Time for me to put it on paper. I have to do this and it will force me to stay on target. I did not come out with a goal article this year. I wanted to keep it simple and knew I wanted to place around $45,000 into the market this year. However, things happen during the year that altered, not the amount, but how I get there. Early on, quite a bit would have been through tax-advantaged accounts, but due to an event this year, I don’t have that option (which I will explain). Therefore, I am aiming to achieve $7,200 in forward dividend income by December 31, 2018 in my taxable account.
new job, new life, new opportunity
Alright everyone, so what happened that altered the direction of my investments? I haven’t written on it, yet, but I officially left the public accounting firm I’ve spent the last 7 years at! It was on my mind for the better part of 18 months and an opportunity that I have been genuinely interested in arrived, that I wanted/needed to try. I have been there since mid-July, actually. Therefore, it somehow has already been quite a bit of time since I have been at my new place – which I am now the controller at a financial institution. I am beyond excited about the new direction of what I do on a daily basis, and the ultimate goal of financial freedom remains completely unchanged. What else is amazing, is their 401(k) plan. We all know how I love the tax benefits of maxing out the contributions to such plan. They offer 100% of your, more than likely, 4% and then, usually there could be a form of profit share contribution at their discretion. It’s great, it’s almost twice as much from where I was at previously. The question from my intro, though, why the change in a goal for my TAXABLE and not tax-deferred account? There is one temporary wrinkle in the situation. I cannot contribute, nor receive the match (due to not being able to contribute), until my six month or 180 day anniversary mark. Agh! I asked if they could immediately start it, but that was something they declined to do. Therefore, my plans, allocation to accounts, tax situation (the list does go on) and strategy had to change.
new strategy & analysis
Even though this is a temporary adjustment, this definitely impacts what I planned on doing for the year of 2018 – maximizing the 401(k) and taking advantaged of the 25%+ tax savings, to essentially invest more cash. I had maxed out my 401(k) through 6.5 months at my old employer, which equated out to be $10,008 (rounded). I was investing, due to a one-time correction to a contribution, $1,542 per month into the 401(k). Tax-adjusted (at 25%), this really only cost me $1,156.50. Therefore, for 5.5 months, I need to make sure I invest $1,156.50 more/in addition to what I was investing without my retirement accounts. After my last few purchases, I am currently at $6,514 in forward dividend income on my taxable brokerage account. Since I have more cash that doesn’t automatically invest into a 401(k), it’s time to fuel that pot baby!
If I currently am at $6,514 and want to be at $7,200, that is a whopping $686.00 to add. Now, I think that there is approximately $2,150 left of dividends to receive (i.e. September through December) and be reinvested at 3.20% (my current yield), causing an assumed add of $69.00. Further, I am assuming 7 dividend stocks to increase their dividend, which could add 3% to my income from that or $195. In total, $264 should be added without much capital investment from me (I don’t typically count dividend reinvestment as new capital, but I could see both sides of this discussion).
Therefore, since it is now almost the end of August, it looks like I still need $422 to be added through investment. 4.5 months remain for the year. It appears, at 3%, that I’ll need to invest $14,000 from now until the end of the year. That’s a sh*t ton!! That is approximately $3,100 per month. Now, I was almost on pace of $1,400 per month in my taxable account before leaving my firm. I need to juice that up a whopping $1,700! Oh man… with only $1,156.50 from my 401k shift, that equates to $2,556.50 that I’m “used” to doing. I need to “find” that extra $550 to invest per month. I can’t work around the math here, to wind down the total I’ll need, so… $3,100 per month it is! Now, you can tell I am trying to stick true to it – with evidence of all of my consistent purchase articles that are coming in like hot cakes.
Why $7,200 as a goal?
I am sure/hoping some of you are asking – why $7,200? For me, it’s a nice $600 per month from my taxable account that I’ll start to receive in 2019. It truly feels like that “next level” type of income that truly comes in for minimal work on a go-forward basis. The amount of bills $600 would cover is insane. If I don’t include my property tax bill or house insurance (which is almost $5k/year), this would cover my mortgage payment and my house utilities, easily, per month. Lastly, the other drive to achieve this – it would put me right next to $12,000 in total forward dividend income (see the current portfolio here), when including the retirement accounts, as the reinvestment and dividend growth from those investments, paired with me achieving $7,200 in the taxable account, could cause me to high jump over the $12,000 barrier! Yes, I was a high jumper – you got that right.
I had to get this off my chest and in writing to everyone out here in the community. I am going to be on a relentless pursuit to… drum-roll… make every dollar count! I am sure you can tell, by me drilling out my insurance carrier to save money, not to mention my utility suppliers. Now, with a goal like this, I am going to have to push hard on side hustles, bring in extra cash, try to eat that peanutbutter, bananas and oatmeal and push to a new height. LET’S GO BABY! Who else is in? Ready to research, save and invest that capital?! Let’s get it everyone, over and OUT.