After weeks of waiting and writing about the subject, my bonus finally arrived. This is therefore a follow up post to how to invest $20,000. A few days ago, I logged into my account and saw that I had $15,000 extra. For me, $15,000 is a lot of money. I’m not used to seeing that huge amount in my account and I wanted to ensure that I didn’t just squander it. Although I’m focused on reducing debt and building wealth, I have a problem with spending money. If it’s in my account, it’s gonna get spent. Period. That’s just how I am. Clearly I need to work on my discipline, but I didn’t want this bonus to be victim of my poor spending habits. So, without further adieu, let’s dive in to see how I invested $15,000. This will likely be a longer post. You’ve been warned.
Why Only $15,000?
In my original post about the matter, I said I was going to be receiving a $20,000 bonus from work. So, what happened? Well, it turns out that my employer kept $5,000 for taxes. I was expecting to receive the full $20k and keeping the $5k for taxes myself, but now I don’t have to worry about that. I estimate that I will be in the 25% tax bracket next year. Honestly, I don’t mind that this is the case. It prevents me from spending the money for whatever the reason. Liquidity is good, but at least I won’t have to worry about a huge tax bill come tax time.
This of course means that my original thought that I miscalculated my investment in my whoops post was incorrect. So, I really didn’t miscalculate at all. I originally thought I would have an effective amount of $15,000 to invest and that’s still the case. So, consider this an update to my Whoops moment. I’ll be checking with my HR department about the extra $5000, but I’m not holding my breath that I’m going to get that into my account anytime soon.
So, lets dive in to see how I invested the $15,000.
Credit Card Debt Wiped Out: $3,000
The first thing I did was payoff my credit card debt. The balance was $2,981.82. However, for ease of math, let’s call it $3,000. That’s going to be the approach I take for the rest of this post, where all amounts are rounded up or down for easy math. The $3,000 was the last remaining balance I had on my credit card at an interest rate of 6.4%. I’m still waiting for my payment to be reflected on my account, but essentially, my credit card is now zero. This is therefore an update to my post, One Down One To Go.
I really hate credit card debt. I was listening to Chris Hogan on the Dave Ramsey Show and he said something I agree with. And that is debt is a thief. We are stealing from our future self when we get into debt. So, it was important for me to get rid of the credit card debt. Goodbye Chase. Good bye.
I will admit that although I got rid of the credit card debt, I have decided NOT to cut up my credit card. I don’t want to get back into debt, but I do recognize that credit cards can come in handy under the right circumstances. Hopefully, I’ll get to the point where I feel comfortable cutting up the cards. I’m not there yet, but hopefully will be in the future.
Can’t Forget Family: $1,000
So, one of the reasons why I pursue the dividend growth investment (DGI) strategy is because I don’t want to find myself in the same situation as my mom. I love my mom, but she currently have to work at her age just to make ends meet. I want to ensure that when I get to retirement age, that I am able to retire and won’t have to work to make ends meet. So, I’m pretty motivated to have diversified sources of passive income coming in when I retire. That includes dividend income.
In any case, I decided I was going to try to help my mom out. I gifted $700 to my mom and $200 to one of my sisters. That sister is also struggling to make ends meet and I figured an extra $200 out of nowhere would be a blessing. My family know that I’m struggling too and it’s just me. But, it feels good to be in a position to help out. I’m sure they would do the same for me, or at least I hope they would. But that’s not the reason why I do it. I give out of love. Simple as that.
I wanted to give $1000, but I found myself behind by about $100. So, again, for easy math, I’m going to round up this number to $1000.
Emergency Fund: $1,000
Having an emergency fund is very important. Dave Ramsey suggests having a starter emergency fund of $1,000. Then, pay off all your debts from smallest to largest. I choose to do a hybrid approach. I try to have an emergency fund of $1,000, but I also want to ensure that I keep investing, even while paying off debt.
Because of recent setbacks, my emergency funds were depleted. I even had to liquidate my Robinhood account, which I didn’t want to do. However, the next thing I did was establish a $1,000 starter emergency fund. This is important because I’m still in a transition period at work, although I think my income will be stabilized with my next paycheck.
I do recognize that $1,000 is the bare minimum and that I should have 3-6 months of expenses. One of the things I decided to do was to transfer $50 every paycheck to my emergency fund. So, that’s about $100 a month. Over time, I hope to grow my emergency fund to the required 3-6 months of expenses. But, I do it in such I way where I don’t feel it as much because I’m transferring a relatively small amount every month. I prefer this approach than to using the bonus to fully fund my emergency fund. I may not be following the textbook approach, but, like they say, personal finance is personal.
Capital One Investing: $8,000
My current portfolio has 7 stocks invested in Capital One Investing Sharebuilder Plan. I’m an Advantage customer. That means that I pay $12 a month for 12 trades. I prefer this approach because I can just set it and forget it. It’s a great way to automatically invest into stocks. Usually, brokerage companies allow you to automatically invest into index funds and the like, but not individual stocks. Capital One Investing allows you to automatically invest in individual stocks. That’s why I like them so much. I get to invest in fractional shares, engage in dollar cost averaging, among other benefits.
So, to clarify and emphasize, I pay $12 a month for 12 trades. However, I currently own 7 stocks with Capital One Investing. That means that each month, I invest once per month in each of the 7 stocks, and then an additional once per month in 5 of the 7 stocks. This gets very annoying to constantly decide which 5 stocks to invest in and the additional amount to invest in those stocks. I can’t really set it and forget it as I would like to do. So, the instant bonus has given me a great opportunity. Instead of investing in only 7 stocks, I can add 5 more stocks to my portfolio and invest in 12 stocks. So, with 12 stocks, I can do 12 trades for $12 a month, one time. I can truly set it and forget it because Capital One Investing will automatically do this for me. That’s the main reason why I’ve decided to add 5 more stocks to my portfolio.
So, with my bonus, I was able to add $8,000 to Capital One Investing. Importantly, I was able to add 5 more stocks to my portfolio for a total of 12 stocks.
5 Stocks Added to Capital One Investing
So, here are the 5 stocks added to my dividend portfolio:
- Cisco Systems (CSCO)
- General Mills (GIS)
- Pfizer (PFE)
- Starbucks (SBUX)
- WW Granger (GWW)
With these five stocks added to my portfolio, I will likely not add anymore stocks to my Capital One Investing account anytime soon. So, I have a total of 12 stocks I track with Capital One Investing. Keep in mind that I still have three stocks with Computershare. So, any additional stocks to my portfolio will likely be added to Computershare.
The other thing I want to mention is that my monthly contribution to my total of 15 stocks is $790 for an average of $52.66 invested into each stock. I don’t invest equally, but the point is that I don’t have a lot of money devoted to buying stocks on a monthly basis. So, I don’t want to spread myself too thin. However, I feel these 15 stocks are good long-term positions to keep for a long time.
One of the last things I did with my bonus was transfer $2000 to my Computershare account. I have the following three stocks investing in Computershare and distributed the $2000 as follows:
- Abbvie (ABBV) – $750
- Exxon Mobile (XOM) – $500
- Johnson and Johnson (JNJ) – $750
Admittedly, the amounts invested in each stock was somewhat random or otherwise based on my gut feeling. I did not do any sort of analysis to see which stock was undervalued or anything like that. Instead, I just spread the wealth based on how I was feeling. I readily admit that, that is not the best way to invest. In fact, I’m wholly recommending that you do not follow my approach. But, call me lazy or whatever, but that’s just what I decided to do.
What I Didn’t Do With The Money
As with everything, there is opportunity cost. The one thing I chose not to do with the money was pay down on my $20k of student loans. I’ve decided that I’m going to try to tackle that on a monthly basis. I track my payments using the debt tracker. I should be reporting my first payment soon.
Paying off debt vs investing is frequently subjected to debate. I chose to take a hybrid approach, for better or worse.
There you have it. Of the $15,000 I received, $3,000 went to credit cards, $1,000 to family, $1,000 to my emergency fund, and $10,000 to my dividend portfolio. It’s not everyday I get a bonus and I’m very thankful for receiving one. Based on the number of credits I have available at Capital One Investing, the full amount of my investment won’t be reflected until sometime in September. But, it’s not a matter of if, it’s just a matter of when at this point.
Let me know what you think about how I invested $15,000? Would you have done anything different? Let me know in the comment section below.