August 2020 - Monthly Finances
Total Pension Pot: 14,050,631 / $826,508 / £638,665
Previous Month: R14,193,129 / $834,890 / £675,863
Month number 5 and my first overall loss for the month
Well I wouldn't exactly call it a loss. I chose to spend more money than I made. Allow me to explain.
We moved to South Africa about 6.5 years ago to some pretty well paid corporate jobs and bought a massive house that we really didn't need and then promptly did almost nothing to maintain it until now and it is (was) starting to show. If you don't live somewhere with 330 days per year of sun like we do, you probably have no idea how much damage the sun causes to a building. It gets even worse when your building is completely dry and then gets the other 35 days of rain. Needless to say, it was time to get a few things fixed. That turned out to be getting a lot of things fixed and then throwing in a few luxuries for ourselves.......because we're worth it.
It started with a simple wall plastering job that was going to cost around R2,000 / $120 / £95.
I just did the math and the total bill is actually R487,980 / $28,705 / £23,237...Ouch
I've set a mental hard stop at R500,000 / $30,000 / £24,000 so we're close but it means the house is fully up to code and all the little things that were getting on our nerves are now fixed. The aforementioned little luxury is a new swimming pool and entertaining space which I have managed to convince myself will save us money in the long run as we'll be able to entertain more at home and save on restaurant and bars. We'll go with that, that works, I feel ok believing that!
So having paid a little over 75% of the bill out of our life savings, we're showing a loss for August, which I expect to repeat in September as I pay off the balance when the work is completed. The mathematicians amongst you though may have already calculated that our monthly loss was under R150,000 / $9,000 / £7,000, and 75% of R500,000 / $30,000 / £24,000 is R333,000 / $20000 / £16,000. Well done Sherlock, it was, despite our flagrant construction splurge, a pretty good month for the investing again.
The Runaway Stock Market
Regular readers will know I've been pretty convinced another stock market crash is in the mail. I haven't changed that view and I have a feeling it's coming pretty soon, but through August the stock markets continued to surge and in fact the S&P 500 hit its highest level ever along with various other indexes and I'm pleased to say despite having a little chunk of change sitting on the sidelines waiting for the next opportunity, I benefited well from the runaway stock market in August
I also continued to plough money into my favourite investment, Solar (Read more about that here) and bought another pregnant cow to add to my virtual herd which is now 3 pregnant cows so soon to be 6 head of cattle (us farmers refer to each cow as a head!). I also bought my first cow that will be reared for beef, which I have to say I have mixed feelings about which I didn't think I would. I am definitely a carnivore and I believe in "eat what you kill" but buying a cow that will be slaughtered in 6 months does feel a bit like going game hunting, a sport which appauls me now I live in a country with so many game reserves and having experienced the beauty of seeing them in the wild. I expect it to pass, I buy steak every week from the butcher so shy would buying a cow be any different.
My Side Hustle also began to earn some money. I've decided to keep everything I earn from the business, separate from my personal finances and not withdraw a salary from it. I'll use the money to fund other opportunities and invest any surplus from within the business. I have a lot to learn about running a business but the business bank account currently has around R100,000 / $6,000 / £4,800 that I've been paid for a few days consulting here and there and I have a bunch of invoices out for more so doing a bit of consulting has turned out to be a worthy endeavour whilst we've been in lock down. Things have quieted down now which I'm pretty happy about but will start actively looking for another gig for 2 to 3 weeks probably after Christmas.
Overall investment growth
Investment Growth: R173,921 / $10,225 / £7,900
Monthly Investment return: 1.2%
Annualised Return on Investments 7.1% - (6.9% Last Month)
I've been keen to understand what my "Do Nothing" income would be from my investments and a pattern is definitely starting to form. I started this journey with a little less than R13,000,000 / $750,000 / £620,000 just 4 months ago and if I make an educated guess (adjusted for COVID and a stock market crash recovery) on my monthly return, I think it's around 1% per month right now. Which is awesome as that would be around 13% annually. Regular readers will know I need 9.5% to maintain our current lifestyle (which is good enough for me) so the extra will actually just sandbag any risk over the first couple of years and let us build up a little emergency fund and then beyond that, any extra will go on travel and experiences and probably a fair amount of wine and beer!
Most importantly it seems we can live pretty comfortably on R62,000 / $3,647 / £3,036 which is the budget I estimated when we set out for the new life and 1% would represent an income of around R140,000 / $8,200 / £6,700 per month. That feels like a pretty comfortable buffer right now.
Still early days though and if I'm right about a stock market crash, it may be some time before we're in that position, but right now, things are going pretty great. I'm sure there will be a shit storm along before you know it but I feel prepared.
Living Expenses: R63,760 / $3,750 / £3,036
Budget: R62,000 / $3,647 / £2,952
Despite a slight overspend for the month, it is nothing short of a miracle we came in so close to budget this month.
Poorly equipped and hungry builders, by the truck load!
Most of the way through August we had between 8 and 15 workmen at our house every day. Mrs H has a heart of gold and fell into the trap of ordering them food for lunch every day when there was only a few of them here, then as the team grew, the local Pizza Takeaway joint was getting a call every day and needed to send a car for the delivery as the order wouldn't fit on the bike! The guys were very appreciative and I'm pretty sure the quality of the work is a little better due to our act of kindness but eventually the owner of the construction company sent a nice message to us to say while he appreciated our generosity, the guys would take care of their own lunch moving forward. That was a relief to me, I didn't begrudge the lunch but the logistics of ordering, delivering, and cleaning up after was taking 2 hours out of my day, every day.
The other problem has been a few expensive trips to the DIY store to pick up paint or screws or nails or drill bits for wood or this or that because the builders need it or I've been given my orders by mrs H on the "Post-construction Interior Design Elements", whatever they are!
So needless to say, considering we were only around R2,000 / $120 / £95 over budget is a win in my book .
So weighing up month number 4 of retirement, it's been yet another good one. We're a little down on the month but still way ahead over all and I'm excited to swim in my new pool if it ever gets finished.
I have a strong feeling dark times are ahead in the remainder of 2020 so will be calming down significantly on the spending after the renovations are done and will continue to move money out of the stock market into alternative investments like Solar and Cattle and will be ready to dive back in with gusto after the next minor apocalypse is over. The other thing that might trigger me to get back in would be the release of a working and approved COVID vaccine, that would seem like a logical time to call rock bottom on global finances.
But until then slow and steady wins the race.
As of 31st August 2020: At our current budget, investment performance and inflation rate, we have enough money to last until I am 70 - That's 26 Years.
Until next month, keep living.