It’s official. I caved. I did something I thought I would never do. I decided to reduce the minimum contribution level to my dividend portfolio. I sense this would happen, but I was trying very hard to make sure it didn’t.
To understand why I chose to reduce the minimum contribution, and by how much, let’s dive in. In short, there was a conflict between my goal and my spending habits that had to be resolved.
But, as the saying goes, “nothing changes if nothing changes.”
Goal
A question I recently asked was, should I buy a house? It’s therefore not a secret. I want to buy another house. That fact has been the driving force behind many of my recent decisions so far. The time-frame I am looking at is April 2019 to start house hunting. In reality, unless my financial circumstances dramatically change, I will likely purchase the house around October or November of 2019. But, I am trying to aggressively save for a down-payment and closing costs as if I will buy the house in April.
Despite my lofty goals of purchasing another real estate property, I don’t have a lot of cash. In fact, I have only saved $5,700. That’s far short of the $30,000 I’m going to need for both the down payment and closing costs.
So, I decided to make some changes to how I save money in order to get to my goal faster.
Changes To Minimum Contributions
One of the significant changes I made was to reduce the minimum contribution to my dividend portfolio by $500 per month. I really struggled with this decision. At the very least, I wanted to wait until January before I made the reduction. But, unfortunately, I couldn’t wait.
The reasons are two-fold. First, I haven’t solved my lifestyle creep problem. As a result, my regular expenses, such as eating out, etc, have been creeping up. Quite frankly, the fact that I recently got two new credit cards only contributed to this problem. That’s because I spend more money using a credit card than I do with cash or even with a debit card.
The second reason is that I keep having expensive expenses come up. This caused me to reduce my savings to $5700 while maintaining a zero balance on my credit cards. Hopefully, going forward, I can not touch the $5700 and thus save my way to $30k.
Reducing the monthly contribution to my dividend portfolio by $500 will help with the above and give me a much-needed cushion where I don’t have to rely on the credit cards.
Other Savings Changes
I started saving more cash. I’m going to keep a minimum level of cash in my wallet (around $20) and anything above that will go into my savings box. It’s quite aggressive, but I’ve started it and so far so good.
In addition to saving more cash, I also updated my rules on Qapital. Before, I was just doing the round-up rule to $1. Now, I’m doing the round-up rule to $2 specifically for purchasing a house. In addition, I set a rule whereby I save 10% of any income I receive in my checking account. So basically, anytime money gets deposited into my checking account (from salary or maybe a deposit from another account), I save 10% of that in my Qapital account.
Finally, throughout the month, I tend to get additional income from work. I save this extra money (usually a few hundred dollars) in my bank account. It’s not consistent, but it is relatively frequent. But, by doing all the above, I hope to get to as close as possible to the $30,000 I need by April. Under the notion that I don’t quite have what I need by April, I am sure that I will have the necessary funds by October or November because, by then, I would have received another bonus from work!!!
So, buying the house next year is high on my list. Unfortunately, the minimum contribution to my dividend portfolio will suffer as a result. As soon as I buy the house, I will focus on increasing the minimum contribution to the portfolio again. Indeed, anything extra that I have from this aggressive savings will likely go to my portfolio, as long as I have a sufficient cushion for repairs, emergencies, etc, after the house purchase.
Conclusion
The good news is that I did not stop contributing to my portfolio. I will just be contributing a smaller amount every month. Also, it’s important to realize that I’m still maxing out my contributions to my Roth IRA and Roth 401K. That will continue next year as well, even with the increase in contribution limits for 2019. But, the practical effect my reduction is that my dividend portfolio will grow more slowly for the next several months.
What are your thoughts on this post? Do you think I made the right decision? Let me know by commenting below.
Well I wouldnt say your not saving now. Investment in RE is also a investment 😉 In L/T RE price is doomed to increase due to inflation so its kinda diversification of your investments to stocks 🙂 30k$ is quite a amount so good luck with that goal!
Thanks P2035 and I definitely think that’s a great way to look at it.
hey port
Seems like you got a plan. You really need to manage that lifestyle creep though even carrying 20 bucks around each day adds up dam fast. I know i wont buy a coffee and doughnut with debit but if i got a fiver in my wallet its not a issue im buying the stuff.
Paying yourself first is so critical. just make sure you earmark that 500 your not investing right into your house account and id recommend that being separate from your chequing.
Keep that house in focus and you should be there before november.
cheers mate.
Passivecanadianincome recently posted…October 2018 – Watch list / 1 Sale
Thanks Robert. I definitely plan on not wasting the ‘extra’ $500 per month. In general, I was going to use my debit card more, but just keep $20 in my pocket for when I need it. It wouldn’t necessarily be $20 per day, although I spend more than that on a daily basis.
It sounds like it was a tough decision, but for where you are right now and your goal to buy a house I think you’re making the right decision for you. There’s nothing wrong with reprioritizing your goals and if the goal to buy a house is your focus, it makes sense.
If you make this change and it only goes towards lifestyle creep, I would feel differently though. Look forward to seeing you progress towards your goal.
DivvyDad recently posted…For FIRE, Not All Dividends Are Created Equal
Thanks DivvyDad. Buying the house is definitely the focus, for now. And I wouldn’t stop contributing just for lifestyle creep, which of course is a constant struggle. One of the things I might do is report on my savings balance after each month (starting in January). We will see.
At least you are still investing and maxing out the tax advantage accounts. And on the bright side, less contributions mean you will stay around my level longer. You have been contributing a lot this year and may have even passed me up haha. We will see how our numbers compare over the course of next year. Good luck with the house hunting.
Dividend Daze recently posted…2018 Goals – First 6 Month Review
Thanks Daze and good point. But, I warn you that once I start contributing again, it’s going to be crazy!!! You might have a hard time catching back up 🙂
Hi DP! I must say, there is nothing wrong with reevaluating and determining what your top priorities are and how to achieve those goals. Sounds like you have a pretty decent plan as well. I had to completely stop my contributions to my portfolio for an entire 6 months back in 2017 when I started to save up for a new home to live in. It was a tough sacrifice, but one that was necessary. I am very happy where I moved and I went back to regular contributions afterwards. I think whatever you decide will be for the best. Best of luck to you! 🙂
My Dividend Dynasty recently posted…My Budget: Those Small Costs and Small Gains
I did the same thing recently. I was aggressively moving money around towards my mortgage prior. Just yesterday, I decided to lower my extra mortgage payments until the New Year starts. Situations do change and we at times have to decide to do what feels right.
Cntrysky recently posted…The Plan
Absolutely! It’s so important to be flexible, even when we have our goals. Goals change, life changes, situations change and we must be ready to adjust when needed. I could not agree more.
Good luck house hunting – I’ve been looking into a rental purchase myself – but were I’m located prices and taxes are so high – nothings hit my return rates yet.
Divs4Jesus recently posted…Stock Purchase :: SWKS
Thanks for the well wishes D4J. I hope it works out for you as well.
Hello! I can only congratulate your work. I’m also equally thinking of you as you are and I’m happy to be in a group with you in the income heroes. Unfortunately, it is actually more and more difficult to find good targets for free money, but next year we will certainly have the opportunity to do so.
Osztalék Császár recently posted…PepsiCo Inc (PEP)
Thanks for the encouragement and looking forward to next year as well.
Makes sense to me, DP. I just look at it as redirecting some of your overall investment money into a different kind of investment. Definitely keep working to keep those expenses in check, so that you don’t sabotage your saving efforts.
Engineering Dividends recently posted…Monthly Dividend Income (Nov. 2018)
Yea, it’s so easy to get side-tracked. I haven’t been able t make real progress yet but working towards it.
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