Blogging Tip: Write some posts in advance

Occasionally I deviate from writing about financial posts.  This post will be a tip on how to blog more effectively - for those of you who have just stumbled across this blog I have been posting for over 2 years and have more than 350 posts on a variety of financial topics.  I do not do this for a living but I have learned some tricks along the way.

Consistency in posting is crucial

When you blog you are essentially writing for 2 groups of people

1. Those who are looking for a specific piece of information and come to your blog through search engines or links
2. Those who actively follow your blog and who log in every day or few days to see what you have written

You get the former by writing interesting posts which get picked up by others and gets you well ranked on Google and other search engines.  You get the latter by having a good bank of posts and by posting consistently so that when readers who like your material come back they have something new to read.

Having something new for your followers to read is crucial.  I saw this myself - towards the back end of last year I was really building up my follower base and the number of page views I was getting was increasing exponentially...and then I went on leave where I didn't have wi-fi, broke up with my girlfriend and life went a bit strange there for a while.  I ended up not posting much for two months and while my readership kept up for the few weeks, it really started to slide after that.  

Worse, when I started to post again in earnest my traffic numbers did not jump back to the levels they were at again.  Instead I had to slowly build up my readership (although it did move a little bit quicker this time).  This is why I say that consistency in posting is crucial - you don't have to post every day...but your regular followers want you to post consistently.

How to post consistently when you have other things going on in your life

You may think that it is too much of an ask to post that consistently - after all, this is just a hobby of yours and not your full time job.  I'm not disagreeing with that at all and there are ways that you can be consistent as well as allow for those things in life which make your blog take a back seat.

1. Write some posts in advance
• The easiest thing you can do is

Why I dropped out of the CFA

I hate quitting things...I really do.  I didn't enjoy my law degree for most of it but stuck to it because I knew why I was doing it (to get into investment banking)...as much as I wanted to quit.  I started banking and found that the lifestyle was terrible and not for me and as much as I wanted to quit after my worst day as a banker I stuck with it because I knew what I was aiming for.

It surprised me therefore, that I decided to drop out of the CFA before even undertaking my level 1 exams. I had registered, ordered the materials and spent a few weeks going through the materials when I decided to postpone sitting the exam.  Note that this blog post is not to encourage you to quit the CFA, however it will hopefully make you think about whether you actually want to do the course before you pay your money and register for it.

Why did I decide to do the CFA?

To quit, you first need to register and there were several reasons that I decided to do the CFA:

1. I really like the investment industry
• I currently work in the investment industry and I love it
• If you want to make it long term in the industry though you almost have to have a CFA
• Some places of employment require it, some highly recommend it and if you have one you are always going to stand in better stead than someone who does not have a CFA
2. I registered for it when I had a big gap of time to fill
• This rationale is rather embarrassing, but basically I registered for the CFA, in part because I had a whole heap of time after breaking up with my girlfriend and it seemed like a productive thing to do 
• Not the best of reasons, but a surprisingly compelling one at the time.  By the way - for all you single folks who read websites telling you to take up hobbies to improve yourself after a breakup...make sure that your willing to commit to it long term
3. My friends were doing it at the same time
• This may seem like a bad reason to do the CFA, but I actually think it is an OK one
• One of my best friends was starting level 1 at the same time I was thinking about it so we registered for it together
• If you want to do the CFA anyway, it helps to do it with others.  The CFA is mainly a self study course and motivating yourself to do it can be quite challenging
4. It is a great idea to get all your professional studies / qualifications out of the way before you settle down
• This is a more a 'why now' rather than 'why at all?' type reason
• Everyone I have spoken to has told me that once you settle down, get married and have kids, further study is virtually impossible
• I was at the prime time in my life to do it

Why did I decide to drop out of the CFA?

Once again there are several reasons which I will outline below however it essentially came down to

Placements: What are they, why do they exist and what are the downsides for investors?

This post will be all about placements, the ability for companies to issue shares to limited group of investors without offering them to all investors.  The description and the rules below are those on the Australian market as at the date of writing however similar ways of raising equity also exist in other financial markets around the world.

What are placements?

Placements are a way of raising capital.  They allow companies to raise capital quickly and cheaply from a select group of investors without offering these shares to all the investors in the company.

There are limits on how much capital companies can raise through this type of raising.  In Australia, companies cannot issue more than 15% of their issued capital in any 12 month period through a placement without shareholder approval (note that in Australia there is an extra 10% available to companies worth less than $300m which satisfy certain requirements).

Why do they exist?

As outlined above, placements are a quick and easy way for companies to raise capital.  Companies do not have to write and file a prospectus for all investors making it a much cheaper option than doing a pro rata rights issue to all investors.

They are also much quicker.  Placements can take place in an afternoon or over a one or two days rather than the weeks you typically need to give retail investors to make their decision.  It allows companies to access the cash they need much more quickly and this is especially important if the companies needs the cash in a hurry.

They are typically done at less of a discount.  Nearly all issues of secondary shares are done at a discount to the market value to encourage people to participate in the raising.  Companies that have a big shareholder or a shareholder that is looking to acquire a big stake without moving the market price may be able to raise capital at much less of a discount through a placement (thus being able to raise more money for the same amount of shares issued)

What are the downsides for investors?

The biggest downside for retail investors (who are the ones excluded from placements) is that the value of your shares decrease because the placement shares are issued at a discount to the current trading price.  Your parcel which was worth $10,000 may now only be worth $9,500 and you didn't have the chance to acquire shares cheaply even if you wanted to.

To see how the share price is affected by an issue at a discount see my post on how to calculate the theoretical ex-rights price of a share.

Further, your voting rights are also diminished.  Most retail shareholders don't value or exercise their voting rights anyway but it is definitely a problem if you get involved in the corporate governance of your investments or if you are a large shareholder but were not invited to participate.

You May Also Be Interested In
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Book Review: The Little Book That Still Beats the Market by Joel Greenblatt

Joel Greenblatt wrote one of my favourite books on investing - You Can Be a Stock Market Genius.  I have referred to this book before on a post about how to generate investment ideas.  I recommended that book to anyone that I could think of however most people did not seem to get the same value out of it that I did...and then I understood why.  To understand why the ideas in that book were so good, you had to be quite an active investor in the markets...in fact you probably had to do it as your full time job.  The book was simply not accessible to many people.

 To my pleasant surprise though, I found another book by Joel Greenblatt which offered a much simpler solution for those who do not have the same level of expertise called The Little Book That Still Beats the Market.

The book's major selling point is that it has one 'magic formula' for investing in stocks.  I am always sceptical of these types of books.  First and foremost because arbitrage normally ruins such a formula once it is well known.  However keep reading because this book intrigued me so much that I am tempted to implement this magic formula for myself.  The formula is basically a ranking one which seeks to get high quality earnings at bargain basement prices.  It has a step by step guide on how to do this.  I'm not going to explain the formula here - the book is really worth reading so I suggest buying a copy for yourself.
The Little Book that Still Beats the Market is simple...I mean really really simple.  It is simple enough that I am going to give it to a friend of mine who really wants to invest but has no idea what the time value of money is.  However, although many books which attempt to simplify investment concepts end up getting stuff wrong for the sake of making it simple - this book does not.  The theory and what Greenblatt explains are spot on and if you go through the book the magic formula makes sense.


The book is really short.  I read it on a 4 hour flight from start to finish.  If you are a little bit more inexperienced you will probably take a bit longer as you get your head around the concepts but it is not at all like The Intelligent Investor which is really hard work.  I recommend reading the book - at the very least it should give you an idea of what to look for when you invest in stocks.

Why I Like This Book

• Because it is accessible and anyone can read it
• Because it doesn't take

I finally bought The Entertainment Book...and it's SO much better than I expected

This will be a very quick weekend warrior post from me which will once again tout the benefits of The Entertainment Book.  I did a post on this last year where I praised the value the book could offer and how much it could save you.  I had not yet purchased one of the books though I could clearly see how much value it could be.

I finally got around to purchasing the book and in one day I made back the cost of the book

This book will offer the most value to you if you are a family or at least not a single person living on your own which is why I delayed purchasing the book for quite a long time.  However I decided to buy the book with my parents and then just take whatever vouchers I wanted that they were not going to use.

I needn't have bothered.  I have saved so much money with this book in one week of owning it that I wish I had done it a long time ago.  The book normally costs $55 - $65 and the first coupon I used was on a breakfast I had planned with my girlfriend on the weekend.  The place we were going to anyway had a two for one offer up to $30.  Our combined breakfast bill was just over $50 and I saved half this money (or virtually my portion of the book) in one meal.

I wish I had bought it earlier...I went through and realised how much I could have saved

I know all about sunk costs and how you shouldn't beat yourself up for decisions you could have done differently but when I went through and discovered how much I could have really saved from the time I moved out I could not believe it.

For example, I helped organise a bucks night where one of the main activities was an afternoon of paintball.  The very paint ball place we went to had a 50% discount voucher for up to 40 people.  As the paintball cost $120 for the afternoon I could have saved our group a collective $2,400 which could have gone back into our pockets or into some other activity on the night!

By the way - it's not only 'fancy outings' that are covered

When I first saw the book

Ahh reporting season...how I've missed you so

For investment bankers, investors, brokers, fund managers and other people involved in the finance world (especially those who have anything to do with the share market), reporting season is one of the biggest times of the year.  For 'insiders' - that is the accounting, investor relations, legal and managerial teams at corporates this tends to be a little bit before reporting season as they are getting everything ready.  For the rest of us, though, everything is jam packed into 3 or 4 weeks of craziness.

Although, I could quite easily do a rant on how I am getting fat, unfit and wish I could socialise more (a la my complaints during my investment banking days) there are 2 reasons I am not going to do this:

1. I used to be an investment banker and if I complained about 2 - 3 weeks of 14 hour days they would probably kick my ass
2. It would be much more helpful to non-financial professionals if I did a re-cap on the best things to look at during reporting season

What is reporting season?

As the name would suggest, reporting season are the few weeks in which most companies report their results.  In the US this happens 4 times a year (as US companies have to report quarterly) but in Australia and most other developed markets, this only happens twice a year - when companies report their half year and full year results.  

Companies tend to have very standardised year ends.  In Australia most companies have either June or December year ends which means that their half year reporting occurs in either December or June as well.  Further the listing rules state that a company needs to report their results to the market within 60 days of their year end.

Companies need to do their accounts, get their accounts audited and then schedule time to meet investors etc which means that most report within a very tight time period towards the end of that 60 day window....hence the creation of a reporting season.

It's not my job...but I invest in stocks...how do I keep up?

The amount of information that investors are given during reporting season is often over-whelming and investors can often

Watch out for those golden handcuffs

The golden handcuffs is an often used expression to describe a workplace that is pretty unpleasant but pays so well that you are actually tied to your job because you would not get paid close to enough anywhere else.  You are, in effect, trapped by how much you earn at that particular place of employment.

Investment banks are one of the classic examples of this but they are certainly not the only one.  In fact there are many industries where this applies.  Strangely enough it tends to apply closer to the top of the hierarchy where the pay is much better and the options for achieving equal pay elsewhere is virtually nil.

The golden handcuffs don't work if your expenditure doesn't rise with income

Another, almost cliché, expression is that expenditure rises with income.  Since I was quite young my parents (and my dad in particular) drilled it into me that you need to watch your expenses and not get ahead of yourself so it was with some surprise that I realised that I had fallen into this trap like a lot of other people.

I recently did a post on what my real 'non essential' expenditure was - that is, the expenditure I was not willing to give up each month.  I ran these numbers past my brother who is studying at university and he was truly shocked at how much money I spent each month.

If you think you have not fallen into this trap then think of this

• How much money did you need to 'get by' when you were in university?  
• How much did you save in your first year of work?
• Have you been spending more in absolute terms as your income has gone up?
• Do you eat at better restaurants?  Go on more frequent holidays? Spend more on these holidays?
• How much do you spend on a night out and where do you go on a night out now?

The chances are, that you are able to justify an

Always check the Management Expense Ratio (MER)

A lot of people who do not want to invest in the stock market directly (that is, by buying and selling individual shares themselves) access the market indirectly - that is through managed funds and there are a variety of these including index funds and actively managed funds which cover a variety of sectors, stock types and commodities.

However, in the capital markets, there is no such things as a free lunch so you will always have to pay a fee to the investment manager for providing this service - this is how they make money.  This fee is also called the Management Expense Ratio (MER).

Before investing in a financial product you need to check this MER and decide whether you are willing to pay this amount for the service that is being offered.  You also need to distinguish between flat fees and performance fees as well and consider how much the manager will need to outperform the relevant benchmark for you to be ahead by using them.

What is the MER and how does it affect your returns?

As described above the MER is the amount you pay your fund manager for managing your money.  It is normally stated as a % of funds under management (FUM) which essentially means that you are paying a percentage of the money you give your fund manager to manage (regardless of whether the fund value goes up or down).

There may also be a performance component to your MER.  This is intended to provide incentives for the fund manager to perform better.  You pay a % to the fund manager as a base fee and then an extra amount if they exceed the benchmark they are tracking (presumably by a certain amount).

An example of how it works

• Assume you invest $100,000 with Fund Manager A.  The fund manager charges 1.5% as the base fee with an extra 0.5% if they exceed the benchmark by 1% after fees
• Assume the benchmark increases by 5% over the year but your fund manager does really well and increases the value of the fund by 10%
• Your investment is now worth $110,000
• The fees are calculated as follows
• The base fee expressed above is an annual fee (although it normally accrues monthly) and it is 1.5% of the funds under management which comes to $110,000 * 1.5% = $1,650
• After the base fee is paid your funds are worth 108,350 which is an 8.35% return (which is 2.35% more than the

Double or Nothing: Not an investment strategy I'm fond of

A few weeks ago I watched a great documentary on ABC's four corners (link here) which went through the spectacular rise and fall of Australian ex-billionaire Nathan Tinkler.  It was an expose as well as having several lessons about investing, keeping what you earn and not blowing it all.

In fact it was almost the quintessential gambling stories.  Those stories of the ordinary people who made it rich winning the lotto and who then lose it all through bad decision making and poor investments.  The episode is really worth watching - I don't know how much longer it will be available at this link so while it is I recommend watching it.

Why is this story capture our imagination?

The reason Nathan Tinkler captured our imaginations so much is that he was an ordinary person, not born into any sort of wealth (unlike the Gina Rinehart's of this world) who made it big.  Further he did it in an extraordinary short period of time and he conformed to all the things we expect of big baller billionaires.

Below is a summary of his rise and fall.  Note that all the information below is from the four corners episode although it gels with much of the news reporting around the time of his risk and fall

• He started as an apprentice electrician and ended up running a company which was supplying tradesmen and services to the coal mining industry
• With the help of friends and family he got $1 million dollars for a deposit on a coal lease and then raised another $30 million
• A year later he sold the company which owned the coal mine to MacArthur Coal for $270 million
• He opted to be paid in shares instead of cash
• Soon after the price of MacArthur Coal price spiked due to an increase in the coal price combined with rumours that the company was subject to a takeover offer
• Tinkler sold out and walked away with $442 million
• A year later it is reported that Tinkler burned through almost all of this money (see what he spent some of it on below)
• Next, Tinkler bought the Maules Creek coal deposit for ~$500 million relying almost entirely on borrowed money (from a Singaporean hedge fund)
• 9 months later as coal prices continued to rise Tinkler floated the holding company for Maules Creek, Aston Resources, for $1.2 billion valuing Tinkler at $1.01 billion
• A year later Whitehaven Coal agreed to merge with Aston Resources to form one of the biggest players in the coal industry
• The share price of Whitehaven Coal fell in tandem with the coal price
• Tinkler had not sold any of his shares to pay back the debt he owed to the Singaporean hedge fund and many of his bills started to go without paying
• The hedge fund called in their debt which was secured by Tinkler's shares in Whitehaven - his last remaining asset of real value

The summary above is super truncated and I apologise for the information it is missing.  It is really worth watching the whole report.  In the midst of making and losing his money Tinkler spent his money on the things that most of us think rich people spend their money on

• He spent millions of dollars on horses 
• He bought fast cars 
• He bought a soccer team
• He bought a rugby team

There is a reason people who are making money don't invest in these endeavours.  They are known sink holes for money.  They are where the rich go to dabble in their hobby and they don't intend to make money out of it. However it all contributes to the story of an ordinary person who suddenly had an extra-ordinary amount of money and who did with it what we ordinary folk expect a person to do with it.

Why am I so critical of what he did?

Tinkler was effectively making the same bet over and over again.  He was

Trickle down economics...separating self interest from good policy

I was on Facebook a few days ago when I noticed one of those annoying 'recommended pages' advertisements that look like your friends updates but are actually subtle advertising.  I was surprised to see Gina Rinehart posting a link to her website with what looked like a blog entry entitled "Gina Rinehart is our least controversial celebrity".

I questioned whether even Ms Rinehart would promote herself so blatantly and in such a crude fashion.  I think it is a fan site and I didn't bother reading it - I was much more interested in the comments under the post itself.  What genuinely surprised me was how much support there was for Ms Rinehart on the entries. There was actually far less trolling than I would have imagined and a rather lively debate on whether the policies and views she espouses were good or bad for Australia and how economic policy should work.

Although it was not clearly stated, I was reading a lay discussion about the relative merits of 'trickle down economics'

Trickle down economics is a term which is often used in a negative sense to refer to the idea that if you stimulate the top end of town - e.g. the wealthy and the business community through incentives, tax cuts and other financial means they will be incentivised to expand their business operations.  Although the immediate benefits in the short term go to business owners and those in the wealthier classes, the 'masses' also benefit as businesses are encouraged to hire people which results in job growth, wage growth and everyone benefits.

This is an argument that is seen much more in America than here in Australia and importantly - they have tried it.  During the Regan era policies designed around trickle down economics were introduced.  Here is a good summary from the Rachel Maddow show - the explanation starts around the 2 minute mark.

These sort of economic policies are promoted by conservatives all the time.  However, it is often hard to separate the truth from self interest and this is where my interest in the Gina Rinehart story came in.  A lot of her supporters were big believers in

More tentative steps into the world of coin collecting (for investment)

A few months ago I wrote about how I overcame my uncertainties and purchased my first collectible coins for investment purposes.  For full details about my rationale and the rules I set myself see my post here.  I just bought my second set of coins and have outlined the details below.

A quick re-cap of the rules and rationale

I am not going to make this a core part of my portfolio but it is an investment class that I hope to build up over the very long term.  To this end I am only going to be contributing $50 a month to the coin collection.  There are a few reasons why I am not going to be spending hundreds of dollars a month on this investment class:

1. I know very little about what drives the value of collectible coins
• I truly believe that people should only invest in what they understand
• I understand at a basic level what causes the prices to move with collectible coins however I do not have the same level of knowledge that I do in the property or housing markets
  
2. I thought about storage and insurance
• Coins are a physical product and like all physical products they need to be stored somewhere
• I am comfortable having a few hundred to a few thousand dollars of coins in my house...but more than that would start to make me nervous
• Also the space considerations need to be taken into account
  
3. They don't generate any income
• Physical commodities do not

Resetting budget expectations in 2013

Last week I sat down and did some calculations and realised why I could never keep up with my budget and my savings plan.  I realised that I actually had much more in quasi non discretionary expenses than I had expected including health insurance, gym membership, rent, car insurance, fuel etc.  Have a look at the post if you want more details and to see how you should think about these expenses.

What this meant though is that I had to reassess my savings and expenditure goals in light of this.  I have attached my 2013 financial goals but basically I was hoping to achieve the following each month

• $3,500 per month towards my home loan offset account
• $2,000 per month towards shares
• $2,200 per month on personal expenditure

Since then things have changed quite significantly...

Not only have I realised that I cannot keep up with this personal expenditure, with the significant falls in interest rates, my investment property is now positively geared and I don't really want to be contributing as much to it each month.  The share market has run pretty hard but I still think there is value to be had here in small pockets and when the market falls.

I am re-adjusting my budget and savings goals to take account for the change in conditions.  When I did this same process last year I mentioned that you should not be dogmatic about your savings goals.  You should try and achieve them but if you have fundamentally not assessed them correctly or if the market changes then you should change your expectations.

...as a result I am changing my goals for the rest of the year

I am therefore updating my savings and expenditure goals.  I thought about leaving fat in my personal expenditure target but I thought that I would rather have a challenge.  Because I have not been achieving my expenditure goals I have become a lot more careful with where I spend money and I think this is a good thing.  The following therefore are more achievable but would still be a challenge.

My new targets for 2013 are as follows:

• Home Loan Offset Account: $2,400 per month (-$1,100)
• Shares: $2,500 per month (+$500)
• Personal Expenditure: $2,800 per month (+600)

Interestingly, I went back

5 tips to make you a better networker

Young professionals, entrepreneurs and really anyone looking to make it in the business world is told that networking is essential.  Your network will be one of the most valuable things that you possess your whole career and your ability to call on your network is a great asset in your back pocket.

Some industries, especially professional services industries, push this more than others - after all, it is in their interests that you have a good network that you can rely and call on when you are trying to create revenue for the firm.

However, as all young professionals know...this is not as easy as it seems...

Networking never seems to go the books suggest it should go.  You are told to find people who are going to help you up in your career and to find mentors and other people who you can suck knowledge from and learn from...however they never say HOW to do this.

Anyone who has attended young professionals events, whether organised by organisations to help their junior staff mingle or by special young professionals groups knows how incredibly fake these types of events are.  You end up chatting superficially to a few people and exchange business cards with a few people and then you totally forget who you spoke to and the business cards never get used.

However the big dilemma is that you can't ignore this aspect of business altogether.  As much as you may like to think otherwise, your ability to advance in the business world is determined not only by your abilities, skill and intelligence but also by your interpersonal skills and your ability to leverage relationships.

Networking is not impossible and does not need to be tedious...

Although the books most of us read only tell you to network and what types of people to find...they rarely tell you how to go about doing this.  I am not an expert on this but I have included a few tips below to help make the process easier and hopefully less tedious.

• Tip 1: Make friends...not contacts
• You never keep in touch with someone who is just a contact...and more importantly you don't really help someone out if you think they only want to know you because you may be useful to them
• The biggest piece of advice I can give you is to try and make friends with those people who you actually want to

Know your investment bias

I have posted about investment psychology before and particularly how you often need to follow your instincts rather than listen to the noise around you.  Conversely there are times when you need to dampen the impulse to act straight away and to think about actions before you take them.

We all have our own individual psychology and the way in which we approach everything.  This is a function of our experiences and our upbringing. Some people are risk takers and others are not, some people like particular things that others wouldn't touch with a 10 foot pole.

Why is this important?  Knowing what makes you tick is important in investing because you know where your biases lie.  Biases are not always a bad thing but it often makes us over-cautious or over-confident with respect to certain issues.  Knowing your own psychology allows you to make more thought through decisions.  When you make a decision you want to be comfortable with the fact that you are not, for some quirk of your own psyche, making a bad one.

Investment bias can cover a variety of situations

Investment bias can cover such a broad spectrum of different activities and ways about thinking about things that it is impossible to list and name all of them.  Here are a few personal examples of my investment biases.  Think about whether you have any that are similar or perhaps completely different:

• I inherently distrust internet / tech stocks
• Why?  I started to get interested in investing around the time of the tech boom in the late 1990s and early 2000s when we were looking at a 'paradigm shift' into a new era.  Things were not trading on current fundamentals but rather on where things were going to be.  I then saw the crash and everyone fall back to reality and from then on have been completely distrustful of anything internet or tech related
• How does this impact my investing? As a result of this bias I refuse to go near anything tech related.  This means that

Save money off your electricity bill: Always compare prices!

Before I moved out of home I never really thought about electricity bills and the fact that one supplier can charge significantly more for an electricity bill than another.  However they do.  The difference in prices can be stark!

This fundamentally does not make sense:  electricity is the very definition of a homogeneous product (i.e. one that is undifferentiated in any way from it's competing product).  There is no difference in quality and regardless of who your energy company is, it is going to come down the same power line (which incidentally, is owned by another company altogether) and power your house in exactly the same way.

This means that in the case of electricity you should ALWAYS go for the cheapest provider

When I did my post on how to save money on car insurance I mentioned that you need to weigh up the reputation of the supplier and whether they are likely to pay out when you claim and weigh this against the cost savings that you get.  You do not need to do this with an electricity provider.  The energy is going to come down the line regardless of who you are with!

This is the truly amazing thing...the product they are selling is exactly the same but some companies manage to charge more than other!

It is amazing how much money you can save

Given the type of product they are selling, I always assumed (and I think most people assume) that the prices companies charge would be pretty similar and that it probably wouldn't be worth switching for the sake of a few dollars.

However if you are with one of the big providers (e.g. AGL or Origin) the chances are that you can save a lot by moving to a

Advice from an entrepreneur: You have more hours in the day than you think

About a year ago I was in full swing setting up my business - and I got very close to launching...but then life got in the way.  My day job got very busy, I got a girlfriend and I was trying to get back into shape after the years of weight gain during investment banking.  This meant that my plans to start a business fell by the wayside.  I thought that if I had more time, or if I was confident enough to quit my job and do the business full time then I could make a proper go of it.

Recently though I was chatting to a close friend of mine who has a day job (he also used to be an investment banker but left for industry) and who had started a business which going very well.  He was also about to launch his second business and run the two side by side and eventually the plan was to quit his day job when the two businesses were throwing off enough cash.

It struck me that perhaps I was making excuses and that it was in fact possible

I grilled him for a while on how he was managing to do run a business, work a day job, keep fit and still have a life...and what he said to me was quite simple: You have more hours in the day than you think!

Now I'm one of those people who hates the simple clichés and feel good mantras that a lot of self help gurus spout...though I couldn't deny that my friend was doing exactly what I wanted to be doing so I decided to dig into it a bit deeper.

Our lives were not exactly the same and although there were some differences in the time we were able to spend building a business, it was not as significant as I first thought

• His new job requires similar hours to my new job (~11 hours a day)
• He also is trying to lose weight after years of investment banking weight gain so goes to the gym everyday
• He doesn't have a girlfriend
• He moved to a new city and so has less friend related time commitments

Of those, the only real difference was the girlfriend and the time spent with fiends.  When I thought about it though...I only meet my girlfriend once during the week, and I spend time with her and friends over the weekend.  It struck me therefore, that perhaps he may be onto something...

...so I drilled down a little further

When I got him to go into the specifics of how much time he spent on everything I realised that I actually have close to the same amount of free time as him...I just don't use it as well

• He finishes work at 6.30 and then goes to the gym until 8 (approx the same as me)
• From 8 until 11 or 12 he gets 3 - 4 hours work done on his business per night
• He sleeps 6 - 7 hours which is more than enough

This is broadly the same pattern of life that I have although the more I thought about it, the more I realised how much I waste those

THIS is why I'm finding it so hard to remain below budget

Regular readers of this blog would know that at the start of the year I set personal expenditure goals and savings goals and try and keep to those goals.  I also measure those goals month to month on my expenditure tracker.

It has been an interesting exercise however I always manage to far exceed what I plan to spend on personal expenditure and I never seem to be able to invest enough as a result.  I had thought about what my personal expenses were and I thought I was setting a reasonable limit.

However in last month's expenditure tracker I suddenly realised that I may not have thought about how I spend money in the right way at all.  All the financial books and budgeting books you read talk about first budgeting for the essentials and then everything else on top of that becomes a luxury and in this way you can save a significant amount of money.

Then generally define essentials quite narrowly (i.e. those things you absolutely need) and I think, for many of us - this is what causes the problem.

I am going to define 'essential' differently...

From now on...I'm going to define essential as 'those expenses which I need or want to spend in order to maintain my lifestyle'

Purists and those who are very good at living on tight budgets will tell you this is a recipe for disaster...that this way of thinking will get you further and further into debt.  However after setting my goals and constantly failing at them even after making some quite dramatic changes (e.g. I stopped eating lunch out almost entirely - I pack a lunch every day and I think quite a lot about big purchases) I realised that I was thinking about it wrong.

All of us have a lifestyle that we like to keep to.  For every person it is different - however we all have expenditures which we think are important or that we are unable to change for a particular reason.

• For example - I spend ~$100 a month on gym membership which is much higher than I could get it for...but I know what I'm like and if my gym was not right next to work I would never go and it would be an even bigger waste of money

If, like me, you have tried setting a budget and wonder why you keep busting through even through it may be because you have a whole heap of expenditures which you have to make every month which you don't even think about.

Go through the exercise...you may be surprised

I was genuinely surprised at how much I spend before I even get to things like entertainment, holidays and other truly discretionary items.  I did a quick calculation and each month I spend:

• $1,150 on living expenses including rent, a very cheap mobile plan, dry cleaning and groceries
• $140 on donations (which I refuse to cut back on)
• $430 on

Renewing your home insurance in 2013...don't forget the fire service levy

This post is for Victorians (in Australia) renewing their home insurance in 2013.  If you have already received your home insurance renewal you will have noticed something strange. Instead of the usual hikes in insurance which you then have to negotiate down your insurance may have been rather flat, or even dropped this year.

Before you go out and celebrate don't forget to adjust for the change in the fire service levy!

What is the change?

From 1 July 2013, the fire service levy (which you were already being charged) has changed from being part of your insurance cost to being part of your rates bill.

For once this is a political change that actually makes sense - it was recommended by the Victorian Bushfires Royal Commission and is fairer for a number of reasons including:

1. All property owners now have to contribute.  Previously if you didn't have insurance you didn't have to pay anything at all
2. People who insured their property for less used to pay less than people that fully insured their properties and so could game the system
3. It was previously at the insurers discretion how they recovered their costs so it was not always an equitable system
4. GST and stamp duty were charged 

That is some background to the why the system was changed but suffice to say that the change make sense and when I compare how much I used to pay and how much I pay now, the change was minimal so there is not that big a difference for me.

Why is it important to keep in mind when renewing your insurance?

If you do not take this into account you could get slugged with a large insurance premium increase and not even know it.  Typically we have some sort of idea what our insurance premium was last year and so if it does not change at all we are pretty happy about this.

However this is not the case this year.  Your insurance should be falling because you are no longer

July 2013 Expenditure Tracker

If you read my July 2013 Net Worth post you will have noticed that I was pleased as punch with how I performed.  However this result was driven almost entirely by existing asset performance.  My actual savings for the month were not as good as they should have been although compared with previous months it certainly wasn't as bad!

Item	July 2013	Target	Over/(Under)
Share Investments	+$1,268	+$2,000	-$732
Offset Acct.	+$1,966	+$3,500	-$1,534
Personal expenditure	+$3,951	+$2,200	+$1,751

The major movements in my 3 accounts are discussed below

• Share investments
• Although I had transferred money into my share market trading account as discussed in last month's expenditure tracker post, I didn't end up investing any in the stock market this month as the share market started to rally almost as soon as I had transferred the money in
• Unfortunately, while I was waiting for a dip this money could have been earning a return
• At the moment I have a dilemma about what to do with some of my shares
• There are some which are good assets which have performed very strongly and I feel like taking my profits
• There are others which have not performed to expectations and I don't know whether I still believe in the story and I certainly don't want to be holding on to dogs
• While I mull about what to do, I have a significant amount of 'lazy capital'...that is capital where I do not have a strong belief in the value of the investment
  
• Home loan offset account
• My home loan offset account was a bit of a non story this month
• I managed to save a bit of

July 2013 Net Worth: $385,000 (+4.6%)

	Value	% Change
Assets	$742,000	+2.4%
Liabilities	$357,000	+0.2%
Net worth	$385,000	+4.6%

After a very disappointing month in June 2013, which was the first month where I recorded a negative net worth performance, I rebounded strongly and recorded a very strong increase in my net worth in July 2013.  Not only was this a very strong performance in a relative sense however after looking through all the data, I discovered that, other than months where I had received a bonus this was my best monthly performance ever.

The share market was once again the primary contributor to my performance.  My share portfolio returned more than 10% over them month and even if I hadn't saved a single dollar from other sources my net worth would have still increased by 2.7% (excluding the very strong performance from my superannuation funds).  However this month was also good from a general saving point of view and I managed to save money into my home loan as well as into an emergency fund and forecast expenditure fund that I have set up.

I had targeted a net worth of $373,000 for July and so as you can see I really shot the lights out compared with what I was targeting.  Some of the factors which affected my performance included

Positive factors

1. As discussed above the share market returns were a strong driver of my results this month
• Of the ~$16,000 increase in my net worth this month, ~$12,000 of this came from