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

What are hedge funds?

If you are at all interested in finance, and especially if you are interested in working in finance or are currently in a finance role and looking at what else you can do then you would have heard of hedge funds.  They have been in the news a lot recently however they are not really a new concept.  We hear of billions of dollars being made for the owners of these funds and the spectacular returns they offer their clients.  Less often we hear about their spectacular falls from grace as well.

However when you really think about it - it is actually hard to nail down what a hedge fund is in a simple sentence.  This is because it is not a homogeneous beast.  They use many different strategies to invest money all with the intention of providing a return to their investors.

This post will cover the basics of what makes a fund a hedge fund.   I will do a post soon on the different strategies that hedge funds use to make money.

What is a hedge fund

Traditionally hedge funds referred to funds that attempted to generate returns that were uncorrelated with market returns - that is they were 'absolute return' funds.  However more recently the name has become associated more with the structure of the fund and the class of investors that it caters to rather than the investment strategy.

Hedge funds, like all other investment vehicles are regulated by the market in which they operate.  In the United States, and in most jurisdictions they cater almost exclusively to rich investors and so are less regulated than those funds which cater to retail investors and so have much more stringent prospectus and risk requirements.

How are hedge funds structured

This discussion will focus on the average hedge fund.  Because it is such a broad term it is possible to find exceptions to almost all the rules of thumb outlined below.  However when one uses the term hedge fund this is typically what they are talking about:

• Most often set up as private investment partnerships that are open to a limited number of investors and require a large initial investment
• This reduces the amount of disclosure that the fund is required to make, both to regulators and also reduces the limits on what they can do with their investment portfolio
• In the US, the majority of investors must be 'accredited', that is they must earn a certain minimum amount of money and have a net worth over $1 million.  Investopedia describes it as a 'mutual fund for the mega rich'
  
• Hedge funds are open ended however require a minimum investment period
• Open ended funds means that investors can add and withdraw capital however as hedge fund strategies often require time to play out they often require investors to keep their money within the fund for a certain period of time
  
• Have much higher fees than ordinary mutual funds
• This is a characteristic of

What are Self Managed Superannuation Funds and are they a good idea?

This is a sponsored post.  It was done in partnership with Clime, an Australian based fund manager.  All the content included in this article is my own and I have not had to have it 'approved' or vetted in any way.  I am happy to do sponsored posts where there is no interference in the content of my post.

This post is all about self managed superannuation funds.  It will cover the topics such as 'what is a self managed super fund (SMSF)?', 'why you would want to use them?' and 'when do they make sense and when do they not?'

What is a self managed super fund?

In essence a self managed super fund is a small superannuation trust which is set up for the benefit of an extremely limited group (1 - 4) of members.  It is a mini version of the large superannuation funds out there but instead of being pooled with thousands of other investors, this superannuation trust is only for the benefit of a select group.

Why would you set up a SMSF?

The primary reason people set up SMSFs is because they want more control over the investment process and assets within the SMSF.  This can be for a variety of reasons including:

• They are able to more closely tailor the investments in the portfolio to their personal circumstances
• For example by duration matching investments compared to when the individual investor will need the cash
• They believe that they are better able to make investment decisions than investment managers
• This is one of the primary reasons that people choose to set up a SMSF however it comes with it's downsides
• It is all well and good to believe that you can do better than the fund managers who are currently managing your superannuation money but have a go at doing it yourself (with a phantom portfolio) and see how you go before doing it
• The extra level of control over the investments also means that you can choose investments that you are confident with
• I argue that people should only invest in what they understand - it also often means that they can get better results than if they trust other people to do their investing
• For example if you want a property investment and are a particularly adept investor in property there is a possibility that you can get a better return from your own investment than a property fund that is part of a large superannuation fund

There are also some other reasons people set up SMSFs including:

• You can save money
• The amount of money you can save often has to do with scale
• There are quite significant fees associated with running an SMSF - see the section below on what you have to do when you have an SMSF - so in order for the fee savings to work you need to have a significant amount in your self managed super fund
• MoneySmart, the Australian government's financial advice website recommends having at least $200,000 in superannuation before setting up an SMSF

What are the downsides to setting up a SMSF?

The real downsides from SMSFs come from the time and effort you need to invest in it.  For many of us, superannuation is just a

Should I write sponsored posts?

On this lovely Friday I thought I would throw out a question for all the readers of my blog; Should I do sponsored posts?

A little background

Many readers know that I started this blog originally just to track my net worth to my goal of 90 million.  Hence the name of my blog: Journey to 90 million.  However since then it has spawned into something I didn't quite expect and I have really become dedicated to updating this blog on daily basis.

It was never my intention to make money from this blog.  As at writing this post I have well over 300 posts and the advertisements I have on the sidebar and top of the bar barely generate any revenue.  Put it this way...Google sends you a check every time you reach A$150 of advertising revenue and I have yet to receive my first check in over 2 years of posting.  That's not a great income generator in anyone's book.

That being said, I am not averse to generating income from the blog as long as I get to maintain the reputation of the blog.  This is why when I do book reviews I'll generally put a link to different book sites you can buy them from and theoretically I get affiliate revenue any time someone clicks on the link and buys the book.  So far I have not really made money off this either.

I was quite content to go on posting on this blog because I genuinely enjoy doing it when an opportunity arose recently that I was reasonably tempted by.  I was offered a sponsored posts on a topic I was actually already drafting.  The way it works is this: I write a post I was going to write anyway and someone pays me sum to put a link to their business in the post along with a keyword.

My question to readers...

My question to my readers is this.  If all the material is still