I know I am a little late to the game with this article, but I wanted to take some time to assess my savings rate for December. Better late than never, right? The last month of the year is always tough to save in, considering all the holiday shopping, meals with out-of-town family members, re-uniting with friends that are around the holidays, etc. With all the headwinds I was facing during the month, was I able to weather this storm and still defeat the Dividend Diplomats’ 60% Savings Challenge?
Before I dive into the numbers…heck, before I even begin crunching the numbers….I wanted to write a paragraph about my expectations for this month. I am expecting my savings rate to decrease this month for many of the reasons I discussed in my opening paragraph. My sister came in town for a couple of weeks and we spent a lot of time exploring Cleveland, checking out breweries, coffee shops, restaurants, etc. It was a great time and we discovered many new places that I will be frequenting during the future. While it was an expensive expedition, it was one that I wouldn’t trade for anything. With our crusade of Cleveland, gift purchasing for the holidays, and other expenses that come with being home for the majority of the month, I am expecting a decrease in my savings rate from not only the prior month (52.75% in November), but my average for the year (Which currently sits at 54%). Now that I have set my expectations, it is time to examine the results.
Savings Rate Summary
Holy smokes! That blew my expectations out of the water! Even with the increased spending, I was able to have a very strong savings rate for the month. It still could have been better and quite frankly, all the extra activities cost me a shot at defeating the savings challenge. As I said before, it was worth it. There was one key component I was forgetting about when I set my initial expectations, and I will discuss it in a moment. Sorry everyone for sounding redundant, this just blew my expectations out of the water. And for those of you who are wondering and calling me a liar, I really did write my expectations prior to calculating my savings rate. So this is a genuine excitement level!
In December, I received income from the same three sources as in the past: employer, fuel reimbursements from driving for work, and dividend income. My employer’s paychecks have remained consistent as I have not received any surprise raises or anything. But who am I kidding, I wasn’t expecting that in the first place. Second, my fuel reimbursements increase over $100 from November due to the fact that I was the driver on a fairly long road trip for work…one that was over 5 hours long! Typically, I would fly, but there is no airport in the proximity so we are tasked with making the long haul via car. Since I had the largest vehicle (and a Camry is not that large of a car compared to others), I volunteered to drive and pocketed the reimbursements from my company. Lastly, and this is what pushed my savings rate up significantly for the month, was my dividend income received in December. When I was setting my expectations at the beginning of the article, factoring the dividends I received in December completely slipped my mind, hence why I had a negative outlook for the month. In December, I received a record amount of dividends, $1,103, and that provided a significant jolt to my total income received for the month! This is just one of the many reasons why I love dividend investing and why I am striving to build a strong, growing dividend income stream as soon as possible. December’s savings rate is just another motivator for me to keep fighting the fight and keep pushing myself to grow my annual dividend income.
I’ll tell you what is funny about this chart right here. Considering this chart in conjunction with the fact that I received over $1,000 more of dividend income in December than November, it is crazy to think about how much extra money I had to spend this month for my total expenses to only decrease 4% from last month. As I have mentioned many times in this post, my spending increased this month. As a result, I added a short-term category to the analysis to reflect the money used for gifts. My family implemented a new gift policy over the last two years to help reduce the cost of gifts since we are all adults now, and I love it. Instead of buying gifts for everyone (Disclaimer: This does not include my two and a half-year old niece. How could everyone not buy her gifts??), we randomly pick out of a hat one family member to buy a gift for and one family member to buy a gift card for. A $25 per gift limit was implemented, and now the cost is ~$50 per person as opposed to over $150. Great idea by my sister!
I incurred a few other expenses that were classified as “Other” above that were due predominantly to the re-upping of annual memberships. The largest of which was Amazon Prime. Since I am not a student anymore (nor have I been for a while), I have to bite the bullet for my Amazon Prime membership. I don’t mind paying this expense since my family and I purchase a lot of goods off of Amazon. While the one-time expense sucks, we definitely receive our value over the year as we continuously purchase goods that are eligible for free shipping. I don’t mind this expense one bit!
Outside of those major items, my expenses fell in line with my expectations. Entertainment increased significantly as discussed throughout the article, gas declined due to the lower gas prices, and my auto/living expenses did not change from the prior month. The lower gas prices were a blessing for consumers this holiday season as it freed up more capital at the perfect time. Plus, as a dividend investor, it created some great purchase opportunities as I treated myself to shares of Canadian Imperial and Schlumberger, both of which have been trending downward due to the price of crude oil.
At the end of the day, while I am upset I did not defeat the Dividend Diplomats’ Savings Challenge, I am pretty happy that I was able to achieve a 56% savings rate considering everything that happened this month. I was bailed out by my dividend income for the month, and I hope everyone takes one lesson away from this article: Keep on investing in dividend paying stocks, as the impact from a steady, growing dividend income stream is real. One day, when large enough, I could turn off my DRIP and use my dividend income stream to cover my monthly expenses. I am nowhere close to this point, but with December’s record-setting dividend month, I got a taste of what this would be like. The fantasy is turning more into a reality with each passing month and I continue to purchase new stocks. For now, I will continue to focus on increasing my income stream and savings rate. After all, I still have some work to do if I am going to accomplish my goal of defeating the Diplomats’ Savings Challenge 6 times in 2015.
Thanks everyone for stopping by. Hopefully you were able to have a successful December. How did my month compare to yours? What suggestions do you have on how to reduce spending around the holiday season?