What have I been up to?

Since I’ve been fairly quiet on the blog front, I wanted to give an update on finances and how things are going in 2020.

2020 has been interesting from a financial perspective. It started out fairly innocuous. My business had another good end of the year for 2019 and we were awarded financially with an excellent end of the year distribution. This was mostly set aside to help pay for the downpayment on our new house.

Then Covid-19 hit. As business owners, we all took substantial salary cuts and suspended distributions. We also got a number of random “vacation” days. I put that in quotes because, yes, those were days we had off, but we had them off because it just didn’t make sense to have a full team of people working when there was no work to be done. It seems crazy now with how busy it has been, but for a good couple of months during the quarantine period of Covid-19, we were basically sitting around twiddling our thumbs for much of the day. The vacation days the first week or two were nice because the weather was good and it was nice spending some time relaxing, doing continuing medical education, or exercising.

However, that soon grew old as we weren’t able to travel and our trips to Hawaii for a medical conference and Canada for a fun trip were canceled.

Things soon got back to normal and then some. In fact, if things continue at work at this same pace until the end of the year, we’ll have actually had a higher total volume than last year!

Salary is back up to normal and distributions have been resumed.

Tax day in July 2020 this year was especially rough. Due to an increase in total income year-over-year from the first full year of partnership in 2019, we owed a huge tax bill. In fact, while we hoped to save the money from selling all our stock, we instead had to give it all to Uncle Sam. (This was actually fortuitous timing since the money was available exactly on July 15th when the 3-day settlement period ended!)

Then, the next distribution, which was back to normal, got cut in quarter because we owed the estimated quarterly taxes on it for the distributions that we would have gotten had Covid-19 hit. Suddenly we are out nearly $150,000 for the year that we were going to save for the house. I’m not a big fan of taxes!

Since then we have started to build back up the savings account with cash for the housing fund. Investing in the taxable account is on a back burner until we get the needed amount for the downpayment.

As all of you know, time in the market is important. Looking back I had no idea how aggressively the government would spend money to bolster the economy (and the stock market). Had I know what I know now, I obviously would not have sold all my stocks (and also would have bought calls on TSLA!)

My rule-of-thumb is that money you might need in the next 5 years should not be invested in the stock market. Therefore, since I was planning on using my brokerage account to fund a lot of the downpayment, selling it when I did was the right move at the time.

I have not stopped investing in the public markets entirely though. Throughout this period, I have continued to contribute the full amount ($1625 per month) into my 401k.

I have also stepped up the amount of private equity investments that I am making. I’ll leave the logistics of this and the benefits to another blog post. It is a lot of fun and has the potential to be very lucrative.

More updates will soon follow, including easy ways to get into investing in the private markets, real estate, and potential tax consequences of Biden’s and Trump’s tax proposals. I’m also working on an update to my dividend tracking spreadsheet.

8 Responses

  1. Mr. Robot says:

    Hey TI, great to see you active again. What a shame that next to the entire Covid situation you also get burned with taxes. You seem in positive spirit and have not stopped contributing so I’m looking forward to your next updates!
    Mr. Robot recently posted…September 2020 Dividend ReportMy Profile

  2. DivHut says:

    Welcome back. I totally agree with, “…money you might need in the next 5 years should not be invested in the stock market.” Risk capital only. Too often people buy into stocks, precious metals, etc. and extend themselves too thinly and have to liquidate at inopportune times when cash needs come up. I’m not a fan of cash but you must always keep a cushion of the stuff. 6 months, one year, 5 years… whatever for your personal situation.
    DivHut recently posted…Dividend Income Update September 2020My Profile

    • scott says:

      DivHut,

      Agree. Cash is important to have on hand. But, given the low interest rate environment, it has gotten especially hard to just have and not have it doing something. Though, given the fact that we’ll be getting a mortgage pretty soon, I hope the low interest rate environment hangs around for a bit.

  3. ross says:

    Here’s to a hopefully better 2021 — looking forward to your next updates!

  4. “Anyone can start a blog, but the real test is getting readers.”

  5. It’s a crazy year twoinvesting. I wouldn’t worry too much about selling out of your stocks. No one knows what the market is going to do. I was in a similar boat. I sold my stocks, and of course wish I hadn’t given how high the market is but you got to make the best decision at the time with the information that you have.

    I know 2020 is a tough year with all that’s going on, and it sounds like you also have been financially affected by the pandemic. But it also sounds like you have other good things going on and so that’s great. I’m looking forward to hearing about those investments that you teased.

    I also would worry about not posting for a while. Post when you can. The DGI Community is a very supportive one and we will be here encouraging you along the way. I hope you meet all the goals you have for 2020, and hope that you can start off 2021 on a strong note.
    Dividend Portfolio recently posted…Sinking FundsMy Profile

Leave a Reply

Your email address will not be published. Required fields are marked *

CommentLuv badge

This site uses Akismet to reduce spam. Learn how your comment data is processed.