Progress Report – June 2018

By | July 11, 2018

I am so thankful than June is over.  As you can no doubt tell from my recent posts, June was very expensive.  To say that I overspent my money is somewhat of an understatement.  I had such wasteful spending, despite not yet meeting my goal of paying off my student loan.  Between casinos, eating out, etc, coupled with the unexpected expenses such as my mom’s surgery, I was wiped out financially.  I wrote about it all in my post entitled, I’m Broke.  But, in life, it’s important to get up and keep going even when you fall.  Still, before we press ahead with all the change that July is sure to bring, let’s take a look at my progress report for June.

Student Loan Repayment

In May, the beginning balance of my student loan was $11,455.94.  The minimum payment is $97.61 and the interest rate is 2.625%.  My goal is to pay off my student loans by October at a rate of $2000 per month.

In June I was NOT able to achieve my goal.  I made a $597 payment towards my student loans.  This was $200 more than I did in May, but still a far cry from the $2000 goal I set for myself.  The new balance is now $10,878.85, after accounting for a little interest.

I should be getting reimbursement money soon.  I did indicate in my most recent progress report that I was going to use it to pay down the student loan.  Now, I am not sure.  My goal is still to get to $2000 in July somehow, but I’m not sure where that money is going to come from.  Since I have a small credit card balance, the reimbursement will be used to get me back to $0.

Finally, to follow my progress towards paying off my student loans, visit my debt tracker for 2018.

Student Loan vs Down Payment

Believe it or not, I’ve been going back and forth in my mind about whether it’s the right strategy to pay off my student loans given the very low-interest rate.  The issue came up because I want to buy a house, but I don’t have the money for the down payment. I am unwilling to even consider liquidating any stock in my dividend portfolio! So, I had a little regret that I chose to pay off the student loan rather than focus on saving for a down payment on a house.

Despite my lack of confidence that I’ve chosen the best strategy, I am still committed to seeing it through to the end.  Once the student loans are paid off, I’ll use that money to save for a down payment.  Estimated time to buy a house will be after April of 2019. That way, I would have owned my previous house for 3 years and will be considered a first-time home buyer.

Savings Rate

Below is my savings rate represented graphically.  This graph will be updated monthly for the remainder of the year.

My savings rate in June was a little bit higher than it was in May.  However, it’s still not where I want it to be.  A 50% savings rate would be ideal given that I want to retire in about 16 years.  The 38% is a respectable number, so I can’t complain.  Also, as a reminder, I count extra payments towards my student loans as part of my savings. Once the loans are paid off, the savings rate as reported on this blog will be more accurate.

Financial Goals

Normally, I would post on my personal goals such as my fitness goals and for spending less on food.  I’ve abandoned my personal goals for now and am actively thinking about putting my financial goals on pause for a month or two.  My reasons for this are as follows.

First, I will be transitioning to my new position at work.  Because I will be moving locations, there will be additional costs that I will incur.  For example, I have to find a new place to rent.  Landlords typically want a security deposit and first and last month’s rent before you move in.  In case you forgot, I’m broke.  So, I need to ensure I have enough money to be able to make a smooth transition.  I have a good job and a good credit score so I’m not worried about getting approved as a tenant.  I just need to make sure I come up with the money without borrowing it.

Second, I need to buy a car.  Getting qualified for a car loan won’t be a problem, but buying a car means the dreaded monthly car payment!  Not to mention, I have to start paying car insurance.  I am so not looking forward to that.

But Wait, There’s More

My tenant may be moving out of my property.  If that’s the case, there might be a month or two of vacancies where I have to pay the mortgage on my own.  It’s not a problem.  The worst case scenario is that I stop my monthly contributions to my dividend portfolio in order to make ends meet. I don’t anticipate that being the case though.  Even if the vacancy is short-lived, there still might be clean up expenses that I have to take care of.  I’m just hoping it’s not too costly.

Before I move on, the issue with my rental house is one worth emphasizing.  That expense shouldn’t be a surprise.  But, clearly, I didn’t plan well enough for it.  Going forward, I’m going to take my mom’s suggestion to heart rather than pay lip service to it.  I’m going to establish an account and divert a portion of my rental income into that account SOLELY for the purpose of meeting rental expenses.  That’s going to take both discipline and a change in mindset on my part.  But, as the saying goes, “nothing changes if nothing changes.”  I should be able to start doing that next year.

On the plus side, my income should be increasing.  Hopefully, the increase will be enough to offset these new expenses.  Even if it isn’t enough, I’m hoping the impact to my current financial situation won’t be too devastating.  Ultimately though, I think I’ll be ok.  What’s more, there are no plans to sell a single stock in my dividend portfolio.  That will likely always be the case.

Conclusion

Hopefully, things will be back to normal in August or September.  I’m still looking at paying off my student loans by October, although December is a little bit more realistic.  I’m partially glad I overspent so much in June.  That’s because it forces me to reevaluate my situation and make improvements along the way.  You can expect future blog posts about my efforts to cut back on my overspending including going back to a cash-based budget.  Until such time, I will continue to do my part to move forward in the right direction.

What did you think of my progress report for June?  How was your progress?  Let me know by commenting below.

24 thoughts on “Progress Report – June 2018

    1. Dividend Portfolio Post author

      Initially, my analysis was that I could make more in the stock market by investing that money, rather than the percentage my student loan was costing me every month. I viewed saving for a downpayment the same way because I figure that I can make more, in the long run, than by paying off the student loan. I then considered the fact that a bird in the hand is better than two in the bush. In other words, I just had to remind myself that its certainly possible to lose money, either in the stock market or by buying a house and that paying off the debt was a sure thing in terms of me not having that payment anymore. I hope it works out Jim.

      Reply
  1. Tom @ Dividends Diversify

    Hi DP, Probably not what you want to do, but I’d say pay off the student loans. If you can, defer buying a house. Houses in general and especially ones you have newly purchased to live in can be huge money drains. If you haven’t owned a home before?… once you do you will have a whole new set of spending needs/priorities. Having owned 2 primary residences in my life, I’m just speaking from my experience. Tom
    Tom @ Dividends Diversify recently posted…AT&T | Fat Yield | Slow Dividend GrowthMy Profile

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    1. Dividend Portfolio Post author

      Appreciate it Tom. I do have a house right now, so that gives me some insights into what it’s like to own a house. The thing with the student loans, which I’ll write about after I pay them off, is that if I lose my job or something, I can’t really claim them in bankruptcy. Whereas, with the house, I can just walk away (in bankruptcy). That, more than anything, has significantly contributed to my decision to pay off the student loans.

      Reply
  2. Buy, Hold Long

    I just posted my June report too. Not much happened for me in the past two months, it’s been quite slow for me lately.
    All that spending, it is fun at the time but once you see your bank account… that’s when it really hurts haha. I’m sure you’ll do better over the coming months and be able to increase your net worth and forward dividend income in no time.

    Reply
    1. Dividend Portfolio Post author

      That’s what I’m hoping for BHL. I got to get rid of the instant gratification and keep focused on my goals. So hard sometimes since all I want to do is spend money and have fun – but I’m only robbing my future self if I overdo it.

      Reply
  3. DivvyDad

    Phew, I got tired just reading about everything you have going on! It is much easier to focus on personal / financial goals when there is a sense of stability, and with so much changing in a short time it can be helpful to realize that there are adjustments to your goals to accomplish the changes in the here and now, and then resume your other goals.

    Re: the student loans, I know a lot of people will say not to pay them off because of the low rate. However, like the other feedback here, I am a believer in paying them off. Like you mentioned, maybe set your target on the end of the year to give yourself a little more breathing room (or even into next year if needed).

    All the best with the new job, move and everything else!
    DivvyDad recently posted…The Cost of PatienceMy Profile

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    1. Dividend Portfolio Post author

      Appreciate the encouragement DD. I do have a lot going on in the next couple of months, but I also want to keep the momentum going. I know taking a break or hitting the pause button may be a prudent option, but one that I’m going to try and avoid – but will be ready to take if circumstances warrant.

      Reply
  4. dividendgeek

    2.625% is a really low rate. A fund like VYM yields 3.0%. So, it should be very easy to service the debt. About, the rental itself … how is working out? I might consider it in the future .. but I am not sure I want to be a landlord. Do you use a property management company?
    dividendgeek recently posted…2018 Q2 / (April – June) Dividend ReportMy Profile

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    1. Dividend Portfolio Post author

      Geek, I am confident that I would be able to beat the interest rate of my student loans in the stock market. The average yield in my own dividend portfolio exceeds 2.625%. I just took ohter factors into consideration when deciding if I should pay off the student loans. Now, the $97 that I’m paying per month isn’t high enough to make me lose sleep over it. I could comfortably afford to pay it. I was more concerned about the worst case scenario of me losing my job, having to file bankruptcy and stuck with the student loans still. Probably an irrational thought given how unlikely that is to occur, but it was something I thought about. But the BIGGEST reason for wanting to pay off the debt was so that I can say that I am debt free (except the mortgage) before I turn 40 which is fast approaching.

      The rental is working out quite nicely. I know there’s a way to invest in real estate by trying to find distressed properties or foreclosures or otherwise making sure that the rent you charge meet some pre-determined ratio (such as the 2% rule or whatever). I bought my house retail, off the MLS using a realtor. Now, I knew when I bought it that I was going to keep it and rent it out. I had two main criteria: (1) The house had to look nice, where I would be comfortable living in it, and (2) The rent I could charge had to be high enough to call the mortgage, taxes, insurance and still leave me positive cash flow.

      The house I found met my two main criteria. There were others, such as it had to be at least a 3 bedroom 2 bathroom house, etc, but you get the idea. I lived in it for a year and had roommates the entire time who helped me pay for the mortgage. Then, when I moved out after that, I used a property manager to help rent it out. So far so good. I’m hoping if there is turnover, the turnover costs are not too high.

      Reply
  5. p2035

    Hi 38% saving rate is owsome. Things will come out in LT if you keep on doing what you do 🙂 For example we also need big money for kitchen repair ~5keur also my car is 16y and repair cost begin to bite. Paid 1keur this year so new car becomming a reasonable buy also 🙂 And we have you know what on the way. So life is not going as plan but if you have a ditection you will get there one way or another sonner or later 🙂 But try foing small fitness stuff, health is as much important as financial independence 🙂
    p2035 recently posted…2018 Q2 BudgetMy Profile

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    1. Dividend Portfolio Post author

      Looks like a lot is going on with you as well P2035. BTW, I haven’t abandoned my fitness goals per se. I just may not blog about it. I plan on going back to the gym once I move to my new location. Then, once I build up some consistency, I’ll start writing about it again.

      Reply
  6. Dividend Daze

    Sounds like an expensive month. But on the bright side, you kept mentioning “it isn’t a problem, because you planned for it.” Isn’t it a great feeling that no matter what life throws at you, you are financially positioned to handle it because you are smart with how your money works. Have savings for times like these and you won’t even have to dip into your portfolio. Just keep doing what you are doing and plugging away at that debt. You will thank yourself for it when it is gone.

    Reply
    1. Dividend Portfolio Post author

      It’s always important to have a plan. Actually today, I went back to taking the cards out of my wallet in an effort to spend less money. I gave myself a daily budget. We’ll see how that goes. But you’re right, it’s a great feeling to know that you’re financially positioned to handle most situations that might come up.

      Reply
  7. Tawcan

    Paying off your student loans, rather than saving for a downpayment, is a very good & smart choice. Get rid of your debt first!

    Reply
    1. Dividend Portfolio Post author

      I hope that is true Tawcan, but that is definitely the plan.

      Reply
  8. timeinthemarket

    I’m dealing with the low interest rate loan repayment struggle myself. My car loan is close to being done but it’s a 2% interest rate so I would probably be better off investing the money or adding to my house payment fund. However, I think I’m gonna pay it off ASAP since I’d like to be debt free! The emotional/cash flow aspect of that is very appealing.
    timeinthemarket recently posted…Portfolio Review – July 2018 – International Stock Market StrugglesMy Profile

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    1. Dividend Portfolio Post author

      There’s more to making a decision than mathematics. We are emotional human beings and so it makes sense that emotions play a role in some of our financial decisions. It’s going to be a wonderful feeling to be able to say that you’re debt free!

      Reply
    1. Dividend Portfolio Post author

      It’s definitely on the shortlist – at least back to a $1000.

      Reply
  9. Torsten Tiedt

    I also think that paying of your student loan first is a good choice, even if interest may be low. It will simplify your financial environment. Furthermore, your June was not that bad. You managed 3rd in stability rank. Only Tawcan posting above 🙂 and a German blogger have a more constantly rising dividend income.

    Keep on investing , reducing debts and don’t have too many doubts. You’re doing fine.

    Torsten

    Reply
    1. Dividend Portfolio Post author

      Thanks Torsten. What do you mean I managed 3rd in stability rank? Just wondering what you were referring to. Once I get rid of the student loans, the only debt I will have are those on any houses I own – hopefully.

      Reply
  10. Jay @ the expat investor

    Hi I just ran in the same situation as you too, basically I just move to Germany for a job and had to find a apartment and car. So my expense has been steadily going up, but after I get settle in another month or 2 I should be good. Those or just some minor setbacks, just keep pushing forward and keep up the good work.
    Jay @ the expat investor recently posted…2018 Mid Year updatesMy Profile

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    1. Dividend Portfolio Post author

      Thanks Jay. I will likely buy my car tomorrow. It’s so exciting and burdensome at the same time. I will talk about my experience soon.

      Reply

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