Saturday, February 9, 2019

Income & Expenses For January 2019: Saved $12,901.75, 98.66% of after-tax income

Since 2014, I have been tracking my monthly income and expenses. You can see a breakdown of every penny I earn and spend. For perspective, this budget is for a household of two in a small US city. By documenting my journey, I aim to demonstrate the feasibility of saving a significant portion of your income and provide some ideas and inspiration for your own budget.

Below are my income and expenses for January 2019. You can see all my monthly budgets here.

Jan 2019
Other Income$762.48
Total Income$15,039.61
Federal Income Tax$1,354.80
Federal Tax Pmt/(Refund)
Student loan repayment$35.70
Total Expense$2,137.86
Before Tax Saving Rate85.79%
After Tax Income$13,076.69
Ex-Tax Total Expense$174.94
After Tax Saving Rate98.66%
Wages remain my primary source of income by far, although dividend income is now more than enough to live on.

Here is a chart of my dividend income by month for the past 13 months:

January tends to be a relatively low month for dividends, coming after the quarterly high in December, the month most preferred by companies for paying out dividends. Next month's dividend will likely be even lower based on history.

Total dividends for the trailing twelve months: $18,089.51, up 11.79% from a year ago.

Here is chart of my dividend income by month and year since inception of the blog in 2014:

Here is a summary of dividends collected since 2014:

Dividend Summary
YTD 2019$657.11
Tax remains my top expense by far. Since tax is proportional to my earned income, there is nothing I could do about that. Tax will go way down once I retire. 

After-tax expenses came in at $174.94, back to the (new) norm for me.

No housing expense this month. My home is pretty low maintenance, the way I like it! My only major home related expense is the annual tax bill due in October which was $708.14 last year.

Student loan repayment is $35.70 per month on a graduated repayment plan on just under $6k outstanding at a fixed 2.5% interest rate, which is way below my personal rate of return, so I am in no hurry at all paying this off.

Food expense was $77.92 this month, which is typical for me. My diet consists mainly of nonperishable items like oatmeal, dried beans, and peanut butter, and I stock up when inventory run low, so this line item will fluctuate.

$18.53 for electric bill is near rock bottom for me. Winter doesn't get too cold when I live in the south, making it more efficient to put on extra layers instead of turning on the heat. I also avoid switching lights on. The fridge accounts of most of my electric usage.

The $17.79 for water bill includes a mandatory garbage collection fee from the city and 0 CCF usage, which is rock bottom.

I donated $25 to charity this month to help plant trees and improve air quality, which made me happy.

And that's it. No other expenses. I bike to work and most places I frequent, saving a lot on gas, so most months I don't have transportation related expenses.

Total after tax expenses for the trailing twelve months: $5292.19, down 42.40% from a year ago. This marks eleven straight months of decreases in ttm expenses. I expect this downtrend will continue as my housing expense went down and I continue to find ways to cut costs. It will probably bottom out around $4k, which is my currently projected annual expense. 

Here is a summary of expenses (not including tax) incurred since 2014:

Expenses Summary
YTD 2019$174.94
Dividend to expense coverage ratio = 3.42, a new high!

The chart below shows my TTM dividend (red line) versus TTM expense (blue line) since I started tracking in 2014. One is financially independent when the the dividend (red) line exceeds the expense (blue) line, which happened around June 2015 for me. 

Given that my expenses have gone down significantly, dividends have become too much of a good thing now. Any excess dividends above the amount needed for expenses incurs excess taxes and becomes a drag on my returns. I think an ideal dividend to expense coverage ratio is around 1.5, which allows room for error without incurring too much tax liabilities. 

I project my overall expenses will bottom at approximately $4,000 annually, so that $7500 annual dividends would be plenty. My currently projected annual dividends is around $20,000, so I have a long way to go.

I am currently in the process of turning over my portfolio to replace high dividend stocks with zeros to bring this ratio down to ideal. I really need the stock market to cooperate by plunging into a big bear market so I can save on my tax bill. Come on, Fed, jack up those interest rates quick!! 


My after-tax saving rate (calculated as after-tax expenses divided by after-tax income) was 98.66% this month, exceeding my 95% saving rate target. I am confident I will meet or exceed my savings goal this year.

Thanks for reading!

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