Friday, 21 November 2014

My 4 Rules for entering gaming venues

I don't often go to Casino's.  It's not that I have a particular moral objection to them - I just prefer not to play a game where the odds are mathematically tilted against me.  However I went to a casino recently (context to come later) and after doing so I now have new rules for myself about gabling generally.

My rules for entering gaming establishments
  1. I will never spend more than 2 hours in a gaming establishment
  2. I will never gamble more than $50 in a night
  3. I will never use a card of any sort in a gaming establishment (credit or debit)
  4. I will never enter a gaming establishment after drinking
...and now it's time for some context...

How did my personal rules for gambling come about?

I was at a bucks night recently (getting married seems to be the thing to do amongst my friends at the moment) which ended up at a casino after several hours of drinking.  We left the casino to go elsewhere however ended up back at the casino later in the night.

Before I go into what I saw and experienced that night let me just say upfront that I did not lose thousands of dollars and this is not a post of regret.  I bet $20, at one point in the night I was up $100 and I ended up down $10 at the end of the night.

When I looked around I was staggered at the amount being bet...and lost

I love people watching however people watching in a casino is one of the most depressing things I have ever done.  I was just on the regular gaming floor (on the cheap tables I may add) but the amount of money being bet was still staggering.

I saw one man playing

Tuesday, 18 November 2014

My Updated Wedding Savings Plan

Around Valentines Day this year I set out my plan to save for a ring and ultimately marriage.  I had heard how much marriage costs and I didn't want to have any sort of bill shock when the inevitable expenses actually came around so I decided to spread some of the expenditure associated with marriage.

My original plan called for $60,000 in total savings:
  • $10,000 for the engagement ring and proposal
  • $30,000 for the wedding itself
  • $20,000 for the honeymoon
I'm glad to say that the first part is done and dusted.  I bought the engagement ring (for $10,000), got the GST back on the ring when I went overseas (-$909) and then spent about $1,500 on the proposal itself.  I was about $600 over budget but in the grand scheme of things I'm not too worried about that.

However, being proposed and being able to talk about the wedding with my fiancée has helped clarify what we want to spend and how much we're probably going to need for the wedding.

The new budget is $10,000 higher than the old budget...and the timeline is shorter

Spreading expenses over a particular time requires you to know 2 variables:
  1. How much are you going to spend?
  2. When are you going to need to spend it?
I had originally forecast $30,000 for an August wedding in 2015 however once my fiancée and I sat down and did the numbers we realised that we would probably need to spend more and save it in less time.

The wedding is going to be ~$10,000 more than I originally forecast...

The wedding is going to be more expensive than I originally forecast for 2 reasons
  1. I under-estimated how many people we had to invite.
    • I originally did the calculations on a wedding for ~120 people however when we actually listed how many people we wanted to invite the list turned out to be more like 150
  2. There are some significant costs I didn't originally think about
    • When I first budgeted for the wedding I thought about the costs that most people incur such as the reception, outfits, church, flowers etc. etc. and I gained these lists of expenses from online forums and calculators
    • However there are some costs which you will incur that are specific to your wedding.  In our case we are going to have to pay for the flights and accommodation of some very close family members that we want to be at the wedding but who genuinely can't afford to be there if we didn't help them out.  I am more than happy to spend this money but it does add up very quickly

...and is also likely to be a month earlier than forecast

I had originally forecast an August wedding and had set my savings plan up accordingly.  However when we worked out when we actually wanted to get married we realised that we were actually looking at early July (due to my work commitments in August).

This effectively reduced our time to save for the wedding by 2 months.  This may not seem like a bit reduction however a few factors meant that it has having a far larger impact than I first imagined:
  • I had originally structured my savings plan so that I was paying more the closer I got to the wedding
    • Originally I was paying

Tuesday, 11 November 2014

My sports car dilemma....

I have been talking about buying a sports car for years.  I have mentioned to friends my family and I have talked about it on this blog more times than I can imagine.

I have the cash to spend on my sports car...

At the start of this year I committed to buying it as part of my financial plan and budget.  There were some hiccups along the way...the fact that I was running over budget on a lot of my other planned expenditures made me realise that I would have to compromise on the amount I had to spend.  However recently there was some good news on that front:

The excess cash from these two factors should cover the 'over-spend' on other items throughout the year which leaves me free to spend my original budget on my sports car.

...but here's the hitch...

I can't work out what

Thursday, 6 November 2014

October 2014 Net Worth: $516,000 (+1.4%) and Expenditure Tracker

I have been off for several weeks as I travelled around South America.  The trip was fantastic and was one of my financial goals outlined at the start of this year.  I returned home yesterday and am still recovering from the jet lag.  I will be returning to my regular posting schedule over the coming weeks.

October 2014 Net Worth: $516,000 (+1.4%)

Value% Change
Net worth$516,000+1.4%

What drove my net worth performance this month?

I should note upfront that this data includes my performance up to the 5th of November - it was too hard to try and remove the last 5 days (since my return home).  As in previous months the big swing factor this month was my share portfolio performance however there were a number of other factors which also impacted the result.  I had originally targeted $510,000 this month and was pleased to do better than I had expected
  • Positive factors
    • Share portfolio
      • My share portfolio increased by 2% over the month which I was incredibly pleased with
      • My Australian shares continued to be weak however my US exposures which make up a significant part of my exposures did well (especially with the softer US$)
    • I paid down a significant amount of debt
      • Although my assets didn't move significantly, this month saw a big decrease in my debt balance as I paid down my credit card.
      • Last month saw my largest credit card bill to date (~$9,500) which was caused by the engagement ring that I had bought in prior months
    • My holiday cost less than I had budgeted
      • I will go through this in more detail below but I ended my holiday with more cash than I had forecast (~$1,500 more) which was an unexpected boost to my net worth
  • Negative factors
    • This month there were no large negative factors which affected my net worth.  Originally I had expected my cash contributions to my holiday to be a significant negative factor however as I came in under budget this didn't move the dial significantly

What is my outlook for next month?

There will be several swing factors in this coming month.  My bonus gets paid which is always a big positive however there will be A LOT of negative factors including 5 weddings (and bucks nights) which are likely to see me out of pocket ~$1000 in gifts and entertainment, I need to pay my tax bill (no refund for me this year) and other bills which all see to fall due at the same time.

I have not yet decided whether I will include the cash from my bonus in my net worth as I am using it to buy a car.  If I buy the car in November it will not make a huge difference as it will net out but if it takes me longer than that I am likely to see a big positive followed by a big negative.  Assuming I do include it I am targeting a net worth of $550,000 for the month.

October 2014 Expenditure Tracker

ItemOct 2014Monthly TargetPerf. vs Target
Accommodation / Living expenses $1,594$2,246-$652
Car expenses$28$692-$664
Health / Well being expenses$450$566-$116
Entertainment / Personal expenses $683$1,230-$548
Travel expenses$1,562$675+$887
Other 'big' expenses$2,000$3,508-$1,508
Savings / Investments$1,138$1,051+$87

If we look at the major line items in my tracker above

  • Accommodation and living expenses
    • My fiancée moved in with me this month which resulted in us splitting a lot of the utilities and grocery bills which feel due.  This combined with the lack of large one off expenses resulted in a large under-expenditure this month
  •  Car expenses
    • I couldn't quite believe how low my car expenses were for this month however I was away for half the month and in the first of the month I didn't need to fill fuel which resulted in the lowest car bill I have seen all year
  • Health / well being expenses
    • A lot of expenses in this category (e.g. gym and health insurance and charities) are automated however being away did help lower other expenses such as the hobbies and sports I engage in on a casual basis
  • Entertainment / personal expenses
    • This is where being away really helped - Friday nights, coffees, meals and drinks were all non-existent expenditures for half the month.  This performance is definitely not going to be repeated again
  • Travel expenses
    • Although I 'underperformed' in this category this month it was by far less than I had originally expected
    • I will do another post on why I spent less than I had budgeted but I came back from my holiday with $1,500 more in cash than I had originally thought I would.
  • Other 'big' expenses
    • I am no longer saving for the engagement ring which reduces the amount that I put towards 'big expenses' however in the next month or two I will be buying a car which is going to see this number completely blown out of the water
  • Savings / investments
    • I continued to save into my employee share plan and didn't need to dip into savings this month which helped keep me in positive territory
This coming month should be interesting, with my bonus payout, my car purchase as well as a lot of other expenses that I mentioned above.  I am starting to look forward to writing up my annual performance in a few months time.  I really hope I managed to stick to this budget.  Tracking every dollar has been a bit of a pain however it really has helped me focus my spending.

You May Also Be Interested In
September 2014 Net Worth: $509,000 (+0.1%) and Expenditure Tracker
2014 Financial Goals
What is a cheap, safe way to travel with money around South America?
How to buy a diamond ring (Part 1)

Tuesday, 21 October 2014

What is a normal home loan interest rate?

When you look to buy a house, chances are the first question you will ask is "how much can I afford to pay" which is really asking the question "how much can I borrow?".  Once you know how much you can borrow, you can go out house hunting and buy that perfect home.

Unfortunately most people just Google one of those home loan calculators or go into a bank branch and ask them how much they can afford to pay and don't look at the biggest assumption that will determine the answer to the original question...the interest rate on the home loan.

The interest rate is the biggest unknown factor when it comes to taking out a loan

In Australia, most loans are variable rate.  If you are lucky you may be able to lock in a 5 year fixed interest period but for the majority of your loan you will be paying an unknown rate of interest.  Why is this a problem?

The problem is that most 'affordability' calculators assume the prevailing interest rates or they may have a small buffer in there if rates move.  In Australia the current rate of interest is ~5% on 30 year mortgages but will it stay like this forever...and will you be able to afford the interest bill if the interest rate moves?

The question we should be asking is: What is a 'normal' home loan interest rate?

The problem with this question is that there is no right answer.  Economists will argue until the cows come home what a steady state 'normal' interest rate will be but the fact is that it will all depend on the economic conditions and government policy in the future and there is too much uncertainty around that question.

So how do we deal with the uncertainty associated with unknown future interest rates?

The simple answer is to

Tuesday, 7 October 2014

I did my own taxes...and it was great!

I am usually terrible at doing my taxes on time.   I always have the receipts sorted out and spreadsheet done well in advance however when it actually comes to seeing the accountant and submitting my taxes I tend to procrastinate for weeks or even months.  Last year I submitted my taxes 6 months late.

This year I swore I would be different.  But not only that...I also decided to do my taxes myself

Why did I do my own taxes?

There are a whole host of reasons I decided to do my own taxes this year including:

  1. I virtually do them for my accountant anyway!
    • The spreadsheet I give my accountant is so detailed it means he never has to look through any of my documentation and I generally only have a few questions that I need to ask him
  2. I value my time less than my accountant charges me
    • My accountant charges $120 per hour to do my taxes and given the work I normally do on them I generally only get charged for 2 hours of work (i.e. $240)
    • I wasn't exactly sure how long it would take me to do my taxes but I was pretty sure I would be ahead if I did them myself
    • As it turned out it took me 4 additional hours to do my taxes (i.e. the time taken to do what the accountant usually does) 
    • I value my personal time at less than $60 per hour so it was a great trade for me
  3. I hate taking time off to go to my accountant
    • I normally have to take a bit of time off work to go to my accountant who works in the suburbs (while I work in the city).  Work doesn't have a problem with this but half the reason I generally procrastinate for so long is that I find it such a waste of time to go out there
    • I thought about getting an accountant that was more convenient but this one knew my personal financial situation rather well and I didn't feel like having to explain it to someone new all over again

Would I do my own taxes again?

Thursday, 2 October 2014

September 2014 Net Worth: $509,000 (+0.1%) and Expenditure Tracker

I managed to get back into positive growth with my net worth this month but it was a close run thing. There were a range of factors which influenced this outcome which I will go through below.  This post also includes my expenditure tracker which helps me track my financial goals for the month.

September 2014 Net Worth: $509,000 (+0.1%)

Value% Change
Net worth$509,000+0.1%

What drove my net worth performance this month?

There were a range of factors which influenced my net worth this month.  The share market was a significant negative (and although I felt that a correction was coming I didn't alter my portfolio in time) however a range of small factors all combined to ensure that I was still slightly ahead for the month (although I did miss my target of $510,000 for the month).

  • Positive factors
    • My restricted bonus vested
      • Part of my bonus every year is restricted and vests in portions over a multi year period.  I count this restricted amount in my net worth so this did not move the dial significantly however it did help pay off some of my large, engagement ring driven credit card bill
    • Continued contribution to superannuation and my employee share plan
      • The power of automatic savings cannot be underestimated and my continued contributions to my superannuation and employee share plan helped incrementally improve my net worth performance this month
  • Negative factors
    • A weak share market performance
      • The sell off in the share market towards the tail end of the month caused a ~$5,000 decrease in my share portfolio and consequently my net worth
      • This would have been much worse if the exchange rate hadn't fallen as well.  A significant part of my portfolio is in US$ denominated investments and these benefited from the falling A$
    • High personal expenditures for the month
      • I will discuss this more in my expenditure tracker below but as I have written about before this year is a year for large one off expenditures on things or experiences that you only do once in a lifetime
      • A lot of these expenses (such as my large overseas holiday, my sports car and proposing to my girlfriend) were tail ended in the year - i.e. I have been building up cash for these expenses and now I am making them
      • The expenditure of this cash on both credit and from savings has started to hit my net worth and will continue for the foreseeable future

What is my outlook for next month?

October is likely to be another flat to negative month for me.  I have several large swing factors hitting in this month including