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!

 

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.

October net worth update (-0.03% month) 16.36% ytd

October was an interesting month, we had a continued pull back in the share markets that offset any additional cash placed into savings. Overall savings rate for the month was ~45% of take home pay. Net worth target for the full year still on track with two months to go with a potential cash dividend coming from the business to assist with achieving the goal before year end.

If the market continues to fall will look at acquiring more shares than just the normal monthly investment.

Net worth update June 2014 (+1.62%) 12.42% YTD

Net worth now at R3.7m ($345k). June was a reasonable month, with savings at around the 50% mark of pay. The net worth increase was primarily as a result of these savings channeled towards RAs and shares, with little overall movement in the stock markets to affect us.

The goal is to reach R4m (+-$400k) of net worth before year-end.

 

Net worth May 2014 +1.96%

Net worth reached R3.65m ($340k at current rand dollar exchange rate) up R96k from last month. Mostly an increase on the back of an overly aggressive stock market. JSE is trading at 19x PE, but lots of it due to recent exchange rate weakness,  and Chinese growth.

Still on track to reach R4m by year end especially if my private company shares pay out some dividends or a bit of a raise at work will help.

I still need to sort out lowering my insurance premiums,  just been too busy at work.

Selling items for cash

Been trying to decide whether one should sell ones old posessions. Im not one for haggling, so have generally just given items away to the needy.

But think I’ll try getting some value for old stuff. Things like:
.squash racquets
.old laptop
.old games
.camping chairs
.computer peripherals

Have a look if cash crusaders or through gumtree. Lets see what happens.