Tuesday, 30 April 2013

May 2013 Sector Allocations: An opportunity in resources?

Readers of my expenditure tracker posts would know that I have seriously under-invested in the share market recently as it moves from one high to the next.  I am, at heart, a contrarian investor who loves stocks and other investments which are cheap because they are out of favour.  Those investments which should, at some point return to a normalised value.

As a result of this investment bias (make sure you know what your investment bias is) I have found it increasingly hard to put my money in the areas which I know well (that is, infrastructure, property and industrial share investments).

I confess that I have not paid a great deal of attention to resources stocks over the last few years.  The resources boom and their popularity in the market meant that I never really paid them much attention.  However I recently noticed that these stocks have not gone along for the bull run that the non resources stocks have had.

The chart below shows the relative under performance of the S&P/ASX 200 resources stocks (the green line) versus the broader S&P/ASX 200 index (the red line).  The difference is stark:

Some of the factors that have caused resources stocks to under perform include:

  • Concern about growth in China
    • China has been the big driver of the resources boom over the last few years and a lot of valuations were based on continued strong demand from China
    • Although there are signs that Chinese growth is moderating, the swings in share price on quarterly GDP numbers are truly staggering
  • A significant fall in the gold price
    • The gold price is one that I will never ever understand
    • There are so many things that drive it, from demand in India to the risk aversion in the market and people using it as a risk hedge
    • The fall in the gold price smashed gold stocks (understandably) however also seems to have dented confidence in other companies which have no gold operations whatsoever
  • A hunt for yield
    • There has been a real push for money to find a home in high dividend yielding stocks and investments, so much so that many infrastructure stocks trade at massive premiums to what their fundamental values would suggest based on the fact that they have a good yield
    • Resources stocks typically have much lower yields and the hunt for yield appears to have hurt these stocks in the process.
I know very little about modelling resources stocks

I know the absolute basics but unlike financials, industrial and infrastructure stocks I have no real experience or track record in modelling resource stocks.  However, the ~30% under performance in the last year is tempting me to enter the space.

I have decided to

Friday, 26 April 2013

The Social Network: Movie Review

I often review financial books in order to help readers of this blog cut through a lot of the junk that is out there.  I also occasionally review movies - I don't think they are even nearly as educational as books but people often learn from movies so it is often worth looking at.

The Social Network may seem like a strange choice for movie to be reviewed on this blog and I watched it more for entertainment purposes than to learn anything.  However it was fascinating and had a couple of lessons for would be business people and entrepreneurs which I will cover in this post.

I was surprised at how much this movie made me think and re-evaluate the way in which I had done business.  I have not yet created a successful business and although I had put my business plans on hold last year I am starting to explore options relating to this again.

The Social Network: Movie Summary (no spoilers)

I will obviously let you watch it for yourself but this movie offers a fictionalized account of the founding of Facebook.  It goes through the motivations for the founding of Facebook as well as the way in which the idea was conceived and developed.

The story is told from 3 perspectives:
  • Mark Zuckerberg: The founder of Facebook who is defending two legal suits in relation to the founding of Facebook  
  • Eduardo Saverin: The co-founder and former CFO of Facebook who is suing Zuckerberg for pushing him out of the company and making his shares worthless
  • The Winklevoss Brothers: Brothers who are suing Mark Zuckerberg claiming that he stole their idea for Facebook after they hired him to program a very similar site
The movie is centered around the discovery process associated with the litigation and the depositions of the parties above.  It is a particularly interesting way to approach the movie and I thought it allowed the director to really engage with the issues while describing background information through the lawyers questions and discussions.

Lessons that viewers can take from The Social Network

Obviously the lessons I am going to be focusing on center around the business aspects of this movie.  Some of the core lessons that I took from it include:

  • The necessity of setting up iron clad legal agreements when going into business with partners, even if they

Thursday, 25 April 2013

Anzac Day Appeal - A worthy cause

Just a quick post from me on ANZAC day to encourage all my readers to donate to the ANZAC Appeal which runs every year.

For all my international readers, ANZAC day originally was to honour the soldiers from Australia and New Zealand who fought and died in Gallipoli during World War 1.  Today it more broadly commemorates all those who have fought and died in military operations for their countries.

The ANZAC Appeal is run by the Returned Serviceman's League (RSL) and it provides support to past and present defence force members in a range of financial and non financial support services.  You can read more about what they do here.

Obviously I wouldn't expect my non-Australian readers to contribute to the Australian RSL and ANZAC appeal however I am going to take this opportunity to encourage you to support organisations in your country that do the same work.  I confess that I am a person that is never likely to serve my country in that way and I have no idea what the soldiers go through and the sacrifices they make.  This is a small thing that we can do and I really encourage you to help in whatever way you can.

Being a financial blog - I thought I would also remind you about a few things that I have written in the past on donating to charity:
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Tuesday, 23 April 2013

What are Bitcoins and should you invest in them?

I recently got sent an article about Bitcoins and the way in which they are going to revolutionise the way in which the financial system works.  There seems to be a lot of buzz about them at the moment and the following post will cover what they are and should you invest in them.

What are Bitcoins?

A Bitcoin is a decentralised virtual currency which means that it exists only online and is not regulated by any central bank.  There are a finite number of Bitcoin in the world.  They are currently generated by Bitcoin miners and there is an upper limit of 21 million Bitcoins which will be reached by 2040.

They have no fundamental value and are exchanged by users over a P2P network.  They are generated by a program on your computer which 'mines' Bitcoins but the amount generated decreases as more users join the network and as the number of Bitcoins approaches the upper maximum of 21 million.

They are untraceable and can be used in transactions with anyone else that will accept them.  This is the whole crux of 'what is a Bitcoin'.  In fact anything can be used as 'money' or a currency.  Something does not have value because a government says it has value.  It has value because people are willing to accept it in exchange of something else.  Thus as more places accept Bitcoin as currency, the more mainstream they will become.

The big questions around Bitcoin is whether it will become a lasting currency and one that is widely accepted.  There is plenty of speculation in them out there at the moment with the slightest hint of a problem causing crashes (see the chart below).  In my personal opinion the only reason that you would use Bitcoin instead of a mainstream currency is because you do not want your purchase tracked or otherwise traceable (e.g. if you are using it to buy illicit substances).  Otherwise why wouldn't you use a more stable currency (even one that is not your home currency).  However in the section below I have found more and more mainstream businesses that are willing to accept them as a method of payment so perhaps I will be left behind on this particular trend.

The video below is how the founders of Bitcoin pitch their product which obviously only highlights the benefits and none of the cons of Bitcoins.  It is interesting to see however, how they think about Bitcoins and the role they can play in the financial system:

Are Bitcoin a good investment?

At the moment Bitcoins are nothing more than pure speculation.  
There is no fundamental value underlying the currency other than the idea that the product is scarce and this scarcity along with the inability for a government or other agency to issue more currency (other than as specified above) gives it some sort of lasting value.

In this sense Bitcoins are a lot like gold.  There is a limited quantity and its value is largely based on people's perception of what it will be worth in the future.  The only difference is that gold has a floor under it because gold can and is used for other purposes such as jewellery.  Bitcoins have no alternative use which could provide a floor under the price if confidence in the product slumps.

If and when the currency stabilises (it is incredibly volatile at the moment based on speculation - the chart below is just the last month!) and is used widely for trade (see the section below) then as a medium of trade it will have an inherent value.  When it gets to this point, though, the potential for massive gains and losses will have largely evaporated.

I wouldn't invest in this product - I can see that Bitcoins will have value to some people who are sick of their currency being depreciated by governments looking to stimulate growth.  The lack of an underlying use for the product and thus a floor in the valuation is the biggest stumbling block for me and one that I can't reconcile.  I can just as easily see people moving onto another 'currency' like this and Bitcoins becoming pointless and irrelevant.

It is the inability to value this currency on fundamentals and the uncertainty around the longevity of the currency which is keeping me on the sidelines.

Can I actually use Bitcoins to buy anything?

This used to be one of the biggest criticisms of the Bitcoin market - it was purely built for 'investment' (read: speculation) and that you could not actually do anything in the real world with it.  Then people clicked onto the fact that the anonymous factor would make it perfect for things such as drugs and other illegal transactions.

However recently more and more vendors are starting to accept Bitcoins as currency.  For example a relatively new website that I came across - BitFash - allows you to

Monday, 22 April 2013

How often should you switch your superannuation sector allocations?

A friend was recently asking me for advice on what they should change their superannuation sector allocations to.  They are not the most financially literate person so I was interested in the fact that they put that much thought into their allocation strategy.  I confess that I have never changed my superannuation strategy after enrolling in it because as I have said before I use superannuation as a 'set and forget' type investment strategy.

However, my friend (rightly) pointed out to me that their superannuation was their largest investment and shouldn't they therefore be looking to maximise their investment return?  I couldn't argue with this however there are some things you should consider.

What are you making your sector allocation change based on?

I am going to assume for the purposes of this post that you do not have a self managed super fund (SMSF) because the decisions you make in a SMSF are exactly the same as ones you would make in your normal investment portfolio - it is just a different structure.  I am going to assume that you are like most people who put their money with a superannuation provider and who are able to choose various strategies or plans.

I completely understand the desire to maximise your superannuation returns - after all, as my friend pointed out it is the largest investment that most people have when they go into retirement.  However you need to make sure that you are making changes for the right reasons.

The biggest mistake that people make (and the biggest danger in switching) is that you sell low and buy high
That is, you look at your superannuation returns and notice that one class of investment has performed for you much better than other classes of investments and you switch from the badly performing investment into the one that has performed well.  The danger in this is that you buy into the investment class that has already had it's run and sell out of the one that could be about to pick up.

If you are going to make a sector allocation switch it should be because you believe that the particular sector you are switching into is going to perform well (note one that has already performed well).

What does it cost you to switch your sector allocations?

Some superannuation funds will allow you to switch as much as you would like with no costs, while others allow a certain number of switches free of charge and then charge you for every switch after that and some charge you for every switch you make.

Make sure you know what you are going to get stung for and if you are going to get charged for switching make sure you keep track of how much your switching is costing you.

Make sure your allocations are appropriate for your stage in life

As a young person, I can have a reasonably aggressive approach to my superannuation and have it all in high growth options versus someone who is a bit older than me, who is getting close to retirement and for whom security of capital value is more important than achieving growth (which comes with the risk of capital depreciation).

What this means is that although a 'set and forget' strategy is not always a bad one because it helps you avoid the buy high sell low momentum trading type mistakes, you do not want to have the high growth strategy that you put in place in your 20s still in place when you are getting into your 40s and 50s.

So...how often should you switch?

Switching is inherently trying to time the market.  Although this is generally a bad idea, if you truly feel that the share market is overvalued or undervalued (and the same for property, bonds or any other investment class) then you should consider switching your asset allocation to what you believe is relatively undervalued.

I would think that switching your allocations any more than 3 or 4 times a year is overkill.  
Relative returns do not swing that much in a single year and you are probably missing the natural ups and downs that come with the market.

So how often (if ever) do you switch your sector allocations? I would love to hear how much you think about your superannuation.

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Superannuation - All Posts
How much superannuation will I need when I retire?
Salary sacrificing into superannuation
Consolidating your superannuation accounts

Friday, 19 April 2013

Get cheap subscriptions to expensive business magazines

I love reading about business and finance - it really doesn't matter what the topic is.  I'll devour books on the share market, on business, on savings and personal finance and never really get bored.  And I've found great ways to get them cheap (Amazon, Book Depository and Fishpond).

However, finding a solution for business magazines was that much harder.  I love some business magazines and they often have more information and material in one issue than some of popular investment books out there (the whole Rich Dad Poor Dad series comes to mind).  I love the Economist as well as the Business Review Weekly (which is an Australian publication).  However the problem is that these are outrageously expensive - I have no problem paying for quality however I do care about getting ripped off.

There are ways you can save money so before you go out and buy your next edition of one of your favourite magazines from the book stand read the tips below!

Getting a cheap subscription to The Economist - An Example

We all know that buying individual issues to a magazine is possibly the best way to blow money out there but it is surprising how many people can't be bothered going online and filling out a subscription form.  At the time of writing the cover price of the The Economist is A$11 (~US$12) which will cost you $561 for a years worth of issues.

The following ways are all ways you can save money with your subscription to The Economist (or any other business magazine)

  1. Subscribe via The Economists website
    • Note that they price differently based on where you are located so if you are getting it posted to home then you will get your local country price
    • For a 1 year subscription for an Australian this will cost you A$8.59 per week (saving you $123)
  2. Subscribe via another magazine subscription website
    • For some strange reason, other online magazine retailers give you a much cheaper rate for a years subscription than The Economists own website which seems crazy to me but it seems to be a trend
    • A one years subscription from isubscribe.com.au will cost you A$7.16 per issue (saving you $196)
  3. Subscribe as a student
    • This is the easiest and best way to save money on your magazine subscriptions but what you need is a student (they can be university level) in your household (I use my younger brother) to make it semi-legitimate
    • If you do it via The Economist website you will pay $6.49 per issue (saving you $232)
    • If you do it via a student magazine website (e.g. magazines4students.com.au) you pay $4.90 per issue (saving you $311)
  4. Subscribe to an international mailbox or address and get it posted to you
    • The Economist charges vastly different prices for

Tuesday, 16 April 2013

Investing in Index Funds: A cheap and easy way to invest in the share market

In previous posts I have written about how investing in index funds is one way that I access the share market and it makes the decision about where to invest easier.  In this post I will cover exactly why index funds are so good and why every investor, especially those who are time poor and do not have time to track individual stocks, should seriously consider index funds.

What are index funds?

Index funds are set up by fund managers to track and replicate the performance of a specific index.  Basically it takes a group of stocks or commodities and invests in every one of the assets within that group so that you as the investor get a return equal to that of the index.

  • Index funds can cover the whole share market (often called broad based index funds) or a specific sector (e.g. materials, resources, retail)
    • Broad based index funds will give you the return of the entire market while sector funds will give you a return for that sector
  • Each unit in an index fund gives you access to the shares in that index on a proportionate basis
    • For example if a certain stock makes up 10% of an index, for each $1 you invest in the index, 10% will be invested in that stock (or will give you the same return as that particular stock)
    • The weight of each stock in an index is determined by the index provider (e.g. S&P, MSCI and others)
  • Index funds are managed by a fund manager and are all slightly different
    • Index funds are managed by a provider who you have probably heard of (iShares and Vanguard are two very common ones)
    • All index funds are slightly different in their attempts to match the index returns - it is too complex and expensive to be invested in every single stock (especially for broad based indexes) and constantly be re-weighting to get the exact return of the market 
      • What this means though is that every index fund has tracking error - this is the difference between the actual return of the index and what the fund gets
      • It's not really a big deal but lower tracking error is better
What are the type of index funds?

Index funds basically come in two types - listed and

Monday, 15 April 2013

Surviving until pay-day: When things get tight

This post will cover my observations about how far you can go when you have busted through your budget and have very little cash until the next payday.

I confess that I never really thought I would be writing a post like this.  I am one of those people that is insane about keeping a minimum amount in my transaction account (anything less than $500 and I start to panic) and I have been lucky enough to have had a well paying job and low expenditures my whole life.  In the last month however my expenditures got out of control, my credit card bill was huge and I moved out of home - see full details in my March 2013 expenditure tracker.

Now, normally what I would do would be to transfer some funds back from my home loan offset account to cover me until pay day.  However, after paying my credit card bill last month, which took most of my wage and not being able to save a single dollar, I committed to not over-spending this month.  To this effect I said that I would not transfer funds from my offset account to my transaction account.  I could spend as much as I wanted to on my credit card however I was also trying to limit that.

At the end of March 2013, I had ~$315 in my transaction account which had to last me until the 15th of April.  Now this wouldn't be that big a problem, except I had committed to going out nearly every day of that fortnight and I hated the fact that I would have to cancel anything for financial reasons.  Those who are good savers out there are probably shaking their heads however I'm sure there are plenty of people who know the feeling.

I am proud to say that I got through the fortnight on that amount of cash.  At payday (today) I have $30 left in my transaction account

Here are some of the techniques I used to conserve cash while trying to get to the end of the fortnight and still maintaining a full social life.

  • Deferred some non essential expenditures
    • In a recent post I wrote about how I could upgrade my phone and save money however it would require buying the phone outright
    • As I wrote that post I was about to purchase the phone (albeit on my credit card) however in light of the above I decided to continue using my old phone and just get the cheaper SIM card until my expenditures come under control
  • I went hunting for coins
    • This may sound silly, but if you are like me and HATE coins you may be surprised how much you have lying around your house and office
    • I am addicted to my morning coffee and although I could have cut this out for the two weeks, I figured that if I could fund this from coins I found lying around the house then I was effectively not spending on it
    • I found ~$100 in coins around my house.  These were in trousers, drawers, jars and (oddly enough) shoes
    • In the end the coins also paid for a few times when I forgot to take lunch
  • I ate at cheaper places when catching up with friends
    • This can actually be done quite subtly if you have arranged to catch up but have not organised a location for a lunch or dinner
    • Instead of going to a steak restaurant which is going to probably cost $40+ for a meal with a wine I went to cheaper Chinese places - just as much fun, just as tasty but for a fraction of the cost
  • I used the credit card too much
    • This was an interesting experience actually.  I never really understood how people managed to rack up so much credit card debt and then had trouble paying it back
    • When I no longer had cash to spend but still wanted to spend I found myself putting everything on my credit card, from dinners and drinks to presents and various other expenditures
    • I can see how easy it would be to get into serious debt if you were living month to month and this month's wage constantly went to pay last months credit card bill
  • I saved the cash for days when I had to split bills
    • Whenever you go out in a group, splitting the bill is almost always a cash transaction (i.e. credit card is not really an option)
    • This was particularly challenging towards the end of the fortnight when I had a few group dinners and I knew that I had to conserve my cash for these events
Before anyone says it - I know that

Monday, 8 April 2013

Should I rent or buy?

This is the second in a short series that I will be doing on moving out of home for the first time.  It will track the decisions I make, why I made them and the financial impact of them (as well as the social impact).  The first post in this series covered the question of 'Should I move out of home?'.

Having decided to move out of home the next decision becomes 'Should I rent or buy?'

There are several questions that you need to ask yourself when making this decision.  These questions should form the basis of your decision to rent or buy.  The questions include:

  1. Can you afford to buy a house / apartment in the area you want to live? 
  2. What stage of life are you at?
  3. Are you moving on your own or with someone else?

Can you afford to buy a house or apartment in the area you want to live?

For many people this decision is made for them - they are unable to afford a deposit or want to move out before they have saved for one.  However for others (myself included) the decision becomes one of relative finances - is it more cost effective to rent or buy and can I afford to and do I want to buy in the area which I want to live?

Obviously the first thing you need to decide is where you actually want to live.  Narrow it down to a suburb or region and then go online and look for houses in the area you are looking to buy in (or rent in).  Look at the relative costs of buying a house and how much it costs to rent in the area.   Then do the maths.  When you are buying it is a very different equation to when you are renting

  • Include the whole amount of the interest costs in your purchase calculation - there is no tax deduction when you are living in your own house (in Australia)
  • Work out how much you will be spending on outfitting the house - will you be happy sleeping in a sleeping bag until you can afford to buy a bed?
  • Work out how much it will cost to live in the house above what you are spending at home
    • Note you need to do this when renting as well so it is a calculation you should be doing anyway
On the other side of the coin you need to work out what the costs of renting are:
  • Do you want to live on your own (much more expensive) or are you happy having a house mate?
  • How much is rent and other bills likely to cost you each month
  • If you are young and not very experienced at living on your own add an additional amount for eating out when you can't be bothered cooking - trust me it adds up
In Australia it is almost always cheaper to rent than to buy when comparing similar places however there are the benefits of home ownership such as piece of mind and the requirement to use that extra cash to pay down your debt as opposed to blowing it when you have it sitting around that cannot be quantified in an equation like this.

Because I already have an investment property, the desire get into the property market was not present.  The relative attractiveness of renting therefore was increased dramatically even though I was raised in a family where rent money was seen as dead money.  This is true if you're living at home however if you move out of home you need to remember that interest on your loan is dead money too!

What stage of life are you at?

If you are at the stage of life where you are looking to 'settle' somewhere and raise a family or start a family or perhaps you know exactly where you want to be and what you are happy with then buying is the option for you.  Buying a house or apartment really only makes sense if you are willing to commit to the place for a reasonably long amount of time (i.e. 5 - 10 years).  Otherwise the transaction costs involved simply do not make it worthwhile and you are likely to lose a fair amount of money.

On the other hand if you are at

Thursday, 4 April 2013

Save money when you upgrade your mobile plan

The contract for my phone plan is about to expire and I was thinking about upgrading my phone and changing my plan.  Now before you jump in and tell me that this goes completely contrary to my desire to control my expenditure better after my disastrous start to 2013 I think that it is possible, in the right circumstances to get a brand new phone, a better deal AND pay less money if you do your research.

Please note that this is written for Australian mobile phone users only.  Whilst the principles are true for wherever you are, the specific examples are from April 2013.  Better deals may come along and if you see them please post them below.

How to save money on your mobile phone plan:

To work out how you can save money on your phone plan you need to answer two important questions and think about the amount you use your phone.  These include:

  1. Are you currently with one of the big carriers and do you need to be?
  2. What is your actual usage each month on average and what are your extreme usage months?

Are you with one of the big carriers and do you need to be?

You can save a lot of money by switching from one of the big carriers (Telstra, Optus, Vodafone) to a smaller reseller who offer great deals.  However this is not a great idea if you need to be with one of these providers.  Reasons you may need to be with these providers include:

  • You require coverage in remote areas
  • The bundling of your mobile phone allows you to get really good international rates or cheap internet (note that many of the smaller resellers also offer very cheap internet)
  • Your whole family, friends and partner are all on the same network which offers free calls between people on similar networks
If you are like me, however and live in a major city and only very occasionally go into low coverage areas and have existing bundles with great rates and your friends are on all different networks then basically there is no reason to stay on these carriers.

The smaller carriers, I have looked into TPG and Kogan which as of writing seem to offer the best deals, are resellers for the major networks.  TPG resells for Optus and Kogan for Telstra (though does not have the same level of coverage and has no access to their 4G network).  

These smaller carriers tend to offer sim deals only.  That means you need to buy your phone outright (unlocked) and then insert their sim.  They do not offer phone bundles.  What this means, however, is that it is harder to compare apples with apples as most major carriers bundle the phones and the phone plans.  If you do a little bit of work you can save a lot of money.

What is your actual usage each month and what are your outlying usage statistics?

It is important to know how much you actually use each month.  There is the possibility that you could save money simply by going to a cheaper plan which more matches with your usage patterns.  The plan I am currently on actually suits me perfectly so I am looking for a similar plan.  

Note that this includes calls, texts AND, importantly in the age of smartphones, data.  I am currently on Vodafone's $49 cap plan which has $500 of included talk and text and 1.5 GB of data.  I use about 70 - 80% of my talk and text every month and 70% of my data.  In more extreme months I cut it a bit more fine but I have only once busted through my cap so this is a great plan for me.

It is important to know what your usage is because it is always tempting to sign up to 'unlimited' plans or ones with a huge amount of included value for 'a little bit more' but you never end up using that extra amount of value.

How do you actually save money when your phone contract expires - a worked example

As I mentioned above I'm on Vodafone's $49 cap and as much grief as that carrier seems to get (and trust me a few years ago it was valid), currently their service is fine and works brilliantly however I think I can get a lot of value by buying my phone outright and switching to a smaller carrier.

So what are my requirements?
  • A new android based phone (I love android - as readers of my Nexus7 review would know)
  • To spend less than I currently do ($49 per month)
Which carrier?

With my usage pattern described above I have decided to go for TPG's mobile medium plan.  It has exactly the same call rates as my current Vodafone plan (but does not come with the phone)
  • Costs $17.99 per month
  • First month set up costs of $40
  • Has $550 of included value (an extra $50 per month I didn't have with Vodafone)
  • 1.5 GB of data (same as Vodafone and what I needed)
Note that if you're a really heavy user of

Wednesday, 3 April 2013

March 2013 Expenditure Tracker

If I do not meet my financial goals for 2013, March will have been the reason why.  I saved and invested virtually nothing, I spent too cash and had to repay significant previous expenditures which had accrued on my credit card.  It will actually take a spectacular amount of discipline to work myself out of the (relative) financial hole that I've put myself into in March (compared with where I want to be).

ItemMar 2013TargetOver/(Under)
Share Investments+$1,094+$2,000-$906
Offset Acct.+$229+$3,500-$3,271
Personal expenditure+$7,550+$2,200+$5,350

The major causes for the movements in my 3 accounts are listed below:

  • Personal Expenditure
    • Normally I deal with this last however this month this gets first priority because it was the reason everything else was dragged down
    • My credit card bill for this month was close to $5,000 which alone is more than double what my total expenditure goal is for the month.  It was this high for a few reasons including
      • I signed up for the CFA program and put it on my credit card (~$1,200)
      • My car insurance was due (~$1,100)
      • Dining out, partying hard and drinking after becoming single again (this cost was stupidly high and I'm not going to put it up here)
    • My cash expenditure was much higher than normal
      • I had to pay double rent this month - I had been paying rent to my parents while living at home and I moved out of home and needed to pay my landlord rent for a month in advance
      • Too much partying which I have been scaling back
  • Home Loan Offset account
    • I did not save anything to my home loan offset account this month
    • The only reason that it was a positive number is because, with the reduced interest rates as well as the cash I have been putting into this account while looking for another place to invest it, my investment property has become positively geared
    • This was not an intentional decision and should reverse once I find new share investments that I am happy and comfortable with
  • Share investments
    • Other than my investment in my employee share plan I did not invest any cash this month
    • With the run that the share market has had, I'm finding it harder to find appropriate opportunities
On a cumulative basis my performance can be seen below

ItemJan 13 - Mar 13TargetOver/(Under)
Share Investments-$6,020+$6,000-$12,020
Offset Acct.+$12,727+$10,500+$2,227
Personal expenditure+$15,115+$6,600+$8,515

As you can see my personal expenditure is dragging down my share investment performance.  I'm still ahead on my home loan offset account by virtue of the sale of my employee shares in February 2013 which I have discussed before.

I have thought about redoing my goals in much the same way that I did last year however having thought about it more I have decided to keep the ones I have for the moment.  They are reasonable goals and I have just been very irresponsible in the first quarter of this year.

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Tuesday, 2 April 2013

March 2013 Net Worth: $357,000 (+0.6%)

Value% Change
Net worth$357,000+0.6%

In my February 2013 net worth post I had forecast March 2013 to be the first month in which my net worth actually decreased.  This was due to several factors which negatively affected my net worth which I will discuss below.  However, as can be seen above my net worth actually increased which I am particularly pleased about.  That being said this was my worst performance both in absolute and relative terms since I started tracking my net worth in June 2011.

An outline of the major factors which affected my performance this month are listed below and as you can see most of the points are liability driven.

  • A significant paydown of my credit card debt which used most of my free cash
    • I have often heard people complain about the amount of money they spend on their credit card.   I have not often had this problem however in March 2013 I had to use practically all of my wage to pay back my credit card debt
    • I obviously had to live somehow and even though I was much more careful about my expenditure in March, most of this by necessity had to go on the credit card
    • However my balance at the end of March is less than half what it was at the end of February
  • The inclusion of CGT liabilities in my net worth
    • I have been selling significant parcels of shares in the last few months (especially my employee share plan shares which I have outlined before).  This have been creating a liability which I've been aware of though not tracking 
    • This month I included this liability in my calculation and it will be included going forward 
    • Without the inclusion of this step up my net worth would have increased by 1.1% (not 0.6%)
  • A reasonably significant decrease in my 'cash on hand'
    • I normally keep a reasonable amount of cash in transaction accounts for every day use.  As outlined above the fact that most of my wage went to credit card repayment meant that I had to use most of this for my day to day expenditure
  • My only savings and investment for the month came from my automatic employee share plan investments and automatic superannuation contributions
    • I have said it before but the fact that it gets taken out of my wage before I even have to allocate it is really a great psychological saving tool
  • My share performance was reasonably flat (to slightly down) over the month
    • I was thankful that there wasn't a correction in the market as it would have made my performance look terrible
In my expenditure tracker for March 2013 I will outline in more detail what caused my personal expenditure and credit card debt to blow out so much as well as where all my cash went!  Overall compared with where I was expecting this performance to come out at, I was reasonably happy however I will be looking to significantly improve my savings and investing over the coming months.

For April 2013 I have a significantly lower credit card repayment obligation and so will have much more free cash to save and invest.  Part of the problem I am having now is finding appropriate investments in the share market.  My target for April 2013 is a net worth of $361,000.

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