Networth update February 2018

So overall networth has been growing well. This was driven by a combination of strong equity market growth, savings and improving political situation in our country.

In terms of overall NW we’re sitting at 80% in listed equities.

The focus has now shifted from maximising networth to optimising income. The focus is to get as much tax benefit through optimally placing the investments into the correct taxable vehicles. So my waterfall looks as follows:

1. Max out interest allocation, that’s R23.8k per person and at 7-10% interest rate is about R240k-R340K of interest instruments. Ours are fixed deposits, loans and bonds here.

2. Max out Tax free saving account (TFSA) a small r33k per annum allocation that attracts no tax on after tax income. We invest these into high income instruments like property and bonds.

3. Max out retirement annuity, tax free savings but hesitant since a growing balance means more money stuck in SA till we’re 50+ age and big slant towards SA and the income tax rates start to exceed other tax rates once the balance is higher than R1m. Anyway whilst I’m working its better than marginal tax at 40-45%.

4. Pref shares, I like these since can get dividends at high rates but am able to get them at 0%-20% tax depending on vehicles

5. Global property – decent returns at 3.5% yields but am avoiding SA property for the foreseeable future post the expropriation discussions that started in December.

So there you have it. Increase income, probably not with more local or global equities for a while until all expenses get covered by passive. Plans had to change because local property is no longer an attractive option so will instead generate it from preferred shares, fixed income and global property REITS.

Growing your capital

I’ve had some thoughts about investing and getting to financial independence. Clearly a key part of this is having enough passive income to cover your day-to-day expenses.

To get passive income, I find that dividends from businesses is a great form. One of the easiest for the average guy to access being via dividends from the share market. Business income through owning shares in the private sector are even better, but not easily accessible outside the industry. Listed companies provide great access to dividends and therefore passive income.

Now, what do you really need to get access to dividends?  Money, ie capital. It’s all very well knowing that you got to get dividends, but actually you need capital, meaningful capital to do so. And the best way for me to get capital has been historically?

To earn it.

The quickest way I got increased capital was through earning more. And not spending it all. It was far quicker than growth from my existing investments, or from building a business. It was just earning more. And I did that by, firstly working and billing more hours when I worked effectively as a consultant. Then it was by switching to a career that paid more. Then it was by adding real value and getting share and equity options. These all helped grow my capital the quickest in the beginning, because I had little capital to begin with.

Once I’d built up decent capital over a period of 10 years (like 5x my gross annual salary), it was much easier to compound it, because now a 10% growth rate on the capital base actually made a difference. Prior to having this, I could’ve made a 100% growth and made the same difference as a monthly paycheck.  Now a 10% growth would equate to half a years pay!

Until you get to any decent scale of capital, the best bang for your buck, in my opinion, is to shoot the lights out on active income, ie job/your time for income.  Heavily invest that capital, spend like a business owner (ie low expenses, high margins) and after 5-10 years have a strong base to take yourself to the next level!

 

April 2017 Net worth

Starting to feel like an expat now! April has been an interesting month, the currency has been fluctuating quite wildly due to political risk changes, the downgrade of the country from investment to speculative grade and all the volatility that goes with it. Despite this our net worth has still been doing well, mainly because we’ve diversified across geographies now so if currency movements happen we come out ahead in rands and hedged on hard currencies.

More importantly is the effect of all this on the psyche, hence my opening comment on feeling like an expat. Starting to move away from being emotionally attached to a market and rather looking at pure investment fundementals. This has always been an issue with home-bias affecting one’s investments. It is also the reason for not being overexposed to local circumstances as we already have a property, jobs etc here.

In terms of figures, most of the increase in net worth came from increases in share values (non rand shares) and savings.

 

 

 

 

2016 is done! Reflections…

boats

So my 2016 work-year comes to an end. It has been a great journey and definitely one of my nicest ones in recent years.

In terms of financial (why I keep this blog!) the following happened:

  • Settled all outstanding debt by paying off the house
  • Sold my shares in a private business that accounted for the majority of the boost in net worth (+50%) and re-invested all this cash.
  • Watched the currency strengthen from its horrible lows last December.
  • Consistently saved in excess of 50% this financial year excluding the business share proceeds.

All-in-all a great year and we’ve gotten to the stage that we are so close to the 4% to cover expenses that it’s possibly in the bag by next year.

I’ve learnt a lot over the year, am in a happy place than I was last year. Work is done for the year and so can go away peacefully for the end-of-year festivities.

Happy holidays for those taking time off!

 

November 2016 net worth update

That’s not me kite-surfing, although I wish it were!

 

November’s increase was pretty non-descript. The majority of the increase came through an increase in cash savings in investment assets.

Savings wise it wasn’t a bad month, we didn’t have any large expenses although as per the graph below you can see we were a bit above our average. Pretty standard month also on the earnings side.

I’m enjoying see the average expenses and 4% Safe Withdrawal rate lines converging steadily, particularly after our big boost earlier in the year.

Till next time, 2016 is a wrap!

Thoughts on financial freedom and doing what you want

Having recently watched Annie, the musical, it struck me as to how out of one’s control life can be. Those made destitute by the Great Depression despite being skilled workers resonated. It would seem this shouldn’t happen and with the best of intentions cannot get back to normality.

It seems it situations like that, there is very little that can be done. Perhaps nowadays it would be easier to move to another country, but a global crisis would limit even this possibility. It just feels like it’s a wake-up call for everyone to do more of what they want, live your life now as things are not in your control and not to work to the exclusion of all else.

I’ve bumped into a number of people lately that say you cannot have time to spend time with their kids due to work committments. Things like making costumes, or attending children’s plays etc are not possible when working and also you have no alternative to working and getting them into private schools. I wonder if people assume they need to work in order to have nice things – there is a mismatch between wants and needs and this causes us to believe you have to work more. I’m pro gender equality, but I think children get a better upbringing with parents that are present. I want to be able to spend time with kids rather than being an ATM. If that requires less consumerism, so be it. Better than financial slavery tied to a desk.

Financial update August 2016

It has been a while since the last update!

In the interim been through a few changes on the personal front. We’ve had some new beginnings on the earnings front as well as cutting out some long-standing big expenses.

Furthermore, a windfall from the sale of some businesses has resulted in a lump sum of additional capital that needed to be deployed. Together with currency volatility it has made for some interesting investments over the past 10 months.

Where are we now?

Well, in terms of net worth we have killed the home loan debt and no are sitting in the position of no debt on the balance sheet. However, we cannot really invest that capital.

 

May 2015 net worth update

We haven’t done an update for some time, in fact since November 2014, oops!

First of all, 2014 ended up being a reasonably good year with ~24% net worth growth in Rands, about 9.5% in US$. The difference? Rand currency and Dollar strength did not help the cause here.

Anyway, so far 2015 has been a good year, we’re up 15.6% YTD in Rands, ~11% in US$ so it’s been going well.

Onto the actual investments:

Assets: 

Cash

Property

Retirement annuity

Shares

Vehicles

Business investments

Liabilities

Home loan

Tax

Net worth: Assets – Liabilities

On to what the individual accounts represent:

Cash

Primarily just cash sitting in savings accounts for planned expenditure for the house, or vacation. However, a decent chunk of this (bit more than half) is sitting in the share trading accounts as we rand-cost average recent cash received. I haven’t pulled the trigger as I still feel the share market is quite high, but it isn’t enough cash to justify buying a property or business. I will probably invest this over next 2-3 months, depending on what happens with additional cash coming in from side business ventures.

Property

This consists of our investment property (house) and our personal residence. Not much has changed here in ages. I grow these by small amounts each year from their original value, but they’re still tracking over 30% below current market prices, so it feels quite conservative.

Shares

Decent split between international shares and local shares. I’ve been steadily buying shares over past 10 years.

Vehicles

Two cars, 3-4 years old each now. I am writing these down to zero over 5 years.

Business investments

These are not recorded at a value. They may or may not pay off, but we did receive a reasonable amount of cash from them this year so far.

So overall it was a good month of May. Most of the growth this year has come from savings and cash received, growth has been approximately 1/3 from capital growth and 2/3 from savings/dividends.Next few months should be interesting as to whether we get some more cash from the business investments. Still on track to achieve the targets by year end.

Net worth update November 2014

November was a particularly good month in terms of performance as both the share markets recovered from the September and October slump and additional cash came in from the business venture. So overall the net worth target for the year was achieved (R4m), hopefully December continues to play ball from a markets perspective and doesn’t drag us back below the goal.

So overall, due to the cash in from the business, savings for the month was at ~80%! and around 55% for the year to date so far of take-home income. So for the monthly increase, bit more than half related to additional savings and the rest from the improvement in the share market. The problem now is that we have a bit too much cash that hasn’t been invested – will look to put a decent amount of cash into local and international shares in the coming weeks before year-end.

 

 

 

Net worth update August 2014

Most of the return for August was driven through contributions to RAs and share investment accounts. August savings rate was lower than prior months at ~25% of take home pay. This was primarily due to pre-purchasing a few items for year-end at decent discount rates (around 50% off on travel fees), so my savings rate will pop back up for the rest of the year. For the year to date, savings still at 50% of take home pay. Goals are still on track for the full year, it will be good to reach a 20%  growth in net worth by year end. With quite a significant portion of wealth now stock-market linked, it could be a bit bumpy.

In terms of discounts for year-end, it seems in SA you can get very good deals if you plan and shop around. The only problem is my wallet is getting too fat with all these loyalty cards. Hopefully the iPhone 6 will make NFC payments a reality in the US, then in a few years we’ll be using our phone or back to a single card for everything again.

August wasn’t an exciting month for dividends, especially after the bumper one in July.

I have some cash that is building up from the savings and not too keen about any investment ideas at the moment. Stock market is still high (locally and offshore) so not too fond about putting my savings every month in there, but am still doing my quarterly investment for cost-averaging. Haven’t bought the JSE for quite some time, and am currently just managing my offshore exposure with my contributions. Anyway at least trying to automatically invest every quarter and not think too much about it. Am getting close to my target allocation – quite excited to start looking at property or fixed interest again, especially once interest rates have gone up a bit more, maybe we’ll even have a stock market correction… Anyway, for now am just staying with target asset allocation and saving as much as possible – time will do the rest.