Monday, 3 July 2017

June 2017 Net Worth Performance Review

After years of consistently writing posts on this blog you may have noticed that the blog suffered a rather sudden and silent death.  Whilst I never intended to just disappear there was a very deliberate reason I stepped away from blogging...

While I love blogging about financial topics and personal finance, I found that I was spending far more time talking about finance and investments rather than taking control of my own financial life.

It doesn't mean that I was not doing the things I was saying that I was doing.  There was just a lot of "this month I will do x, y and z" and honestly a lot of that stuff never got done.

In addition to this I decided that I needed to concentrate far more on my career and my time at home got taken up with a new addition to our family.

However I still kept tracking my net worth...

Just because I wasn't writing posts on it every month doesn't mean I let my focus on my net worth and financials fall by the wayside...

Actually with all the time I freed up by not having a posting schedule (and by giving up my industry blog that I started as well) I found that I had far more time to dedicate to my own personal finances.  I still track my net worth every month and I my plans have evolved significantly since the last time I posted on here.

I'm going to go through a quick summary of my net worth, the changes that have happened over the last year as well and then will cover quickly what my new plans look like.

June 2017 Net Worth: $1,130,000

I finally cracked the $1 million mark a few months ago however this had as much to do with how I measured my net worth as improvements in my savings and investing focus and outcomes.  Before I get into the nitty gritty details here are the highlights:


As you can see I have managed to increase my assets significantly over the last year while holding my liabilities flat.  

My liabilities are fairly basic - I have a home loan, some credit card debt (which is rolling and I pay it off every month) and some tax liabilities which come due once a year.

My assets are far more complex and over the last year I've spent some time re-working how I think about my assets.  Historically I just broke them into categories like shares, property, cash etc.  I now take a more nuanced view of my assets which you can see below:


The differences in totals are due to rounding at various asset classes but don't worry my numbers add up on my spreadsheet.

Now that we can see what is actually going on in my asset portfolio we can have a discussion about what I've actually been doing and changing.

Investment assets

Broadly speaking my investment assets fall into two categories that you can see above. Controlled investment assets and restricted investment assets.  

Restricted investment assets include my retirement accounts (the majority) and employer restricted shares.   I have little to no control over these and I don't add excess amounts to these accounts so let's set them to one side for the moment.

Controlled investment assets are where I've been concentrating my efforts and in the last year these accounts increased by ~60,000.  
  • My investment holdings have done really well in the last year especially post the election of Donald Trump in November last year (who would have thought?!).  I have been selling out shares which have performed particularly well as well as holdings which I am no longer particularly close to
  • Years ago my parents gave me some managed funds and I've held onto them for years.  However they were incredibly high fee and didn't really outperform the market after tax so I recently sold them and am slowly reinvesting them back into index ETFs and select individual stocks
  • Uninvested cash is cash that is sitting there for investment purposes but which I haven't found a home for yet.  I don't like this cash balance to get too high and it is sitting a little higher than I would have liked.  Most of this is in USD and I'm waiting for the exchange rate to come back before bringing it back
The largest increases in my asset base have been in my non investment assets whose total value increased ~$240,000 over the year
  • The Principal Place of Residence as the name suggests is my home.  Historically I valued this at the amount I paid for it and a few years ago I increased it from $440,000 to $480,000 when the bank did a revaluation.  More recently I've been using a selection of apps which track the market value of my home.  Tracking this at historic value may have been conservative but it actually belied the level of equity I had to draw on and the exposure I had to the property market so I've been using market values.  My home property market has been on a tear for the last few years which is the cause of the large increase in my home value
  • My non investment cash holdings is the cash we are saving to buy our new home with.  It offsets most of my liabilities (my home loan) and will be used to pay for our new home.  As we are looking to buy a new home in the next year or two this is where we have been concentrating most of our savings efforts

Financial Freedom Targets

When I first started this blog in 2011 I was in my mid 20s and I wanted to be rich.  Not just comfortable but rich.  In fact as you can tell from the title of this blog I wanted $90m and I was willing to do anything to get there.

Over time my priorities have changed.  I value lifestyle and living a full life as far more important than I used to and as such my financial priorities have changed as well.  I discovered the FIRE (financial independence retire early) community and a lot of what they had to say inspired and motivated me.  

Now I'm not looking to retire particularly early but financial independence and having investment income to cover my living expenses sounds pretty appealing to me.  It gives me the flexibility to perhaps pursue a life where I earn slightly less but perhaps get to live a little more.

So I started with a target:
My target is to earn $100,000 p.a. (in 2016 dollars) from investment income
This would cover the lifestyle that I currently live with a bit of a buffer and would allow me to be comfortable even without a job.

I then back solved what this would require in terms of assets:

Obviously this is incredibly dependent on your assumptions and I'm not going to set out all of my assumptions and asset allocation mix here.  But basically:
My income target of $100,000 requires $2.8m of total assets (including a home value) in 2016 dollars
Now why do I keep mentioning 2016 dollars?  Because inflation eats away at the spending power of your money.  $100,000 today is not the same as $100,000 15 years from now.

Accounting for inflation my 2017 asset target is $2.9m and importantly these numbers are net.  Meaning I have all my debt paid off.  So I'm aiming for $2.9m this year and my net worth is $1.1m which means:
I am currently $1.8m short of achieving financial freedom
This seems like a huge amount to be short by but once you consider that I can save and invest at above inflation rates then I should be able to achieve this target over time

So am I back for good now?

Well...no.  I found that being able to concentrate on my investments and career has really started to pay dividends for me and given it's working for me I'm going to continue with it.

That being said my aim is to update my progress on these big goals on occasions.  Given that it is a slow moving target I'm currently thinking semi annually seems about right.

Thursday, 1 September 2016

August 2016 Net Worth: $800,000 (+1.5%)

When I last updated my net worth I listed the 4 major things I wanted to do during the month with my investment portfolio.  They included:

  1. Get my individual stock holdings down to 10 (from 11)
  2. Progressively transfer stock holdings into my wife's name for tax reasons
  3. Work out what I want to do with my managed funds
  4. Move cash and stock progressively out of my Interactive Brokers account
I managed to get exactly none of this done and actually did very little in August at all on the savings and investment front.  Why did I get so little done?  Frankly work was so busy for me during the month that I spent the whole month just trying to get enough sleep and not burn myself out.

I now have more time so will be working on doing some of that this month.  One thing that I am planning on doing this month (which ticks several of the boxes above) is selling index funds that I hold in my Interactive Brokers account and buying them in my wife's name:
  • Given the shares are held in the name of interactive brokers I don't get the benefit of the franking credits of Australian index funds (costs me 1% p.a.)
  • I have a capital loss on some of these funds so the transaction costs are far lower than would normally the case
  • I get the benefit of having the earnings taxed in my wife's name going forward.
It's a no brainer and I'm just putting things into place so I don't get burned too badly from market moves while I buy and sell in different accounts.

So if I did nothing this month how exactly did I manage to get an increase of $12,000 in my net worth?  There were a couple of bit things which really benefited me including:
  • The vesting of my employee share plan
  • Continued saving into my employee share plan and superannuation plan
  • A positive share market move which helped increase both my share portfolio and superannuation valuations
  • Small increases in my home loan savings account and a pay-down of my credit card bill

August was the first month where I got to a net worth of $800,000!


Monday, 1 August 2016

July 2016 Net Worth: $788,000 (+3.5%)

My net worth is up pretty significantly this month however other than saving a decent amount into our home loan offset account I didn't actually do all that much which is a little disappointing.

I still have plenty to do with respect to my personal finances before I'm in a position where I'm happy to just sit back and let my investments do their thing.  These are just some of the things that I'm looking to do:

  1. Get my individual stock holdings down to 10 individual stocks (currently at 11).  
    • I've been doing quite a lot of work on this and have managed to narrow what I hold
    • This does not mean that I only want to hold 10 securities. I'm willing to hold far more than that in broad based index funds but those are pretty much set and forget type investments that I don't need to think about all that much
    • I want to hold at maximum 10 individual stocks.  Any more than this and I honestly do not have enough time in the day to do them justice and I end up not knowing enough about the stocks I own
  2. Progressively transfer stock holdings into my wife's name
    • I currently hold most of my share investments in my name which is incredibly inefficient from a tax point of view (given that she is in a lower income tax bracket)
    • As I sell shares over time I want to move more and more into her name
  3. Work out what I want to do with my managed funds
    • Several years ago my parents gave me a portfolio of managed funds and they have slowly been growing over time
    • However they are quite high fee and they do tend to create tax issues for me each year so I need to work out what I am doing with these
  4. Move cash and stock progressively out of my interactive brokers account
    • Interactive Brokers is a great platform if you are looking to trade frequently
    • My investing methodology has been changing over time and I am far more a buy and hold forever type of person...interactive brokers isn't great for this especially given the inability to participate in DRPs or receive franking credits
I could keep going however these are just a few of the larger things I need to do to get my portfolio into shape over time.  Some of these I just need to sit down a do a bit of work and others I can only do opportunistically.

However that's enough about the future plan...let's see how I've actually performed this month.

July was a bit of catch up month after a dreadful June...



I've outlined below how I performed in different areas

Tuesday, 12 July 2016

June 2016 Annual Report

This post is one I really enjoy writing every year.  I love looking back on the year and assessing how I did and also looking at what I wanted to achieve.

In some ways the last year has been a little boring on the financial front.  I have been building cash so that my wife and I can look at buying our new home so I haven't been as active with my investments as I was in the first few years of this blog.  However this year I have been doing a lot on the personal front and in cleaning up my share portfolio which had grown incredibly unfocused.

I will look at most of these points in detail below and this post is going to be one of my longer ones so feel free to skip to whatever section interests you most (I've tried to signpost it as well as I can)

Annual Net Worth Performance: +$200,000


Over the year to June 2016 my net worth increased from $561,000 to $761,000 and although this is a spectacularly large increase there are a few reasons why this is a one off which I will discuss below.  However even excluding these one offs my wife and I managed to do really well this year especially given the amount we have been doing in our personal lives including:
  • Getting married
  • Going on two overseas holidays
  • Doing some expensive renovations on our home


Although the net worth performance over the year looks pretty amazing there are a few one offs I should probably call out here:
  1. In 2015 I had adjusted my net worth down to account for the fact that we would have to spend a significant amount on our wedding and honeymoon so these big expenses didn't actually impact our net worth
  2. At our wedding in July last year our guests were incredibly generous (especially our parents) and this boosted our net worth by ~$30,000
  3. We had our home revalued in August last year by the bank and this added another $40,000 to our net worth over the year
However even allowing for this we still managed to do very well over the year.  Before I go into the details of what we did over the year it may be worth looking at how I have done since I started writing this blog over 5 years ago.

The power of continuous saving really does work...

Wednesday, 6 July 2016

June 2016 Net Worth: 761,000 (-1.5%)

I thought I would start this post with a quick thank you to those who still read this blog 5 years after it first started.  I know that I am posting less than I used to and it has gone from being a blog which disseminated some (hopefully) useful financial knowledge to pretty much a pure personal financial blog.

I know I've explained it before but I thought it would be worth recapping why I decided to post less.  Most of us only have a finite amount of time in the day and I had to decide how to spend mine.  Instead of posting on this blog (and indeed on other blogs which I write) I decided to scale that back and spend time actually investing and trying to get ahead financially.  There were plenty of things which I had planned to do financially which, frankly, were never getting done and I was spending hours each week writing blog posts.

I decided that a better use of my time was to focus on my business of investing.  Unfortunately this has meant that I have far less time to post here.

With that being said I do still enjoy tracking my financial progress and it does allow me to take stock once a month of where I am at.  This month I will also do an annual review of how I have performed over the last year (I will upload that post in a few days time).

June 2016 was a tough month...

I don't think I'm the only one that had a tough month this month with markets going into a nose dive on the back of the unexpected Brexit vote.  My share investments tend to be higher risk and have a higher beta and my financial performance suffered significantly as a result.

Here is a summary of where I ended the month...


Now let's see where I took most of my pain this month...

Wednesday, 1 June 2016

May 2016 Net Worth: $773,300 (+2.5%)

I continue to honestly be surprised at how my net worth continues to rise month on month.  My wife and I have been talking about finances a lot this month.  As crazy as it sounds this is the first time in my life I have felt any anxiety about money at all.

Why am I feeling anxiety when I am doing pretty decently for my age (for those of you who don't know I just crossed the big 30 a few months ago)?  Housing is the reason.  My wife and I are saving for a new house and housing in the state I live in is incredibly expensive.  I keep going round and round in my head the different options:

  • Do I sell some investment assets to be able to afford a better home?
  • Do I compromise on where I live to buy something more affordable?
  • Do I buy something more expensive and keep the investment assets but leverage myself more?
  • Do we go for the area we want but perhaps not the house that we want?
  • Can I afford to take extra leverage if I'm the sole bread winner and we have kids?
Obviously in a world with limited resources where I am not a multi-millionaire these are all very real questions and questions that lots of people ask...it's just my time to ask and go through these issues.

Why do I raise all of these issues in a post about my net worth?  I haven't been tracking my net worth performance this month all that closely and given the stress I have been feeling with the above questions it was a relief and pleasant surprise to see things continue to go well.

So how did I actually do this month?


My net worth performance breaks down as follows (note that totals may not add exactly as there are formulas which round everything to the nearest $100)


Let's walk through some of the major movements this month...

Monday, 2 May 2016

April 2016 Net Worth: $754,400 (+2.0%)

I was surprised how well I performed this month.  I actually spent a fair amount of time this month working on our personal finances and sorting out some admin problems we had (including spending about 2 hours speaking to my superannuation fund to make sure that there weren't any admin errors).

This month we focused a lot on trading and not a lot on investing.  I'm hoping to get back into investing more aggressively over the next few months.

Let's have a look at the breakdown in performance this month: