Dividend and Expense Review – September 2021 – Inflation Ticks Up
Inflation Ticks Up!
Inflation is here! It’s become pretty obvious almost everywhere I look as prices everywhere are going up. This has been especially true on the grocery side for me as we’ve seen our expenses tick up quite a bit on that front.
We’re lucky enough that we bought a home at the tail end of last year as home prices in this area have been rising quickly after being relatively static for quite a long time. Based on what I’m hearing, it was good timing as I think our rent increase would have been in the double digits this year making the home vs. rent calculation a lot more clear.
Still, it’s quite possible we’ll see home inflation next year in the form of higher taxes and possibly a higher home insurance rate. On top of that, heating oil and various other necessities are sure to be higher than last year.
We’ve also seen higher expenses when fixing things at home and notice a lack of availability when it comes to a variety of things. A chair we ordered took 8 months to get here. We’re getting two new skylights put in as well. That was something the previous home owner agreed to pay for when we bought the house last year and we’re only JUST getting around to getting someone to come out to get it done because of the lack of supplies and demand for changes as people spend more time at home.
The official inflation number is just north of 5% but it feels like it’s higher when I look at all the things we buy regularly. Meat is definitely up in the double digits as are a variety of other foods. I’ve noticed my weekly Trader Joe’s bill has started to trend well north of $100 per trip even on smaller trips where it struggled to reach that before. Gas prices are up 50% from this time last year and back to 2014 levels and that’s off peak season. Rent is up near 10% nationally and more in certain locations. Hopefully you don’t need to buy a car or a new computer or something like that right now because good luck with that.
Hell, even Costco raised the price of their $2.99 package of water to $3.29 and those guys are always the last to raise prices.
I’m always a bit weary of the official CPI as the real number just seems a lot higher.
It’ll be interesting to see if this inflation is permanent or transitory. After all, a lot of these problems seem like they’re caused by supply chain issues but who knows how long those will take to clear up and even then, the backlog will likely flow well into next year and beyond as pent up demand for certain things combined with slow to recover supply keeps prices elevated.
I’m certainly worried about the outlook ahead and what it means for a variety of things but on the bright side of things, I bought a ton of crap this year and spent a bunch of money on healthcare so if inflation is permanent, I got in before it all exploded.
It’ll also be interesting to see what this means for investments. Will rates soar sending bonds and stocks down? Investing in bonds is certainly a tricky proposition right now as many pay a low single digit rate against an inflation number that easily eclipses that. Is crypto the way to go to combat rising prices? Who the hell knows!
For now, I’ll just keep investing in everything knowing that cash is likely the least valuable thing until inflation slows down.
Also, what will happen to my wages? Can I expect at least a 5.4% raise this year to match inflation? After all, my manager always says how it’s an inflation adjusted raise and inflation is certainly higher than normal so gimme that cash!
I do think this is an interesting period and there’s certainly a lot of unknows but all we can do is keep trucking along and not worry about it too much(or as little as possible).
As I mentioned before, I have had a pretty crappy savings rate year due to very high expenses but now that I’m caught up on most of those(and I’ve met my health insurance deductible and am nearing my out of pocket max), I can get back to saving again.
On the dividend side, I’m also back to one of my bigger months as most of my ETFs and Index Funds pay quarterly. Last September, I had $2,535.20 in dividends so I’m hopeful I can grow that this year. So far, I’m at a positive growth rate for each month in 2021 but these quarter ending months can be irregular as index funds and ETFs can sometimes vary quarter to quarter.
Let’s see where September settled in at for 2021.
September 2021 Dividends
My dividends in September came in at $2,536.63.
That’s a big old dollar increase over year or a 0.1% bump.
Since I’m re-investing all that money, that takes my forward annual income up $73.50. That’s not a ton but every little bit helps get that compound growth ball rolling. It’s important in a year like this where I haven’t saved a lot to re-invest what you get because it does add up pretty quickly.
A 0.1% bump may not seem like much but it’s important to keep the entire year in mind.
After all, I’m already north of $9,700 for the year through September and showing a near 15% growth rate over last year. I can just jump back a few years and see that my yearly total in ALL of 2017 was $8,300 so I’m already beating that number with three months(including my biggest one in December) still ahead.
While this is a low growth month, I’ve had some pretty significant growth rates so far this year and it was about time it slowed down. After all, like I mentioned before, these quarter ending months can sometimes be a bit odd.
For example, my extended market fund’s dividends were up 200% in March, up 10% in June and down 33% in September. Clearly that leads to higher growth rates in March and June and lower in September. This doesn’t mean that a lot of companies cut dividends in the September time frame. It just means that some funds especially small and mid-cap ones can have irregular payout dates. Overall, for the year, the dividends on that fund will be up but they can be spread out erratically year to year.
In general because of this, while growth month to month matters, it’s the yearly growth that really defines where I am and so far, dividends are up 14.8% against this time last year.
That’s a pretty solid increase and not something to complain about.
Steve, my dividend employee, had a nice $15.22/hr. wage this month which brings his annual wage up to $6.50/hr. If only all months were like this but as seen below, most of my months are a lot smaller. It’s not quite enough to retire but eventually even those smaller months will start becoming a bigger deal.
Overall, give the low savings rate I’ve had all year, I’m happy with the growth here.
Even though I’m not saving a ton each month, all these dividends help me get more shares which helps future growth. I’m at a point right now where dividend re-investments in months like this eclipse the total amount I invest with new dollars. That’s a cool spot to be in and certainly fuels my results going forward.
Now that I can start saving more again soon, I’m hopeful that the growth numbers will continue to rise going into next year and beyond.
September Total : $2,563.63(+0.1%)
2021 Total : $9,743.90(+14.8%)
Portfolio monthly hourly wage : $15.22/hr.
Portfolio annual hourly wage : $6.50/hr.
September Expenses – Inflation!
We’re 9 months into the year and I’ve had 3 negative savings rate months and no month higher than 33%. This is after a year where I had 7 months with a savings rate above 50%. That’s quite the swing.
What happened? Well, we bought a house, bought some furniture and tools(garden and otherwise) for said house then fixed some things that broke. After that, my body started to suck and I had to visit a half dozen doctors multiple times to figure out what’s up along with a variety of tests that have me nearing my medical out of pocket max.
Plus, I had some dental work too in the form of two root canals, two apicectomies after the root canals failed and two crowns. There was probably some other stuff but those are the cliff’s notes.
All, in all, an expensive and somewhat shitty year(the house stuff is cool). However, now I’m in a spot where I’ve met my deductible and am nearing my out of pocket max so I can start saving a bit more due to lowered expenses. I’ve also gotten a decent grasp of what’s going on with my health after multiple specialist visits.
That’s a nice spot to be in and I’m hopeful this is the start of a trend of high savings rate months.
Last September, I hit a savings rate of 54.1% so let’s see where I sit this month.
My savings rate was 38.5% this month, a high for the year! Adding in employer contributions brings that number to 45.42%.
Since I own a house now, I’ve also started tracking this rate with the equity part of the mortgage payment. On that basis, my savings rate with equity was 46%(41.3% with just the extra equity payments I make). With equity and employer contributions, I saved 52.9% of my income.
On a gross income basis, I saved 28.8% of my income. That number jumps to 33.98% with employer contributions and 34% with equity(39.6% with equity and employer).
That’s a lot of numbers but the main factor that matters is that I’m back to saving money with the best month I had all year. That comes down to expenses dropping as I didn’t have any huge home repairs or major health bills.
Groceries were actually #1 this month and speak to my initial point about inflation. It’s not all super bad but it certainly does come down to stuff being more expensive. However, I do track my Costco purchases there and that number might be a bit inflated as it includes some items we bought on their buy $100 P&G items and get $25 cash back. We stocked up on paper towels and toilet paper since that’s always a great deal each year it comes around. That’s not really groceries but items like that have gone up in price too and they’ve been in low supply at times too.
Health and health insurance were next. Despite having met my deductible, these costs still continue as 20% of a high bill is still a decent amount of money. Most of my specialist visits run $200+ a pop and then you add blood tests and stuff on top of it and you’ve got a recipe for a high cost month anytime.
I think based on my experience this year, I’m going to enroll in a richer benefit next year and pay more up front(pre-tax) for a lower deductible and out of pocket max. I’ve done the calculations on the offerings my company has and I think that makes the most sense. It’ll still be an HSA(you have to love those tax benefits) but the deductible will be a few thousand bucks lower. I’ll have to pay more for it up front but I’m more comfortable with the more predictable costs and earlier cost-sharing.
Gifts were next as were some personal electronics. The wife and I got some Fitbit Charge 5’s which are a cool little tool.
Note that I also picked up a new iPhone although that’s not reflected here as I’m paying for it monthly. My old iPhone SE was dying and somehow Verizon gave me $600 to trade it in(even though I paid $399 for it when I got it) so I upgraded to an iPhone 13 Pro. It’s a nice little machine. I’m an upgrade every 5 years type of guy and hope to make this phone last as long as possible.
It’s funny how spending money during an inflationary period somehow bothers me less. It’s as if I’m thinking that my dollars will be worth less next year so might as well buy some stuff I want now.
Beyond that, I’ve got pets as an expense which is just pet food and medications for my old doggo and then your usual stuff including a small meal out and some fun things like board games that I got on sale in the entertainment spot. In the tools category, I think I picked up a weed puller to help with the garden and we also picked up a bunch of mulch when it was on sale.
Overall, I can’t complain about a month like this. I saved money and grew dividends(even if only by a tiny bit). The overall influx of cash into new shares in a month like this is really solid and one of the reasons I keep seeing continued growth in dividends and portfolio size.
I do think inflation is a concern as losing buying power is a big deal if your investments and/or salary don’t keep up. I’m lucky to be in a good spot to weather the small changes right now but also hope the impact is transitory as long term inflation is never a good thing for most.
What do you think? Is inflation here to stay or just a temporary thing due to the pandemic?