[This February dividend and expense review about investing your bonus may contain affiliate links for which I receive a commission at no cost to you. I only recommend products I use and trust.]
I love bonus month. It’s a big check and an even bigger investment month. Investing your bonus makes total sense if you can do it. That’s because tax withholding often gets screwed up with it comes to that bonus check.
The withholding tables your employer uses don’t account for the fact that it’s a one off check and often withhold as if this was your pay every paycheck. That means a big over withholding when it comes to bonus pay.
However, investing your bonus into a 401k means that taxable income goes down by a lot. That leads to a lower withholding AND a big head start on the amount saved for the year. That way you can get that compound interest working for you earlier in the year. I don’t know about you but I’d rather get a head start in maxing my 401k than give the government a bigger loan due to over withholding.
That means I generally bump up my 401k in February to get most of that bonus flowing into 401k. I can make that money work for me earlier and get a good head start on some of my annual goals too.
That means February is generally a great savings month for me. In 2017, my savings rate was 68.9% and in 2018, it was 71.1%! That likely means good things for 2019 as well.
On the dividend front, February is one of those small months. However, like the other small months, the dividends are growing. I had one individual security that paid out this month, Apple. On top of that, my M1 Finance account is starting to grow and that leads to some trickles of monthly dividends from there as well.
Last year’s February brought in $121.96 so let’s see where we landed this year.
February’s total comes in at $211.59! That’s a 73.49% boost over last year.
This month continues the huge growth rate I saw over last year as we overlap the time where money market and bond yields began to rise. Those yields really started to jump as 2018 progressed and lead to big growth rates into 2019 in these earlier months.
Investing your bonus helps these numbers going forward but so does reinvesting any dividends. This money reinvested at my average yield will increase my future income by $4.87 annually. Not huge but every little bit helps!
I figure the growth rates should normalize as yields now are about the same as they were into the middle of 2018. That means these early months may see big growth but that should decrease as the year progress and yields are more comparable.
However, my M1 Finance account is another factor in the growth rate. I started putting some money into that account towards the latter part of the year. That account holds many individual stocks which often pay in these off months. I figure these numbers should grow as I invest more money into my M1 Finance holdings.
Overall, this level of growth is awesome and bodes well for the rest of the year. The growth rates will decrease but seeing $200+ in these off months is awesome. It’s pretty recent that I was excited about $100+ months every month. It’s possible that I’ll be looking at $200+ every month going forward soon.
Steve, my dividend employee had himself a decent month. He broke $1/hr and it’s possible that his sub $1/hr months are behind him. His hourly salary for the month was $1.27/hr and that brings his annual wage to $1.12/hr.
I’m sure your Steve will appreciate investing your bonus. It’ll help his numbers grow going forward. My Steve still has his biggest months ahead of him as evidenced by the graph below.
You can see the blue trend is great so far and I’m eager to see how it looks in March, my first of the big four months.
February Total : $211.59
2019 Total : $373.08
Portfolio monthly hourly wage : $1.27/hr
Portfolio annual hourly wage : $1.12/hr
Savings Rate and Expenses
I already mentioned that February should be a good month on this front. It’s not because I minimized expenses but because my bonus came in this month.
Investing your bonus is a surefire way to get a solid savings rate month. My company has a cap on how much of your check you can put in your 401k so I didn’t investing it all but it’s a pretty big chunk.
As mentioned before, my savings rate in 2018 was 71.1% so let’s see if I beat that.
My savings rate came in at 77.05%! I think that’s a new record and a huge savings rate month. Adding in employer contributions brings that number up to 83.66%.
That number doesn’t include taxes as it’s just a comparison of saved dollars and expenses.
On a gross income basis(including taxes), my savings rate was 56.5% or 61.3% with employer contributions.
That’s 2 months out of 2 with a 50%+ savings rate, a good sign for my goals.
You can see what I have to look forward to in the graph below.
Generally the months past February get tougher so it’s good to get a strong start to the year. The reason for that is that March brings with it the end of winter. I’m a sucker for day trips when the weather is nice on the weekends and that can be a bit costly. However, life is for living so I’m not to worried about spending money when it increases my quality of life.
On the expense side, rent was #1 as usual followed by car expenses.
I don’t have a car payment anymore(paid it off last year!) but still have to pay car insurance and my 6 month premium was due in February.
Health and health insurance are next. I already talked about my ever increasing insurance costs last month so I won’t go into detail about it again. On the health front, I had an annual specialist visit and since I’m on an HDHP plan, it’s a pretty costly visit, all to say that I’m doing well and to keep doing what I’m doing. Gotta get that prescription renewed though!
We didn’t spend a ton of money anywhere else. Pet expenses included a bag of food(she eats some prescription food that costs a pretty penny) and some tick and heart worm pills. I think our Teddy is due for her annual physical soon too so we’ll see pet costs re-appear regularly.
Valentine’s Day meant some chocolates and a nice dinner out. It was nice to get dressed up and fancy and spend some time with the wife and some good food.
Overall, saving money is easy in these earlier parts of the year. The 401k and HSA resets means I can pump more money into tax-advantaged accounts. The cold weather means I don’t have a problem staying inside and doing indoor stuff. It’s all board games, TV, reading and sleeping over here. I don’t mind winter hibernation but I’m eager for some warm weather and some day trips too!
March is up next and brings with it the end of winter. I already know I have some costs flowing in and it might be the first month I don’t hit 50% for the year. I had a root canal(eww) a few weeks ago and I’m not sure how much of that will be covered! On the good news front, my tooth doesn’t hurt anymore.
As always, thanks for reading and sticking around for my journey. Let me know how your February went!