Monday, November 4, 2019

Income & Expenses For October 2019: Saved $12,212.49, 93.75% 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 October 2019. You can see all my monthly budgets here.

Oct 2019
Other Income$740.44
Total Income$14,989.99
Federal Income Tax$1,354.80
Federal Tax Pmt/(Refund)
Student loan repayment$46.41
Total Expense$2,777.50
Before Tax Saving Rate81.47%
After Tax Income$13,027.07
Ex-Tax Total Expense$814.58
After Tax Saving Rate93.75%


Wages remain my primary source of income by far, although dividend income is now more than enough to live on. Other income include interest and miscellaneous non-recurring income.

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

Total dividends for the trailing twelve months: $16,112.98, down 10.55% from a year ago. This is a positive development, as I continue to switch from high dividend paying stocks to lower or non paying ones to reduce my taxes.

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

Dividend Summary
YTD 2019$12,878.48
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.

Housing expense of $655.54 this month was my annual property tax assessment on $40,000 home value. My county charges a high tax rate. But my property tax is still affordable because my home value is low.

Student loan repayment was $46.41 this month.

Food expense was $59.25 this month, typical for me. Cheap pinto beans (good source of protein), oatmeal (good source of carb), and peanut butter (good source of fat) make a good healthy and balanced meal. My splurges are on fresh and frozen vegetables like cabbage, collard greens, broccoli, turnip greens, mustard greens, when I can buy them for under $1 per pound.

$25.21 for electric bill is slightly lower than that for last month.

The $28.17 for water bill includes a mandatory garbage collection fee from the city and 2 CCF usage, 1 more than last month, but average usage.

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

After-tax expenses came in at $814.58, somewhat higher than typical due to nonrecurring annual property tax on my home.

Total after tax expenses for the trailing twelve months: $2,971.91, down 56.43% from a year ago, as my housing expense went down. This ttm figure dipped below $3000 for the first time and is a new low! My current expense ratio, the ratio of my ttm expenses to my net worth, is only 0.17%, which is far less than the 4% SWR and should allow my net worth to compound near market return.

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

Expenses Summary
YTD 2019$2,572.74
Big drops in housing expense accounted for the big drops in annual expenses from 2014 to 2015 and again from 2017 to 2018. My housing expense is now near rock bottom so I don't expect any more big drops in annual expenses in the future.

Dividend to expense coverage ratio = 5.42, about the same as last month and remains quite high.

Here is a summary of my passive income (dividends) to expense coverage since 2014:

Coverage Summary
YTD 20195.0157.59%
<1: div="" financially="" independent="" keep="" not="" working="">Below 1: Not financially independent; keep working! 
Between 1 and 1.24: Financially independent, but not much margin for error.
Between 1.25 and 1.75: Sweet spot for financial independence: passive income adequately covers expenses, with room for error, but not too as to cause tax drag. 
Above 1.75: Too much passive income, which becomes a tax liability: try to convert some passive income generating assets to zero dividend growth stocks to maximize return without excessive tax drag.

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. 

My overall expenses are bottoming out at approximately $3,000 annually, so that $4,500 annual dividends would be plenty. My currently projected annual dividends is around $19,000, so I have a long way to go. 

Fortunately, it appears that my dividend trend line is beginning to fall now, thanks to actions I have taken to replace some high dividend payout stocks with lower yielding ones. I will continue to exchange more high dividend paying stocks for low or no dividend paying ones as the market drops, to minimize my capital gains taxes.

I have now tracked my monthly net worth for over 3 years and have accumulated a lot of data to display my expense ratio in a chart. My annual expenses is far below 4% SWR and has been steadily trending downward, a good sign.


My after-tax saving rate (calculated as after-tax expenses divided by after-tax income) was 93.75% this month, slightly below my 95% saving rate target due to the annual property tax payment. I am confident I will meet or exceed my savings goal this year.

How is your budget? Did you meet your savings goal this month? If so, how did you manage to do so? If not, what do you plan to do differently to reach your target next month? Please feel free to comment below. I would love to hear from you!

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