Dividend and Expense Updates

My savings rate and expenses – February update – bonus time

It’s bonus time! That means February is generally a pretty good month for my savings rate. This year is no different.

The annual bonus at my company is paid out in February. That generally means that my monthly pay for the month is double the normal paycheck. Most of that money goes into savings.

I bumped up my 401k contributions this month to nearly the max allowed. The idea is to get an early start on maxing out the 401k and to avoid the high tax load that comes with bonus payments.

That means that February is one of the highest savings rates I’ll see for quite a bit; possibly the entire year.

Let’s take a look at the gross income breakdown for February.

bonus time

I saved 53.6% of my gross income this month. That’s a killer number. I’m very happy about that. Even if most of it is driven by the fact that I received my bonus for the year.

February will go a long way in helping me achieve my savings goals for the year.

Adding in employer contributions brings this number to 58.3%.

Taxes were about the same as usual. A lot of that is because I pushed a ton of my bonus money into the 401k. That lowers my taxable income. I always try to minimize taxes paid if I can. Bonuses are often taxed at the highest marginal tax rate depending on the size of the check. That means it’s wise to take a big chunk out of that taxable income and put it in a tax-advantaged 401k.

Expenses were also in line with last month. However, they make up a much smaller percentage due to the higher gross income.

Benefits are half of what they normally are as well. That’s mainly because my gross income almost doubled this month.

Let’s take a look at the savings rate.

savings rate graph

Things are looking good this month with a savings rate of 68.93%! This is an amazing month from that perspective. It’s the highest month I’ve had since I started tracking this data. That number jumps to 75.04% after you add in employer contributions.

Saving this much money means good things for my portfolio size and dividends. I saw the first part of that result in my last portfolio update.

My bronze goal for this year is to hit an overall savings rate of 40%. This will go a long way in hitting that target. This is also the first 50+ month of the year. With two 3 paycheck years coming up this year; I think I should at least hit my bronze goal of three 50% savings rate months this year.

Now let’s look at where my money went this month.

Rent is about the same as it always was. My car related expenses were a bit higher than usual due to some additional principal payments(one of my annual goals) and the car insurance bill coming in this month.

I also had some pesky new health issues that unfortunately still persist. This month had some doctor visits. That included an annual trip to the doctor and an urgent care stop along with some prescription expenses.

I have an HSA with a high deductible so most health care payments fall on me completely until the deductible is met(then I pay 20% after until my out of pocket max). That means that I can potentially have to front up to ~5k each year in medical costs even while having insurance!

I’m still nowhere close to being near that out of pocket maximum. I haven’t even met my deductible yet! And there are more health expenses coming down the pipeline in March and April and potentially later that will limit my savings rate those months.

Healthcare is one of the biggest question marks when it comes to early retirement. I’ve seen first hand how much those can actually cost even if you have insurance. Plus the premiums for that insurance. It can suck if you happen to have some chronic conditions or any medical emergencies.

I’m still not sure how much this latest event will end up costing me. Nor am I done with any doctor visits to figure out what’s going on. Still, I’m hopeful that I can get things figured out and managed sooner than later even if it costs me a little bit. There’s one thing you don’t want to skimp on and that’s your health so I’ll gladly take a hit to my savings rate to make sure everything is well.

Healthcare expenses do make you think about the prospect of early retirement and how realistic it is especially with all the uncertainty in the american healthcare system. One of the biggest perks of having a job is employer sponsored healthcare and even with that annual expenses for a single person can still run in the 5k range depending on plan design plus any premiums your employer may not cover.

Not all of us are lucky enough to stay healthy and that can really affect your ability to retire early because medical costs and access to medical care are a big question mark when it comes to retirement planning.

Beyond that, the usual suspects are there with restaurants and groceries leading the way. Groceries are offset by a credit card cash back credit which helps to lower my expenses for the month. I do use credit cards for everything, pay off the bill in full every month and take advantage of the various cash back perks that they grant you to save some money on the side.

That’s it for the update this month. I’m excited to see the savings rate this month but know that the next few months are probably going to be a bit rough.

I had some medical expenses in late February and early March that will likely fall into March and April and might need some additional doctors visits and medications in the future. Health is important so I want to make sure I don’t skimp on that part of my expenses.

I also have a vacation planned in April to visit Nashville, TN(another goal) and I’ve already paid for the hotel/plan/car in March so add that to the medical bills and you have a recipe for a disaster!

Hope your February was as good as mine and that your March is shaping up to be better than mine as well.

Thanks for reading and see you in a week for another side hustle update.

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