small items here and there. We had to pay our lease breakage fee and had to already pay for an oil and propane delivery.

On top of that, beyond buying a home, I had some health issues that necessitated some MRIs and doctor visits meaning I met my deductible but spent quite a bit of money out of pocket until that happened(and some after due to coinsurance).

Overall, it was a very expensive month, exciting on the home front, less exciting on the health front but hopefully both things will work out well as we move into a better 2021.

On the dividend side, December is always a record month for me and I was hoping this year would be no different.

It was a tough year for dividends in general and certainly up-ended some dividend growth goals for some. There were various dividend cuts throughout the year but honestly it was less dire than I expected when we saw what happened in March.

Still, the S&P 500 went from about 85% of the companies paying a dividend down to just north of 75% which meant dividend growth was more muted this year. However, like I said, given the market conditions, things could have been a lot worse.

You can see that the dip in S&P 500 dividends per share in 2020 is quite small especially when compared against some of the other market dips in the past.

You can find more of that data here but essentially 2020 will end the year at essentially flat dividend growth ending a solid streak of growth. However, I’ll take flat in this market dynamic versus the 25% cut we saw post 2008. It’s still quite possible more companies cut their dividends in 2021 and I would certainly expect dividend growth on average to be muted until we’re a bit past this but it’s nice to see that most large cap companies weathered this relatively well.

Of course, that’s a diversified look and depending on where your investments lay, you might have seen a bigger or smaller cut. Some of the sectors more heavily impacted like consumer discretionary or real estate cut their dividends by double digits on average. On the opposite side, industries like tech, healthcare and staples continued to grow their dividend on average.

What does that mean for most investors? Well, it was certainly tougher to grow dividends year over year and I certainly saw that going into December with a 2.8% growth rate. That’s despite pushing additional money into the market throughout the year.

December itself is always my biggest month and a big chunk of my yearly dividends(32.1% last year) due to my holdings of ETFs and index funds which pay out quarterly and sometimes once a year.

I knew I wasn’t going to blow my year out the water because of the various cuts and reductions in bond yields but it would be nice to finish the year off on a positive note. Despite the lack of large dividend growth this year and some changes to my strategy which led to less dividend yield post March, I still think additional funds flowing into the market would help offset those numbers and drive some growth.

Last December, my dividend total was $4162.24 which was a new record so let’s see where I end up in 2020.

December Dividends

December comes in at an electric $4900.86 breaking last year’s record! That’s a 17.7% boost over last year which is amazing for such a big month.

It’s nice to see such consistent growth in this month since 2018 and that really speaks to the power of continued investing and compounding of dividends.

It’s too bad that not all my months look like this but hey I’ll take ever one month approaching $5,000 in a year like this one. Of course, I’m going to re-invest all this into the securities that paid dividends which means I’ll get a boost of $142.13 to forward annual income. That’s certainly one of the reasons a month as large as this one can grow so much.

On top of that, my mutual funds also paid out $1594 in long term capital gains and $88 in short term capital gains. These aren’t dividends but do get re-invested into additional shares.

My dividend employee Steve sure didn’t disappoint this month with an hourly wage of $29.41/hr. That’s a pretty darn good month and a boost to last year’s $24.97/hr.

For the year, that brings my total dividends for 2020 to $13,930.48 or a 7.6% growth rate against 2019. For Steve that means an hourly wage of $6.97/hr. Not quite a livable wage but he’s starting to get there.

It’s clear that December is a huge month for me but I’m also glad to see some of the smaller months start to grow as well as seen below.

Sure, it’s not near $5,000 in these small months but some of them are nearing $300, a threshold I’m sure I’ll break soon enough on a monthly basis as I keep investing in my M1 Finance accounts which generate more regular monthly dividends. I’ve also got March, June and September, the quarter ending months as strong stalwarts to generate a ton of income due to my ETF and mutual fund holdings.

Overall, December was a huge success and really speaks to the power of continued investing. I didn’t hit my dividend goals for the year but any growth in a year like this one is amazing. I’ll do a deeper dive of those goals in a future post but I’m glad to see this update end on such a positive note for the year.

I think all the money saved in 2020 due to my high savings rate was key in driving any growth this year. Given the fact that we just bought a house and will have a bunch of new expenses next year, I don’t know if I’ll be able to save as much next year but I’ll certainly try my best given the results here. It’s a testament to continued investing through thick and thin.

December Total : $4900.86
2020 Total : $13,930.48
Portfolio monthly hourly wage : $29.41/hr
Portfolio annual hourly wage : $6.97/hr

December Savings Rate – Buying a Home

It was a big month on the expense side.

This was the most expensive month of my life since my wedding(and far eclipsing that in total costs). However, we got a house out of it so I’m pretty glad for that.

It does come with debt for the first time in a while but whether it’s rent or a mortgage, home payments have to be made.

On top of the house payments, I had a bunch of medical expenses too which really broke the bank. I’m still dealing with some issues so those costs will roll into 2021 as well now that the deductible has reset but such is life.

Let’s take a look at where my money went this month and whether I could still maintain a positive savings rate despite buying a home and having medical costs.

I saved -38.8% of my money this month! That’s right, it’s a negative month and the first one of those since my wedding in 2018.

What does a negative month mean? It means I didn’t save anything and had to dip into my savings to cover costs for the month.

If I add employer contributions to the equation, my savings rate jumps up to -31.9%. On a gross income basis, my savings rate was -29.9% and -24.57% after employer contributions.

Negative months are never great but they’re the reality of life. Sometimes your income just doesn’t cover your expenses and that’s why it’s good to have an emergency fund or additional savings on the side.

The reality is that none of these expenses were really planned. We weren’t expecting to buy a home in December nor was I expecting to have medical issues.

In fact as seen in the graph, I might have been positive if it was just buying a home but not these medical issues had to ruin the month. Health expenses were killer making up 40.7% of my overall costs. It was basically going from 0 on my deductible to meeting it and paying some coinsurance on top of that.

It’s good to have that protection but it always sucks to meet the deductible near the end of December since it just restarted a few days ago. That means any follow up visits(which will be had) and any additional testing will mean high healthcare expenses again. That’s on top of my health insurance payments which actually went up for 2021 and already made up nearly 6% of my expenses this and every month in 2020.

It’s really crazy how prohibitive healthcare costs can be in this country even if you have insurance. If I wasn’t already frugal and didn’t have a cushion, I’d have been in debt pretty quickly. While access to healthcare for those who can afford it is good in this country, we really have to do something about the costs and the ability to access healthcare for those who currently just cannot.

Home/rent and household expenses were next and made up 34.6% and 24.7% of my costs respectively.

Note that none of this includes the down payment which had already been saved and accounted for in the past but does include moving costs, lease breakage fees, rent, and various other home related costs. One thing to note is that the money spent on movers is money so well spent and I highly recommend them if you’re moving.

One piece of good news since my post about buying a home is that they found someone to take over our place next month. That means we won’t have to have double payments until our lease is up which is a great piece of news that really made me relax. That means I can save more than I expected without the overhang of two payments.

On the household side, that includes various things we’ve bought to furnish and/or spruce up the house. That means my desk is in there and things we got from various trips to various stores.

When you live in a 1bd/1ba apartment, you really don’t have the stuff to set up a larger home. We’re not really rushing to fill out every room(in fact two are empty right now) but small things like garbage cans for each room we use and bathrooms, new shower heads, snow shovels, paint and brushes and the like really starts to add up.

Home bills were up as well as we already had an oil and propane delivery. On top of that, since we’re still technically in the apartment, we have to pay some bills there to until we’re fully moved out(which is in a few weeks). Thankfully, we can cut those off pretty soon.

With oil and propane, our bills will likely be more concentrated and dependent on when we get deliveries. Some months might have low utilities while others will be rather high. Overall, I do expected home utility costs to go up given that we’re in a much bigger space and oil costs can be unpredictable but I’ll have a better idea of what that means after we’re in here for a year.

Pet expenses were up since my elderly dog had her bi-annual check up and blood work. She also got some new medicine as her poor old muscles are starting to deteriorate and she needs a bit more pain control. Thankfully, the meds are cheap and already starting to work as she’s doing a lot better.

On top of that, it was the holidays so some costs for gifts were around as well. Nothing huge as we’re not a big gift family but some small things here and there especially for the kids in the family.

Beyond that, it’s the usual suspects although I did buy a new Roku Ultra for myself as an upgrade to our old model. This one does come with some neat features and it’s great when my wife watches her shows since she can just plug in her headphones into the remote and keep the volume down since the TV room is right across my office.

Overall, what can you say about a month that’s well in the negatives? it means a step back for the year in terms of savings rate but it was a month where we bought a house so a big purchase like that and all that comes with it will tank the savings rate. On top of that, the healthcare expenses didn’t help because let me tell you, medical costs especially for a test like an MRI can be through the roof even with insurance.

Once nice thing is that I was able to get 15% off the medical bill simply by asking if there’s a discount for paying in full. That’s a pretty big chunk of change to save.

In the end, it’s not a great savings rate month but the cool thing about this is what while I certainly went negative in terms of savings this month, the dividends I collected and re-invested more than offset the higher expenses so that’s always nice to see. That’s one good thing about dividends, even in a month where you don’t save anything, you’re always getting some additional shares through dividend re-investment.

Despite the poor December, the savings rate for the year is still 47.7%, something I will dive into more during my financial goals review. That’s a drop from 2019 due to all these housing and medical expenses but it’s still a damn good year given what’s going on in the world today.

I’m super lucky to be able to save so much and while I know some of that comes from controlling expenses and being frugal, a lot of it comes from being fortunate enough to retain my job and earn a solid wage in the first place. It’s total crapshoot whether that’s true for many and I just happened to be in an industry that wasn’t overly impacted which is pretty much all luck. I’m aware of that and thankful for it every day.

However, the year also gave me a chance to see why being frugal and saving as much as you can is so vital because you never know what will happen and being prepared is key.

Overall, while 2021 has already started on a rather sour note, I’m hopeful and positive things will slowly get better as the year progresses and we can get back to some sort of normal.

Hope everyone’s staying safe and doing well and here’s to a better 2021.