08-24-2019, 01:09 AM
(08-24-2019, 12:43 AM)crimsonghost747 Wrote: I'm bringing this thread back to life!While I do understand the logic, having a cash buffer seems like an easy solution. If worrying what month a stock pays it's dividend causes an income problem, you are living month to month IMO. Maybe you retired from work a month or so too early?
I've been thinking about this a lot lately. And after some calculations etc, I've found a way that seems like it would work for me.
Monthly budget = trailing 12-month average cash flow. At first I wanted it to be a shorter time frame but I quickly realized that it's not doable with my portfolio. It might work if you have a pure buy and hold portfolio with quarterly dividend payers but I trade options, I have fixed income instruments that pay out once per year and I have maybe around 10% of my portfolio in stocks that pay once or twice a year instead of quarterly. So 12-months was the shortest amount of time where the trailing average remained relatively stable. Anything shorter and those once in a year payments made it jump much higher than what I need and a bad month or two with options pulled the average below what I require for a decent life. Just for reference: in 2018 my best month was 21% of the total cash flow for the year. And my worst month had a negative cash flow.
I think this requires a cash buffer of at least 1 year's expenses. Right now I have a way too large cash buffer (though Trumpet and his twitter account are trying to make me spend it!) so I actually won't be moving any money out of my investment portfolio, rather I'm reinvesting it and eating from my cash pile. This is just a way for me to calculate what sort of money I should be spending each month. And being the super cheap person that I am, it's more about having a number which I must spend rather than having a number that I can spend. :p