Monday, 30 December 2013

Delayed gratification is great...but can we take it too far?

Delayed gratification for a greater reward is something we all learn as children.  In fact, my parents used to explicitly teach it with chocolates and other rewards.  The concept of delaying reward or gratification for a better outcome is one that has been taught as a virtue for many years and we all know the benefits of it.

In our financial lives the benefits are obvious - if you save more before you buy a house, the burden of loan repayments for a similar property will be much less...or you can buy a bigger house. You can extend this type of analogy to almost any financial transaction.

But can we take delayed gratification too far?

If we are particularly good at delayed gratification we are probably better savers than we are spenders.  I recently wrote a post on the difference and how to tell which one you are.  This is not necessarily a problem but I think it can be taken too far.

With financial matters delayed gratification can be taken too far because the payoff from tomorrow will almost always be greater than the payoff today.  Does this mean that we continue to delay our gratification until we are old or unable to really enjoy the fruits of our labour?

I am particularly good at delayed gratification - if I can see a bigger payoff (especially financially) from not spending money today then it will go under lock and key.  However this means that I often set a financial goal (spending wise) that I am then delay further.  An of this was my purchase of a sports car.  I went back and had a read through my posts and I first mentioned my sports car in my 2012 financial goals...almost exactly 2 years ago.  For one reason or another I have continued to delay this purchase.

I have been thinking about my 2014 financial goals and once again looked at putting off my purchase of a sports car.  This time I was thinking of

Wednesday, 18 December 2013

Christmas Giving: A little microfinance can go a long way

I recently wrote about how I had budgeted for my Christmas gifts and how I always allocate some money (not a lot - normally around $50) to buy a present which is donated to someone who cannot afford to get presents for Christmas.  Although I still think this is something which is really worth doing this year I did something a little different - I lent money via Kiva, a microfinance organisation.

What is Microfinance?

Microfinance, very simply, is providing financial services to very poor people while taking little or no collateral.  These are the poor of the poor, and the loan often allows them to start or grow their small business (it may be as simple as allowing them to buy a goat or a pig or may be to provide extra working capital for their business) and they pay back the loan like a normal borrower.

Why does microfinance appeal to me?

The beauty in microfinance is that you are effectively helping people help themselves.  Whereas a 'handout' is often necessary and helpful, once that money is spent, it cannot do any further good.  However, when you are repaid the loan, you can then on lend it to someone else and with the same money you can do good for multiple people over time.

If you add a little bit more money to your 'lending pot' each year then the amount of good you do grows significantly over time!

Isn't there the possibility that the borrower won't repay the loan?

Of course there is the possibility that you will lose some of your money and that the borrower will default. This is normal for a lending organisation.  Banks normally diversify their loan book so that no one loss will hurt them too

Friday, 13 December 2013

Are you and over-spender or an over-saver?

The way we think about money is different for every person and has a lot to do with the way we are raised and the circumstances and life experiences we have been through. I am sure we all know the person who is unable to save 2 dollars - they spend every last penny they have on silly things - cars, holidays, good clothes and food - and they have no savings or investments to show for it.

Conversely I am sure we all know the person who could afford to loosen the purse strings a little.  They earn quite well though are so tight you wonder when they are actually going to spend all that money they are saving. They do not enjoy the money they earn and they could definitely do with (and afford) a nice long vacation.

Are you an over-spender or an over-saver?

So where do you fall - I think we all instinctively know which side of the coin we fall on.  Perhaps you are the type of person who finds it really hard to save for a house deposit because you seem to blow your cash and you have no idea where.  Or perhaps you are the person you has not treated themselves to anything for as long as you can remember.

Assessing where you fall on the spectrum is important when it comes to setting your financial goals and working out what you

Wednesday, 11 December 2013

FKP's rights issue made me a tidy profit

This is just a quick post to update you on one of my investments that I have written about on this blog.  I wrote recently about how I had participated in the FKP equity raising through their rights issue.  I took up my rights and I applied for an over-allocation.

The allowed application for an overallocation was $100,000 however given that the share price was trading at a significant premium to the issue price I figured there would be a massive scale back.  The last time there was a big scale back (in this very stock) I got quite lucky because my broker allocated me much more than I would have received had I held the stocks in my own name.

Below I have outlined how I made my investment decision, what I applied for and what I ended up getting.  I have not yet been able to sell the stock because my work has a minimum holding period for stock trades (which is very common if you work in the finance industry).

A walk through of my investment rationale

First and foremost in an equity raising you need to look at:
  1. Is the company going to go broke?
    • When companies do equity raisings (especially to pay down debt) there is a chance that they are going to go broke anyway 
    • This is the first thing you need to think about before rushing into an equity raising
  2. Does the price represent a good deal for you?
    • If you do not participate in an equity raising you are going to get diluted (especially if the equity raising is non renounceable - i.e. you can't sell your rights) so if the company is not going to go broke you would normally want to take up your rights
    • You need to think about the fundamental value of the company you are investing in and whether it represents a good deal to invest more into this company
The FKP equity raising looked particularly compelling because:

Tuesday, 10 December 2013

Start thinking about your 2014 Financial Goals

With only 3 weeks to go until the end of the year it is once again time to start thinking about your goals for the next financial year.  Although this is a finance blog and I will be putting up my financial goals, it is a great time of the year to be thinking about all of your life goals for the year.

Last year, around this time, I put up a post on how to set goals for the upcoming year and this post is going to be much of the same.  However, this year I will focus much more on what you should be thinking about when it comes to your financial goals.

It is very hard to separate your financial goals from your life goals

Trying to set financial goals without thinking about what you want for the rest of your life is pretty pointless.  Not only are you unlikely to set good goals, if your life goals involve some pretty big expenditures, your financial goals should reflect this and should aid in the achievement of this goals.

In fact, I think the first thing you need to do is to sort out exactly what life goals you want to achieve in the coming year and then set your financial goals after this.  For example

  • If you want to get engaged this year (as many of my peer group do), you will need to buy a ring.  This should then feed into your financial goals.  For example - I want to get engaged in June, and I want to pay for the ring in cash so that my savings are not affected so I will need to save $5,000 / 6 = $833 per month
  • If you want to go on an expensive holiday you will need to pay for this - do the same as the ring example above - set a time frame and savings objective and this will lead to a financial goal for the year
  • If you want to buy a house in two years time then perhaps you should start saving for a deposit now and your financial goals should revolve around this
It really depends on what you want

Friday, 6 December 2013

Tips on budgeting and spending this Christmas season

Christmas has come around again and like most people (I imagine) I have not done my Christmas shopping in advance.  Now Christmas is an expensive time of the year for almost everyone but especially if you have a family with children or a large amount of close relatives and it is the norm for you to give Christmas presents to everyone.  It is the time of year where it is really easy to blow your budget and to rack up some serious credit card debt.

We all know that we shouldn't however invariably we get carried away.  This post will give you several strategies to keep your spending in check (even if you have children and a large family) and will hopefully mean that you wont be suffering as badly from those post Christmas credit card blues.

Set a clear list of people that you need to buy gifts for

The problem with Christmas shopping is that we often buy gifts for people on impulse based on things we see that we may like for them.  While this is very thoughtful it really blows out the budget.  The best thing to do is to make a defined list of people that you need to buy a gift for.

For example my list includes my immediate family (2 people), my girlfriend, one Kris Kringle (or Secret Santa) present and one 'wishing tree' present.  My list used to be 4 - 5 times as large but I really found that I was spending far too much money on Christmas presents.

If you have a large extended family that gives gifts set up a Secret Santa (or Kris Kringle)

This is something my extended family started doing years ago and it made so much sense.  When I was a kid I used to get a present from every single one of my aunts, uncles and extended relatives.  What I didn't realise was that my parents had to fork out for every single other child and most of the other adults in the group.

What our extended family instituted was a Secret Santa system.  A few weeks before Christmas we would pick names out of a hat and we would only be allowed to a buy a present for that person which would be shared on Christmas day.  You were not allowed to spend more than $20.  The cost that your family would need to bear was directly proportionate to how many people were in the family.  For example a family of 4 would be buying gifts for 4 other people so the total cost could not exceed $80 instead of the many hundreds of dollars that it used to cost.

Set a budget for each person...then stick to it

You know how much you can afford to spend on Christmas presents.  It is best to sit down and work out how much you 1) can afford to and 2) want to spend on each person.  You need to do this before you go out and start looking for

Thursday, 5 December 2013

November 2013 Expenditure Tracker

This is my second last expenditure tracker for the year and uses my reset expectations for 2013.  It also continues to be influenced by my smoothed expenditure technique.  This month had a lot of one off expenses - I travelled overseas for 1/3 of the month, my bonus got paid and I subscribed to a rather large rights issue which took a significant amount of cash out of my offset account and put it into my share investment account.  Full details are below:

ItemNov 2013Target (new)Over/(Under)Target (old)Over/(Under)
Share Investments+$31,094+$2,500+$28,594+$2,000+$29,094
Offset Acct.-$11,256+$2,400-$13,656+$3,500-$14,756
Personal expenditure+$6,355+$2,800+$3,555+$2,200+$4,155

As you can see above my personal expenditure has once again blown out in quite a large way - I will go into the reasons for that below) - but this was counter balanced by the large inflow of funds from my bonus.  The major movements in my three accounts are discussed below.

  • Share investments
    • This month I transferred $30,000 into my share investment account as I wished to take up the FKP rights offer - I already had a significant balance of cash sitting in this account so the amount I actually applied for was quite a bit higher
    • I continued to invest in my employee share plan 
      • I have not yet sold out of the shares that vested in the previous period nor have I sold out of the shares associated with my bonus last year which were subject to holding periods 
      • I have been waiting until the currency drops a bit to get a 'free kick' however my exposure to my company's stock is getting beyond where I want it to be so I am thinking of doing a sell down soon
  • Home Loan Offset account
    • The $30,000 I transferred into my share investment account came out of my home loan offset account however this was partially offset by

Monday, 2 December 2013

November 2013 Net Worth: $457,000 (+10.2%)

Value% Change
Net worth$457,000+10.2%

My strong net worth performance continues to surpass my expectations.  They are driven by a share market that seems to have no bounds as well as better than expected performance in other areas.  As mentioned last month I had hoped to get to $435,000 this month and to $440,000 by the end of the year.  As you can see above I did much better than this which was entirely due to my bonus being announced and paid during the month.

My bonus was (for the first time since I started working), better than expected.  It's not that I got paid the most I ever have - I'm still not even close to what I got paid as an investment banking analyst - but rather I was expecting a number that was 5 - 6% lower than I actually received. Part of my bonus is deferred and invested in the stock of the company that I work for and I can't touch this for several years.  I include this at the full face value as I don't intend on leaving this company any time soon - if I do leave I would forfeit a reasonably large sum of money.

This month actually have many moving factors which I have outlined below (both positive and negative).

Positive factors

  1. The payment of my bonus
    • As outlined above my bonus got paid this month
    • The cash amount I actually received was only about 40% of the headline number due to tax as well as the deferred component of my bonus
    • With this bonus I saved most into my offset savings account, I put a bit into my expenditure smoothing account for Christmas presents and I also kept aside $500 for myself to buy something 'special' although I haven't worked out what that is yet
    • A more detailed outline of this split will be detailed in my expenditure tracker tomorrow
  2. A continued strong performance in the share market
    • The share market continues to perform positively and although this month didn't have a crazy jump like the past few months it was still driving strong performance
    • I also continued to save into

Friday, 29 November 2013

How much cash should I give as a wedding gift?

It seems that I have hit an age where a significant proportion of my friends are starting to settle down and get engaged.  This year I had 5 weddings in total and next year I already have invites or 'save the dates' for 7 so the chances are that I will be going to something more than this.

Wedding gifts have gone through an interesting evolution.  Historically there was not 'list' or preferred gift and so people typically got several presents which were exactly the same.  Then came the wedding registry which lasted for a quite a while - you set a list of items at a large department store and people went in and paid what they wanted to buy you one or more items on that list.

The next evolution of the wedding gift trend has emerged in recent years - the cash gifts.  I spoke to some people in older generations and they said that cash gifts used to be seen as almost taboo and impossible to get right because of the risk of giving too little money.  However in the last year I only received one wedding invite which had a gift registry and the rest invited you to give cash to help towards their honeymoon.

So what is the right amount of cash to give as a wedding gift?

The old problem of not knowing the right amount of cash to give as a wedding gift still exists.  Because it is a relatively recent phenomenon there is no set rule or expectation about the right amount of cash to give as a wedding gift.  The dilemma is as follows:
If I give too little I look like I'm tight and if I give too much then I'm just wasting money
I don't know about most of you but I'd rather be in the giving too much category than in the giving too little category.  However there is a limit to this.  What made me think about it was the first time that I gave an amount and then later though..."that was a lot of money".

A rule of thumb for giving cash at a wedding: give slightly more than it would cost them to have you at the wedding

This is the most basic rule and only really applies for

Wednesday, 27 November 2013

Travelling Overseas: Saving on airline fares which code share

As we come into the Christmas season and the summer holiday period (for Australians and all those in the southern hemisphere) many people will be well advanced in their vacation planning.  If you are travelling overseas and not going on a cruise you are going to be booking flights and in this day and age of global air alliances, the chances are that you may book with one airline but be flying with another (aka code sharing).
You may be in a situation where you are paying a very different price for exactly the same airline seat because you have booked through a different carrier.  
When I recently travelled on holiday, my destination was a small island in the Pacific and there were only two carriers that flew there: the local carrier and Qantas (an Australian airline).  If I'm going to be honest I had reservations about travelling on the local carrier - when it comes to air travel, safety is the most important factor and I had no idea what this small airline's safety record was.

The local carrier's price was ~$750 return and Qantas was ~$100 more than this.  In the end I decided to go for the local carrier to save the $100.  It's not that I valued my safety at $100, it was more I considered my fear of the small carrier to be irrational and I wasn't about to pay more for an irrational fear.  I was surprised when I boarded my flight and noticed that Qantas was actually code sharing with this small regional airline - paying the $100 would have gotten me nothing more than a Qantas boarding pass.

Airlines generally disclose when they are going to put you on a different carrier

I went back to Qantas' website and found out that when you selected a flight they did disclose

Tuesday, 26 November 2013

Should I move into my investment property?

Recently I have been posting about buying a house for myself to move into.  This is not going to be a very short term thing - I was giving myself enough time to look and consider what I actually wanted and where I wanted to live.  What happened though was that I found out that property in Australia is much more expensive than I first imagined - in fact I found myself looking in the same area which my parents live (and I didn't grow up in a great area at all).

This didn't deter me though - I had a decent budget and I could get somewhere ok...certainly not where I thought I would be able to buy but I wasn't going to be buying in the middle of nowhere.  My girlfriend then asked me a question I hadn't really considered before: why don't you move into your investment property for a few years while you save up for a deposit on the place you actually want?

At first the idea of moving into my investment property didn't appeal to me

I think I was most opposed to the idea of taking something that was definitely an investment of mine and converting it into something which was not an investment - i.e. something which I was using for my own benefit.  In my mind I think I thought of that as reducing the amount I had 'invested'.

This was a really short term way of thinking about things and as I thought about it more I realised that perhaps it was not as bad a suggestion as I first imagined.  There are definite draw backs to such a move (which I will outline below) however there are a significant number of advantages (which I will also outline).

The benefits of moving into your investment property (while you save for another place)

When I outline the benefits of moving into your investment property please keep in mind that I am not comparing this to continuing to rent a place - renting is almost always going to be cheaper than buying a house (otherwise negative gearing wouldn't exist).  I am comparing this against buying a house that I can afford at the moment.

The benefits of moving into my investment property include

  1. Being able to save for a place I really want
    • I am currently priced out of those areas that I really want to live in.  Property in the areas that I want to buy are currently in the ~$1 million mark while I can only really afford around $700,000 mark
    • Moving into my investment property will give me a few more years to save up and buy in the area that I want to live in
  2. I already own the place I live in - no further sunk transaction costs
    • Transaction costs (such as stamp duty) when you buy a property run into the tens of thousands of dollars
    • I already own my investment property - I can invest those transaction costs which would have been sunk
  3. My loan is currently at a very manageable stage
    • My investment property loan is currently very manageable - I could pay it down very quickly and save for the place I actually wanted to buy
  4. I can always convert the property back into an investment property
    • When I eventually buy where I want to live I can convert my investment property back into an investment property, leverage against it (and so get a tax deductible loan) and use this to pay down my non tax deductible home loan
The cons of moving into your investment property

The cons of moving into an investment property instead of buying a new house are also very

Monday, 25 November 2013

Don't get ripped off when converting currency

I recently returned from my overseas holiday and realised that although people shop around a lot to reduce the costs for their flights and accommodation we rarely ever really shop around for a good deal on the currency that we exchange.  We normally go for safety and convenience, which are undoubtedly important, but given the amount that you are likely to spend in cash on your travels (from trinkets and souvenirs to meals, drinks and transport) it is always worth remembering that you can save a lot by shopping around for a good exchange rate

You can never change cash for anything like the actual exchange rate

I think we are all used to the idea that we are going to get screwed when we exchange cash.  Anywhere that retail punters typically go, there is a large spread between the buy and the sell rate with the actual exchange rate somewhere in the middle.  The first time it happened to me I was outraged but then I (like most people) got used to the idea of being screwed.

On my recent overseas holiday though I was once again reminded how badly you could get screwed.  I am going to call out one company which was particularly bad: Travelex.  They were offering to convert my currency at 20% less than the official exchange rate

Even by the regular standards of exchange rate rip offs - this one seemed particularly bad.  What was even worse was that this was their rate when I was looking to change a rather large amount of cash.  On top of this outrageous rate they were going to charge me a 'transaction fee'...normally this is built into the spread but Travelex believed that they could convince me that this was their charge.

Always shop around for a better may even do better next door

Obviously I wasn't going to exchange cash at this rate...I walked less than 10 meters to the ANZ branch that was right next to them at the airport and I got a rate that was only a 10% discount to the official exchange rate (with no transaction charge).  I wanted some cash for when I landed at my destination so I exchanged a bit at this (still exorbitant rate).

You can often get a better rate if you wait until you get to your destination

I'm not sure if it is only Australia which rips people off so badly when it comes to exchange rates but I always seem to get a better rate when I exchange cash at my destination rather than before I travel.  I exchanged more cash when I got to my destination airport at a

Thursday, 21 November 2013

Board Appointments: A flawed process

Corporate governance is one of those things which shareholders take an occasional interest in but can really make a difference to your investment.  The way in which executives are remunerated is important as are the directors who represent YOUR interests on the board of the company.

However for reasons I have posted about before, people very rarely get involved in the decision making process of their company.  Retail shareholders rarely vote and all too often institutional shareholders rely on proxy advisers to tell them which way to vote.

I have recently come to realise that there is also an inherent flaw in this process.  Even if you ARE interested in the way the company is being run you have little input into WHO gets to run the company.

But...don't I get a vote as a shareholder?

In principle yes.  You get to vote on all resolutions that are brought to an AGM or other EGM.  You get to vote for directors that stand for election and if you want to you can vote for or against directors based on their decision making.

But there is an inherent flaw in the way these resolutions are structured

  • It is the directors of the company who effectively determine who and what gets included on the ballot
  • When it comes to new directors, the current board will propose ONE name and you get to vote on whether you want that person on the board
  • When it comes to existing directors, you are not given any alternative choices if you would like to see a director of the board replaced
Effectively the board has too much power over their own appointment

The board should be there to represent the interests of shareholders, but the way in which the election process is set up means that effectively the board is representing their own interests.  The process is structured so that you are given a false sense of choice.

Further you are given insufficient information
  • When an external candidate is proposed the board often recommends shareholders reject their appointment and gives the reasons why they should not be voted for.  You are rarely given the reasons why you should vote for this person
  • When the board talks about themselves they talk about you should vote for them not why you would consider note voting for them
  • Boards often talking about new potential members as having the skills that the board needs (e.g. financial, operational etc.) however they never give you a choice of multiple people who have the same skills - i.e. give investors a real choice about who they want to represent them
This all makes sense when you think about the fact that directors do not want to lose their very comfortable corporate jobs or reputations.

What is an alternative?

The solutions all have to do with the information available to shareholders.  There are two solutions which I find particularly persuasive
  1. Make disclosures around how board members voted on EVERY vote available
    • Individual board members can then be held to account for every bad decision that they made as a director in a very real and direct way
    • Boards cite confidentiality and business imperatives as the reason that there is not more disclosure about how votes are taken and what options are considered...but as owners of the company we are the ones who have the right to know how are boards are acting
  2. Make a full list of candidates available for every directors vote
    • Companies always talk about screening several candidates for a board before putting one up for election
    • I am all for them screening candidates but why don't they put up several candidates instead of just the one that they want - why don't they give the investors the choice about who they want representing them
    • Further if I don't like the existing members of the board I want real alternative choices - there should be real, credible alternatives put up for every single current board member
Boards are never going to do this of their own volition.  They are too interested in protecting their own privileged positions but it is something that is a real concern and which people should pay attention to.

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Wednesday, 20 November 2013

How to respond if someone asks you what stock to invest in

I actually re-wrote the title to this blog about 10 times before I settled on what I was going with.  Originally I wanted it to be "No, random stranger, I will NOT tell you what to invest in"...then I realised that it may look like I was saying that to my readers which was not at all what I was going for.  This post is something that almost every professional faces and it's a pain in he backside so I'm going to tell anyone who works in the finance industry how to deal with it.

It drives me nuts when family, friends AND strangers ask me 'what should I invest in?'

Anyone who works in and around finance would know this feeling.  It is a question that gets asked all the time and it's insanely annoying for several reasons

  1. I don't know your financial situation and your risk profile
  2. I don't know how much you know about finance and I'm pretty sure you're mooching off my because you find learning about it boring
  3. There is no way I'm ever going to give you a stock that I'm thinking about...if it goes down you're never going to accept that stock investing comes with risks so I could have been right in my rationale and been wrong in the short or long term
I know it is not only financial professionals who get this.  I imagine doctors and dentists get it all the time - I have seen family members bother others about all sorts of conditions in social settings when it is clearly inappropriate.

What also drives me nuts is when complete strangers ask me what to invest in.  I was recently at my high school reunion and I was chatting to someone who I hadn't seen in a decade who I wasn't even friends with in high school and he asked me what he should be investing in.  At least with family and friends I felt some sort of obligation to educate them a little...with way!

So here is a 'safe' answer you can give if you work in the finance industry

I found a really safe answer

Tuesday, 19 November 2013

Penny wise, Pound Foolish

My dad is full of clichés - in fact I am pretty sure I once heard him use 3 of them to complete a whole sentence.  One of his favourite though is that "if you take care of the pennies and the dollars will look after themselves".  Unfortunately I think I fall within another common cliché - I am most definitely "penny wise and pound foolish"

I had always subscribed to the first one - I am very careful with my small expenditures and save quite a lot of money by doing things like bringing my breakfast and lunch from home and for looking for the best ways to save money on meals when I go out.  The problem is that, even though I look after the small stuff so much, I lose most of these savings by blowing a significant amount of money on large expenditures.

You can lose all the benefits of careful saving through a few big expenditures

I only realised that I operated in this way because I have been trying to keep to my expenditure goals (which I reset recently after not being able to keep to my first set of goals).  I was discussing it with a friend and he got me to walk him through where all of my money went to.  I rattled off all the items which were 'quasi compulsory' and I knew and accepted where a lot of that money went and where I was happy to pay a premium.

However I then started to think about bigger ticket one off items which do not reoccur and I realised that this is where I spend so much of my money.  I think very little of going away for a weekend with my girlfriend or of an overseas holiday for 2 weeks.  The former is expensive and the latter can really blow a budget quite easily because I hate backpacking and I love experiencing everything.  Further I love a night out on the town as well as nice dinners (which can easily come to $200 a night).

This is a lifestyle choice...and I need to change it

I have traditionally held the view that the solution to budgeting and investing is just to earn more.  I wrote about this a long time ago but I think this is something I need to change.  The further I get into my career, the more I realise that I want

Friday, 15 November 2013

Weekend reading: The Truth About Marissa Mayer

This post will be very short from me as I thought I would post up something incredible that I read recently.  It is a biography of Marissa Mayer, the CEO of Yahoo and covers her life from growing up to college and her stellar career at Google and then the transition to being CEO of Yahoo.

The link to the article is here and I really recommend you spend the time reading it.

A few comments about the article

I really like it when a good piece of investigative journalism is done.  With our shorter attention spans, the trend towards more news, not more in depth news and the days of 140 character updates news, information seems to be focusing on the highlights and not the details.  This article is different though - it is seriously long and well researched.  I confess that I first looked at it the length of it intimidated me slightly and I thought I would read the first few paragraphs (at work) and then print it to read at home.  I got so engrossed in the article that I spent the next 30 - 45 minutes reading it from start to finish.

I like it when a biography is more than a puff piece.  All too often biographies are either puff pieces or hatchet jobs.  This seems to be exacerbated when the person is particularly powerful like a billionaire or the CEO of a powerful

Wednesday, 13 November 2013

Beware travel medications: You can get ripped off

I am used to losing cash pointlessly when I travel - in fact when I am going to the third world I expect to pay 5 times what I should because I have no idea what the cost of something is meant to be.  But when it happens at home it really irks me.  This is a warning for all those who simply assume a doctor is going to prescribe the cheapest medication because it's the right thing to do: they aren't and you can get stung for hundreds of dollars.

I was travelling and left my medical appointment to the last minute...

I am going on holiday to a part of the world where you really need malaria medication and I had completely forgotten about it.  With 2 days to go before I leave (don't worry - the posts will keep coming - I learned my lesson from the last time I travelled) I scrambled to make an appointment with the doctor.

I have been going to the same doctor for as long as I could remember however he retired earlier this year and this is the first time I've needed to go to one.  I went to one in the CBD next to work.  I knew it was going to be expensive...but $70 for an appointment which took exactly 6 minutes seemed a little excessive to me.  I'll get a bit back on Medicare but it is still ridiculous.

I was actually going to post about this - about trying to find a doctor who bulk billed because it could save you a lot of money if you went several times in a year - but then I got stung really badly.

I had a doctor who was not interested in providing me the full information

The doctor I got stuck with did not bother to provide me with the information I needed.  I went in and asked for a prescription for malaria medication.  I have travelled overseas a fair bit and I know what I usually take: Doxycycline.  I mentioned to him that I have a real sensitivity to light when I take it (a common side effect) and asked whether it was the only medication out there.

He said there was - it was just as good and then he prescribed me Malarone which seemed like a magical drug when he described it - you don't need to take it as often as Doxycycline, you don't need to take it for as long and it works just as well which sounded like a miracle replacement...

However when I went to the chemist...10 days worth cost me $150!

Doxycylcine costs ~$30 for a 10 day trip...I was out of pocket more than $120 to solve a problem that I had been dealing with for years.  The doctor I had a relationship with never bothered to prescribe this other drug for me because he knew it was super expensive.

I know I should have asked about the cost.  I know that it was on me to get the right prescription...but when a doctor doesn't mention to you that the cost is significantly higher...and the only way you can get another prescription is to pay another $70 then it does feel like a bit of a rort.

The moral of the story is...don't trust that a doctor is prescribing you the most cost effective medication

If it is not life and death it is worth asking them about the relative cost and benefit.  For me the difference between the two drugs was a sensitivity to light but they worked to stop malaria just as well as each other...I would have taken the cheaper drug.

If you don't have a relationship with a doctor that you trust to do the right thing by you it is worth asking the questions.  It is sad that you have to but you could get stung like I did. It pays to question what you are being told (whether it is by financial professionals, lawyers, accountants - or as it turns out here...medical professionals).

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Tuesday, 12 November 2013

Interactive Brokers - BPAY makes funding even easier

As regular readers may know, I use interactive brokers for most of my share trades.  It is cheap, simple and easy to use.  It has some big draw backs including not being able to invest in dividend reinvestment plans which they really should fix, however they also have some quirky benefits like being able to get over-allocations for rights plans due to the way in which they hold your shares.

It was always quite easy to fund your account with Interactive Brokers

I have covered before how easy it was to do a wire transfer into Interactive Brokers and how my account funded the very next day.  One of the slightly more frustrating things about wire transfers is that often financial institutions would limit how much you could transfer to another account per day.  These limits were quite large - for my financial institution there was a maximum of $20,000 per day - however there were situations where I wanted to do more than this.

The first time I participated in a rights issue I wanted to transfer about $50,000 into my Interactive Brokers account to apply for an over-allocation.  I had to do this over 3 days which didn't limit my ability to participate, but if I was not on the ball about this issue then it would have become a problem.  If I wanted to participate fully in the over allocation it would have taken me 5 days to transfer all the funds.  This can be a problem, especially when the election window is quite small.

The cap on transfers was not Interactive Brokers' limitation and I thought that there was no solution to this issue and when I went to transfer another $50,000 into my account for my latest rights issue participation I was pleasantly surprised to find out that they had made funding your account even easier.

You can now fund your account using BPAY

Instead of having to

Friday, 8 November 2013

How to avoid getting caught in a financial scam: Ask yourself "why me?"

People get sucked in by scams all the time.  From thinking that they are going to make it rich by funnelling cash through their bank account for someone trapped in the third world to allowing someone who says they are from Microsoft to take control of their computer and steal their identity.  Some of these are so obvious that we wonder "How could they possibly fall for that?"...however people seem to fall for scams and dodgy investments all the time.

This will be a rather short post which will encourage you to ask one of the most important questions when trying to work out whether something is legitimate or not.  It is will deal with financial related scams and dodgy investments (but will not save you from the tech scams like the Microsoft one mentioned above).

Always ask..."why me" before investing in a 'great deal'

Financial scams are almost always pitched as a once in a lifetime opportunity that is being offered to you so that you can make a lot of money in a short time.  Always take a step back and ask yourself 'if this is such a great deal why am I being offered it?'

Very few people (and certainly not a stranger on the street, or someone that is part of a social club or church congregation) will give you something for free. Even if you know what they are getting out of need to ask yourself why you are being offered the deal of a lifetime or the great deal that not everyone has access to.

I have written about this before but if something seems to be too good to be true then it usually is.  But even if you get sucked in at this point and think that it may actually be a good deal then think about this...why is it being offered to you...Mr or Ms Ordinary Investor.  I work in the investment world and trust me when I say that these sort of 'super return' investments do not exist in our world...why?  Because we know how the game is played and fraudsters are not going to make money off us.

If something is guaranteed to make a huge or abnormal amount of money, especially in the short term then ask yourself why they are selling it to you and not mortgaging their house to invest in whatever they are trying to sell you.

Ignore them when they say that they are investing alongside you...and don't ask them why you've been chosen

The thing about investment scams and confidence scams

Thursday, 7 November 2013

FKP: Another year, another rights issue

When I write posts about stock investing I generally try and stay away from stock specific examples especially when I am writing about ways to make money because I don't want readers to invest in anything I am doing unless they really understand it.  That being said, one of the stocks that I do write about reasonably often is FKP because so much seems to be happening with it.

I have posted several times on the stock because

Now the stock is back again and I seem to have done everything right this time around (by absolute fluke).  The day after I sold my partial holding in FKP taking a large profit, they announced a large rights issue which once again offers to the potential to make quite a bit of money.  You can't buy into the rights issue unless you hold stock so please keep that in mind as I'm writing this post.

A recap on how rights issues can make you a lot of money

As I have posted about before, rights issues can make you a lot of money.  For the full details see the prior post that I wrote on this topic.  However basically it came down to
  • You can buy stock at a discount (in this case significant discount) to the prevailing share price
  • If you buy your rights (proportionate to your share holding) you are typically even if the share price trades at TERP (the theoretical ex-rights price - see how to calculate TERP here)
  • However if you apply for an over-allocation of shares that people don't take up then you can make instant profits by selling the shares at the market price and buying them at the discounted price
The biggest risks involved in this are
  1. The share price trades below the issue price straight away or by the time you get around to selling the stock
  2. You get scaled back significantly and the company just returns your cash but you've lost any interest you could have been making on this in your home loan or savings account

FKP traded really poorly last time after their rights issue...what is different this time?

After FKP did their rights issue last

Tuesday, 5 November 2013

October 2013 Expenditure Tracker

This is the third month of my reset expectations and the second month in which my smoothing technique has started to come into effect.  Although I am still spending far too much on my personal expenditures and not saving enough this month did represent an improvement.  I am starting to control and think about my small expenditures better - things that I don't normally think about but which add up.

ItemOct 2013Target (new)Over/(Under)Target (old)Over/(Under)
Share Investments+$1,094+$2,500-$1,406+$2,000-$906
Offset Acct.+$3,050+$2,400+$650+$3,500-$450
Personal expenditure+$4,305+$2,800+$1,505+$2,200+$2,105

As you can see above I performed quite well in my offset account target and my personal over-expenditure almost exactly offset my share under-investment.   The major movements in my 3 accounts are discussed below.  I will discuss my share investments first as it had the most moving parts

  • Share investments
    • Although you can't see it in the numbers above there was a fair amount of movement in my share investment account this month
      • I sold a portion of my holding in FKP because the price was getting a little ahead of itself and I wanted to take some of my gains
      • I kept this cash in my share trading account because (as I will discuss tomorrow) the company decided to do another rights issue almost as soon as I had sold out
    • I continued to invest in my employee share plan
    • I have been holding onto cash that I want to invest in the share market for quite a while however I am assessing my current portfolio before I go out and start looking for new ideas.  I am also uncomfortable at the moment with investing in index funds because the market has run so much
  • Home Loan Offset account
    • I actually didn't save as much as I wanted to from my wage this month due to several factors including
      • An over-expenditure in my personal expenditure account
      • I had run

Friday, 1 November 2013

October 2013 Net Worth: $414,000 (+5.0%)

Value% Change
Net worth$414,000+5.0%

My target this month was for a significant net worth increase from the previous month and I wanted to get over $400,000 (which I thought may be a bit of a stretch).  As you can see above I smashed through this because of a really strong share market performance which I will discuss below.  The volatility in my net worth in recent months has almost entirely been driven by my share market performance.

An interesting thing I noticed was that, because I have been concentrating on the small factors - i.e. controlling my expenditure and saving and investing where I can and ignoring to a large extent my overall portfolio (other than this update every month) the growth in my share portfolio and the impact this has on my net worth continues to surprise me.  It is now a significant portion of my net worth (whereas before much of my wealth was tied up in my investment property).

Below I have outlined some of the factors (both positive and negative) which have impacted my performance this month

Positive factors
  1. A continued positive performance in the stock market
    • After the US government stopped it's shut down the market responded quite positively and this impacted a lot of my investments (as I tend to have a risk on portfolio)
    • One of my shares, FKP had a very strong run and I partially sold out some of them, taking a nice profit along the way
      • Because I had different entry prices I wasn't burned by a CGT liability at all (which I include in my tracking).  Any further sales in this stock will incur capital gains tax however I have held a significant number of them for longer than 12 months so will be entitled to a discount
  2. Strong savings into my offset account
    • I did not manage to save a great deal from my wage this month into my offset account - my personal expenditure is still not under control (although is much better than in previous months) however some of my restricted cash bonus from last year vested which allowed me to save more than I had originally expected
Negative factors
  1. Low levels of cash
    • Although I have improved my cash position

Thursday, 31 October 2013

Buying a home and the desire to do better than our parents

I have recently started posting on how I have started hunting for my own home (as opposed to an investment property) and how I seriously underestimated the level of house prices in Australia.  Indeed one of the things in that latter post which shocked me the most was that I ended up looking "where my parents lived".  This post is to examine why so many people have this viewpoint and how it can create real disappointment when it comes to house hunting, especially if you were brought up in an upper middle class or affluent area.

The desire to do better than our parents is a goal shared by many people

Almost everyone has a desire to achieve something in their life.  It does not need to be financial (although in my case it is) but almost all of us have hopes and dreams that we hope to fulfil in our life.  When thinking about our goals and objectives our base line is often set by the example of those closest to us - our parents.

This does not mean that we in any way diminish what they have achieved in their life - we are often proud of what they have accomplished (sometimes in the face of great adversity).  It is just that when we set our own goals and objectives, our parents achievements are our 'norm'.  It is what we have grown up with and we do not experience the harder times when they were much younger - we experience the pinnacle of their achievement (when we are of an age to appreciate the way in which they live).

With this 'base line' set our goal is all to often to live our own life and achieve our own goals.  Our goals, however, are often set at a level higher than our parents achieved because this is 'improving our lot in life'.  It is not a particularly revolutionary idea or statement - in fact I think most people would share this way of thinking and living.

However, when we go to buy our first house...we often find ourselves going backwards

This desire and goal is

Tuesday, 29 October 2013

Taking partial profits with shares: A sensible strategy

One of the biggest problems that most people have with investing is knowing when to sell and take the profit they have made on their shares.  If you have bought a share which you thought was cheap and you have a significant margin for error built into your valuation the chances are that you will face the problem of having a share that has performed significantly well in percentage return  terms but still represents value in an absolute sense.

An example of how the issue can come about

I recently faced this problem after FKP (a share that I have posted about extensively on this blog) performed very well.  I first purchased FKP, an Australian retirement and residential property stock because it was trading at a significant discount to it's net asset value (NAV).  However not long after I did so they had some serious debt issues and did an equity raising at a significant discount to the stock price.

I participated in the equity raising and managed to get a significant over allocation because of my particular broker (most people got scaled back which was rather annoying at the time).  In the following months the stock performed terribly which was nerve racking because it represented 1/4 of my share portfolio.  Given how low the price fell I would have liked to purchase more but from a portfolio concentration point of view this didn't make sense.

You may wonder why I didn't sell the stock and just take my losses when it was performing so badly.  I had researched the stock well and I believed that the management team was doing the right thing and the news that was coming out was incrementally positive the whole time even though the market was not recognising it as such.  I was keeping on top of my existing shareholdings which is easy to forget to do.

Recently, after more good news the share market finally responded positively to the stock and the stock moved to a point where I had made a ~20%+ return and I was faced with a dilemma...this stock could go up by another 20 - 40% but I had already made a good profit off it...should I sell it or should I hold onto it?

Taking a partial profit allows you to lock in some of your gains

I decided in the example above to sell about 1/3 of my

Friday, 25 October 2013

My first Google Adsense paycheck! I definitely don't do this for the money...

People reading my blog would no doubt have noticed that I have some advertising on this blog.  However they are really limited  - I have a few Google Adsense banners, I have written one sponsored post (I have been offered others but they wanted to write the content of the post which I didn't want)  and I can potentially receive affiliate revenue if you click through one of my book review posts to one of the book sales websites that I link to.

  1. I don't really write this blog to make money - if I put the amount of time and effort into actually making money that I put into this blog I would have made significantly more
  2. I hate websites which over-advertise - we have all had the experience of websites which may have good content but which are just covered in advertisements.  It really distracts from the content and I really write on this blog now to help others out in the same way I have been helped.  Pop up ads are the ones that drive me insane.
Because I am not really willing to push the advertising thing (as mentioned above) I do not really make a great deal of money from this blog which I'm completely fine with - I'm looking to start my own business as a second income stream.

But...I do get a little bit of revenue and Google just paid me for the first time!!

I do get a little bit of revenue from this website (mostly when people click on the links to the advertisements but some for the people that visit the page) and it was very exciting when earlier this week I got a notification that I had been paid for the first tine. 

It was not a huge amount - about

Wednesday, 23 October 2013

People weren't kidding: Property is really expensive in Australia

I posted recently about the fact that I have started searching for my own home and how I was doing this well in advance of when I actually wanted to buy my own place.  I have actually been surprised at the number of developments that have taken place in relation to this in the relatively short time since I did that post.

Some of the big things that I have done since I decided that I actually wanted to buy my own place included

  • Talking to my girlfriend about it
    • Getting on the same page with my girlfriend about where we were heading etc. was a great idea (although for the life of my I can't remember how the conversation came about) because it forced the discussion about other life factors
    • It is really really hard to work out what you want and a price range for a property when you have no idea of what your life plans are going to be 
    • If you are thinking about buying a place make sure you think about your life plans
  • I started narrowing down areas where I wanted to buy
    • I actually sat down and thought about where I wanted to live and what I wanted to buy and then thought about what I wanted to spend and how much I could afford now and potentially in the future as well 
    • I then worked out what areas fulfilled all three requirements
Then something scary happened...

You know how you read people complaining all the time in the newspapers and on blogs and in social settings about how expensive real estate is?  They weren't kidding.  I earn a really good wage for

Tuesday, 22 October 2013

The US Government Shut-Down has me reconsidering my sector allocations

I posted recently that I was rather disappointed that the markets had not over-reacted to the news of the US government shut down and I was hoping that it would go a bit nuts and that there would be a buying opportunity.  It appears that I may have missed some short term gains as the market rebounded significantly in the days following the apparent resolution of the crisis.

Below is a chart of the US share market (represented by the S&P500) and how it performed in the lead up to (in anticipation of) and during the shut down as well as the strong rebound post the shut down.  Although the market did slip early on the market did not really over-react however as outlined before, perhaps people are celebrating too soon.

However...before you think that everything is back to normal...

The solution the US government comes to appears to be a short term solution - i.e. the government is only being funded until January 2014 and the US will once again have to raise their debt ceiling a month later.  Although I try and keep abreast of US politics for financial reasons (and because the drama is frankly more interesting than anything I have in Australia) I do not have a deep understanding of what it would take to resolve the situation.

It seems to me that the US politicians are going to be shooting themselves and the US economy in the foot if they continue to govern and negotiate through crisis tactics. Further it is pretty to easy to see why it is bad for the US economy and share market to continue to do so.

If both domestic and international (e.g. me) investors are unsure about when these types of crises are going to hit again we are going to require a greater premium on our investments (such as interest rates) or demand a higher return on our shares to compensate for the fact that the market seems to blow up every few months based on the newest drama created by US politicians.  This means that borrowing costs for the US government are going to be higher than they would ordinarily be and the share market is going to bake in a discount to account for the fact that there is more short term volatility.

What does this mean for my investment strategy?

Although the share market has responded significantly since the announcement of the short term resolution to the crisis, the US dollar has

Thursday, 17 October 2013

The Corporate Paradox: Communism inside a Capitalist Entity

I'm sure there is more extensive research on this out there but I was recently struck by a discussion I had with a colleague about the nature of capitalism and the players that act in it.  The crux of this post is that it is a strange dichotomy where the main players in our capitalist system - i.e. the corporations (especially the large institutionalised ones) work more like a communist economy internally while spouting the benefits of capitalism and free markets externally.

In several posts before I have identified as a 'realist capitalist'.  That is I know and appreciate the benefits of free markets and capitalism however I do not think they are perfect and we add enough distortions to the system which means that rational actors do things and act in ways which are perfectly rational from an economic standpoint (such as forming unions).  I think that accepting the rhetoric of capitalism and ignoring it's shortfalls are dangerous and leads to bad policy outcomes.  Besides which - it can be a fun thought exercise.

Corporate entities often work like communist economies

Most people would call me out for being ridiculous for suggesting that the bastion of free market capitalism - the corporation - is more like a communist government than the free market hero they position themselves at.  They may be a free market hero when they are operating as an entity as a whole but if you look through to how corporations (especially large institutionalised ones) actually work...they are remarkably like a communist economy.

You can take this analogy quite far however at a very high level:

  • Like communist countries, corporations are centrally planned
    • Corporations have a very strict hierarchy of control and the ability for any part of the corporation to act economically independently of another to maximise their own profitability or outcomes is squashed for the greater good of the corporation
  • Like communist countries workers within a corporation rarely have an input into their job function
    • There is an allocation of labour in corporations based on where the resources are needed and people find themselves often doing things that they originally didn't come on for because that is where they were needed...a system awfully like that of communism
    • I'm not saying that you cannot leave the corporation...just that if you want to stay in it you need to play within these rules
  • Ideas and independent initiative are subject to approval of those further up the chain 
    • How often have you seen employees of a corporation come up with and implement independent ideas without the approval of their managers and how often can they quickly respond to a need or want without this approval?
    • If a corporation acted like the free market bastion it claimed to be there would be a maximising out outcomes within the corporation through things like competition and innovation
You can keep going with this analogy for as long as you want - there is a centralised media strategy, only approved people are allowed to set strategy and to message this strategy to the outside world etc. etc. 

Yet corporations are often the most vocal proponents of capitalism

I find it incredibly ironic that probably the most centrally planned entities within our free market economy are the ones that are constantly calling for deregulation and an ability

Tuesday, 15 October 2013

What should I do with my bonus?

People in many industries (including finance) get paid on a salary + bonus structure every year.  However because of what it is called, even if a bonus is relatively certain and you know the approximate amount you are going to receive, people still treat it as a windfall rather than as an ordinary part of their income.  I would argue that you should plan to spend and invest your bonus in much the same way you do your ordinary income - spend a part of it, save/invest a part of it and put some aside for a rainy day.

What is the problem with treating a bonus like a windfall

There are a couple of major problems with treating a bonus as a windfall which include

  • No one really plans for a windfall which means that most people, when they receive one tend to blow it or invest it haphazardly.  Just think about what you have ever done if you have one a cash prize or received a modest inheritance - most people do not do sensible things with it
  • Even if you do invest it...lump sum investing is always more risky.  There are others (and I fall into this category all to often) who treat the bonus like a windfall and know we should invest it but then go out and do it in one hit so we don't have piles of cash lying around.  The big problem in this is that we may not be doing this when we have a great investment idea and if we stick it in something like index funds then you're effectively saying that this was a cheap point in the market
  • People rarely stick some aside for a rainy day.  I have never been a 'rainy day stash' kind of person however I've realised that having a small amount of cash that doesn't get touched except in extreme emergencies is a valuable thing.  Putting aside a very small amount of income every month can help you build up this slowly and bonuses (where you have excess uninvested capital) offers an opportunity to top this up
How do you plan for a bonus?

The simplest answer is to plan to spend and invest your bonus like any other budget.  However you need to put less into personal expenditure as your regular income normally covers this and more to saving and investment.  Here are some steps which

Friday, 11 October 2013

Fuel dockets are useful but don't get sucked in

This is a post for my Australian readers once more and will deal with fuel dockets which you get from Coles and Woolworths when you spend more than $30 (which typically reduce the cost of petrol at selected petrol stations by 4c / L).  We all know how they work and where we can use them and they are particularly handy, especially with fuel as expensive as it is (especially if you need to fill premium fuel in your car as I do).

Before you get totally sucked into this mindset...think about how much you are saving

The amount will differ for everyone but if we use my car as a typical example.  My car requires premium unleaded fuel (why I will never understand as it is just a standard Japanese made car) and has a 60 litre tank.  I am not the most efficient driver so I only get 10 km / L when I drive.  I typically only fill fuel when I need to and sometimes I leave it quite late so I am filling my whole tank up.

The maximum amount I can save is $2.40.  This does not vary when the price of fuel goes up and down which seems to be one of the strange mindsets that people get into.  I save 4c / L and I have a 60L tank...the maths is really easy.  Indeed because my tank is never completely empty I normally save far less than this.

Don't get sucked into buying something at the check out so you cross the $30 mark

I'm sure we've all done it - we are a few dollars below the $30 so we pick up one of the

Thursday, 10 October 2013

High Interest Savings Accounts are starting to pay very low rates

Interest rates are probably the one financial metric that almost everyone has a handle on.  People generally know the official cash rate and also know what they are paying on their mortgage as well as the rate they are getting on their savings.

Conventional wisdom is that decreasing interest rates are good - but this is only for those who have loans - if you have cash savings (especially in bank accounts) - then you are disadvantaged when the official cash rate comes down.

Australia is now starting to experience what many in western economies have been experiencing for a while - interest rates so low that the amount you earn (even on high interest savings accounts) that you are barely keeping up with inflation and you are certainly not earning a decent return on your invested capital.

Check your high interest accounts - you may be surprised how low the rate is

I have a high interest account which I use primarily for expenditure smoothing and I realised recently that I was only receiving 2.5% p.a. on this account.  I did a quick check of other high interest savings accounts and I realised that they had all come down as well.

The best rates I could find were introductory rates which were around ~4.5%.  I have written before about how to roll the best introductory rates available which should help you keep the rate up if you really want to stick with savings accounts.  However these accounts were limited as well - some of them had maximum cash levels for the high rate (e.g. you would only get this high amount up to $10,000) while others would not let you withdraw at all or required a minimum deposit each month without any withdrawals.

The first thing that you need to do is to check your current high interest savings account - find out whether you are getting a rate of interest that you are happy with.  I would suggest that anything less than the inflation rate (~2.5%) is not

Tuesday, 8 October 2013

Damn! No one seems to be over-reacting to the US Government Shut Down

About a week ago now the US government went into shut down after Democrats and Republicans could not pass a budget.  There are many causes of this - all political and I do not have a good enough understanding about US politics to understand how it is going to end or how long it is going to take.

Similarly, most people know that the likely economic effect will be bad if the shut down goes on for long enough but people do not know how bad or what the impact will be on confidence or markets generally.  There is much speculation and reporting out there on this very fact and it is not something I have a great deal of insight into so won't post about.

Why do I want people to over-react to the government shut down?

You may be wondering why then I am posting about it and why I seem disappointed (from the title of this article) that people are not over-reacting to the news.  The fact is that I am looking for a (personal) silver lining in the shut down.  Markets typically over-react to all news (good and bad alike) and this creates opportunities to buy or sell depending on which way the market goes.

I have posted recently on how the market had run so strongly and I was actually finding it hard to find places to invest.  I am not a short term investor nor am I in need of my invested money in the short term so I would be quite happy for the share market to tank temporarily (or even for a few months) which would give me the chance to invest some of the cash I have been building up.

Interest rates are so low at the moment that having this cash has been really inefficient however I have not found any value in the share market (other than some of my current holdings) so I have been sitting waiting for buying opportunities.

I want people to over-react.  Panic is good if you (as a rational individual) can control your own feelings and invest when others are panicking.

Unfortunately...people seem quite sensible about it this time around

I think one of the reasons that the markets are not over-reacting is that it very much seems like ground hog

Friday, 4 October 2013

Razor blades...can you save money by buying non standard blades?

This will be a post for the male readers today - not that I discriminate but for this weekend post I will be writing about the cost of razors and whether it is worth buying non branded blades in order to try and save on what is a very very expensive product.

Let me say upfront this is a personal observation and not scientific.  If you have had a different experience I would love to hear from you.  The test subject for this 'experiment' was my face and I'm one of those guys that needs to shave every day so it got some fairly robust testing.

What are the options when it comes to razors and shaving?

  • Buy a brand name razor and replace the blades with authentic branded blades
    • This is the super expensive option which we all bemoan
    • Most people buy a Gillette or Schick and then replace the razor 
  • Buy a brand name razor and replace it with generic blades
    • There are a lot of websites which sell generic blades for brand name razors.  This is particularly useful for those of us who already own a brand name blade which (let's face it) look and feel better than the disposable razors (discussed below)
  • Use disposal razors
    • There is a view that disposable razors are actually just as good as the brand name razors for a fraction of the costs
    • The argument is that you get exactly the same quality of shave for a fraction of the cost
I actually decided to try all of these options - I figured that I was going to be shaving for the rest of my life and if I worked out the best option reasonably early then it I wouldn't mind taking the pain early.  I basically assessed them on how good the shave was and

Wednesday, 2 October 2013

September 2013 Expenditure Tracker

This is my second month of my reset expectations and the first where my expenditure smoothing technique has started to come into effect (i.e. whereby I save money in one month to offset future expenditures).  This month had so many one off large expenditure items that it would have taken almost my whole wage if I had not used the smoothing technique.

ItemSep 2013Target (new)Over/(Under)Target (old)Over/(Under)
Share Investments+$1,094+$2,500-$1,406+$2,000-$906
Offset Acct.+$169+$2,400-$2,231+$3,500-$3,331
Personal expenditure+$5,828+$2,800+$3,028+$2,200+$3,628

As you can see above I once again underperformed all of my old and new expenditure goals however given the different expenditures I had due I am not as disappointed as I would normally be.  This was just one of those months that happen every so often where everything falls due and there is no way of getting around this.

The major movements in my 3 accounts are discussed below.  I will deal with the personal expenditure first (as this pretty much drove my whole result)

  • Personal expenditure
    • My credit card bill this month was ~$3,700 which is significantly more than my reset amount - this alone was enough to break the budget
      • However offsetting this was ~$1,800 which I had put away previously
      • This still left a significant amount which had to be cash covered but it was definitely not as bad as it could have been!
    • I put away ~$1,000 to cover future expenditures in the month which obviously detracted from my cash balance (and somewhat neutered the effect of the amount that I was funding my credit card bill with)
    • I had significant cash expenses this month including
      • A cash wedding present - these always hurt and there is no way of getting around them
      • Paying for flights and accommodation for my overseas holiday in November - this was the major culprit
  • Home Loan Offset account
    • With the expenditure smoothing that I was doing above, I was able to put $1,000 into my home loan offset account for the month which I was pretty happy about given the number of expenses I had due this month
    • However offsetting this was that a lot of annual bills fell due this month including my annual insurance bill as well as my quarterly rates bill
    • The net effect of this was the small increase seen above
  • Share investments
    • I actually still have quite a lot of cash sitting in my share investment account and I will not be transferring money into this account until I work out where I can place the cash
    • As I recently mentioned I am re-evaluating the stocks in my portfolio and I will start moving back into shares once I work out where there is value in the market
On a cumulative basis my (reset) performance is as follows:

ItemAug 13 -Sep 13Target (new)Over/(Under)Jan 13 -Sep 13Target (old)Over/(Under)
Share Investments+$2,188+$5,000-$2,812+$16,187+$18,000-$1,813
Offset Acct.+$2,319+$4,800-$2,481+$8,848+$31,500-$22,652
Personal expenditure+$11,420+$4,800+$5,820+$43,322+$19,800+$23,522

Unfortunately I am still way out on my expectations.  I am hoping it starts to come back in the coming months with my tax return and the payment of my bonus as well as more controlled expenditure (perversely I spend much less when I go overseas because I tend to pay most of the expense in advance).  I did a quick calculation of October and I think my personal expenses will be much more in control over this coming month.

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Tuesday, 1 October 2013

September 2013 Net Worth: 394,000 (+2.4%)

Value% Change
Net worth$394,000+2.4%

As in recent months, this month's net worth performance was quite volatile.  After a flat performance last month I had quite a good performance this month.  My net worth target for this month was $390,000 and you can see above I have quite significantly exceeded that goal.

September 2013 had some swings in various accounts (most notably my share portfolio) which I will outline below however there was a mixed effect including a significant reduction in cash as I had to pay for two overseas trips (one to visit family and the other my annual holiday).  Interestingly my cash spreading technique is starting to work and my credit card bill was not as bad an influence as in previous months even though I had quite a large bill due.

Below I have outlined the factors (both positive and negative) which affected my performance this month:

Positive factors
  1. A really positive performance in the share market
    • The share market and particularly high beta stocks (which disproportionately represent my portfolio) performed really well over the start of the month which boosted my returns significantly
    • They pulled back towards the end of the month however not enough to impact my net worth performance
  2. A much lower credit card balance
    • My credit card balance dropped by almost $1,000 as I had less one off bills due this month
    • Interestingly this month my cash balance did not drop as badly as I had expected because I had started to expenditure smooth some of my larger bills (as posted about before)
  3. Continued saving into my employee share plan
    • As posted about every month, the enforced saving that comes from my employee share plan is a constant source of performance in my net worth performance.
    • I always thought I was a pretty disciplined saver, however if I look at how much I save into my home loan versus my employee share plan, the difference is pretty stark
Negative factors
  1. Lower levels of cash
    • I have had to