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Just when you thought you were out......they pull you back in again!
Life, Health & Early Retirement - 3 Years & 4 Months Since Retirement
What a weird month, I feel a bit like I've been back a few months in a time machine, but I'm not complaining.
I won't lie, the transition out of my successful side-hustle into a bit of something new and a bit more aligned to enjoying my retirement has been proving to be a somewhat stressful process so far in 2023.
I'm not normally an indecisive person and I've been very good at committing to my self imposed target of canning my consulting business after 3 years and transitioning into something more enjoyable but inevitably less lucrative. The problem lies in that I was very good at turning off the lucrative hot tap but have been uncharacteristically failing to turn on the cool tap.
And I'm not sure if, because of that, I've psychologically engineered a safety net but all of a sudden I seem to be inundated with offers of consulting work and I'm currently back to 2-3 days a week of actual work each week and it's looking like it will be that way until Christmas. I'm not going to complain because in that 3 months, if I play my cards right, I should be able to bank our living expenses for 2024 but I do feel a bit mad at myself as it feels like I'm putting my plans on hold.
All of that has kept me occupied over the last month and as Mrs H announced she was stopping smoking on her return from a UK trip, keeping myself busy at The Lair and as far away from her as possible has been a wise strategy. Have you ever met a Scottish woman with a short fuse? No? you're lucky, try to keep it that way!
I have made one change though which is proving to be industrious and good for my wellbeing and that is to take one day in the week to clear my personal to do list. That list is usually things like doing the small repairs around the house, tending to the garden, getting gas bottles refilled, dealing with anything government related (which is South Africa is a highly frustrating mission), replacing batteries and lightbulbs and all those annoying consumables and generally clearing down the backlog of jobs that are very easy to ignore.
This has two distinct benefits, the first is that having a list of jobs that you know you need to do, but not getting to, is a bit stressful (especially when you're constantly "encouraged" to get them done by her who shall not be named) and then actually getting them done, gives me a good feeling of achievement so it's a double whammy. It also means I can enjoy my weekends guilt-free and if that means laying on the sofa with a beer watching YouTube then suck it up people, I've earned it!
The fist signs that winter may be over in Cape Town are finally starting to show and as this was my 9th winter so far here, it has been a doozy, I thought it would never end. I have been wearing long pants for easily 3 months and that makes me sad, its a small thing but I literally cannot wait to get back to my proper retirees uniform of shorts, t-shirt and flip flops.
Socks are for suckers people!
Net Worth
This Month Net Worth: R14,671,420 / $815,071/ £637,888
Last Month: R14,960,420 / $831,113/ £650,437
Change: -2% (Previous Month +1.6%)
It had to come eventually and to be fair we've had a solid upward trajectory for the past 6 months so there was a bit of a battering on the finances this month. It wasn't massive but it did trigger me into action on a a couple of things and that is proving to be good timing as September is shaping up to be more of the same.
The markets have been surging since the start of the year and that seems to be taking a break as the economic powerhouses of the world seem to be backtracking a bit on their stance of "the worst is over" and seem to have replaced it with "Hold on, is it over? did we say that?" so time will tell on that but I maintain my stance that I think it's going to be steady upside for the foreseeable future but it's not a good time to be taking big risks, its a steady, hold your position and don't get tempted by the shiny shiny kind of vibe.
And it's that sentiment that got me to do a full service on my portfolio in August which is a continuation of my simplification programme to achieve my 12% annual return target. If you're not a regular reader, a quick recap. My target is pretty simple, we want to draw down around 4%-5% of our net worth every year to live without having to earn any money (any side hustling is upside), but we also need to protect our net worth from inflation and then, you know, shit happens, so we need a slight buffer. That means, I need 4.5% to live, 6.5% return to keep up with inflation (which is a good long term average inflation rate in South Africa) and 1% to cover life's little unexpected "presents". Which simply means 12% is my golden growth number. Then there is a second game I play which is to try and side hustle to either supplement the living costs to have a better standard of living OR draw down less then 5% to live by using side hustle cash instead which means we need less returns as we get older.
So I did a simple but effective audit of our portfolio this month and made a little action plan to make 12% return as inevitable as it can be over the next year or two. It was broadly broken down into the following actions:
Consolidate my SA based stock portfolio and pensions into 3 index tracking ETFs:
Sygnia S&P 500 - The top 500 US companies
Sygnia FAANG Fund (which is currently being changed and renamed is essentially the US top tech stocks)
Satrix MSCI World - The global economy
Cash in all of my other "stuff" like my Ninety-One, Franc, Easy equities etc. all of which have high fees (easy equities is debatable but I've noticed some hidden cost in their bid and ask spreads) and I tend to play around with them which compounds those fees
All of that money gets reinvested in SV Capital cattle which delivers around a 14-15% annual return and once it's in there, I can't mess with it!
Reinvest all of my solar income also into SV capital to compound those returns from around 12% to 14% before I draw down on them.
Cash in all of my remaining crypto and get out of crypto all together.
The outcome of this activity is three fold:
A significantly simplified portfolio that I don't need to interact with daily.
A low cost and low effort portfolio that requires no major maintenance and should comfortably produce 12-13% annual returns
A big shift of our investments to Capital based investments rather than income based. Simply meaning tax will be 18% rather than up to 45%
This really gets us ready to start drawing down from our net worth in the next year. As it stands today, we have about 6 months left of my side hustle money to fund our living expenses and although I might earn some more in that time, I want to make sure that any side hustle is just that and we don't suddenly realise we have a dependency on generating any income, or then I'm not really retired, I'm just working for myself.
This has been another rewarding process as I could see that the "fun money" that I was playing with in crypto and a bit of day trading was actually not producing much returns and would eventually evaporate which feels a bit of a waste of time and money.
Who knows, maybe I'm growing up?
Investment Performance
Monthly Investment Return: -R191,165 / $-10,620/ -£8,311
Investment Return Percentage: -1.3% (+1.6% Last Month)
I've already talked about the markets talking a breather but we've also seen some really odd behaviour in the rand over the last couple of months.
In 2023, we've seen the SA Rand to US Dollar rate flex between a low of 16.7 Rand to the Dollar up to as much as 19.8 and in the last 6 months it's been up and down like a fiddler's elbow. That is a swing of 18%
Because we have around 80% of our investments in offshore investments but we spend in Rand, that means our net worth has actually fallen and risen by 18% when considering that is around R15m / $800k / £650k that is a swing of R2.7m / $144k / £117k that is totally outside of my control, without even moving out of my seat!
I get around this volatility by using a constant number which I update every 3 months. That number right now is 18 Rand to the $ which feels like the right place.
That, and the clean up of our portfolio should reduce the amount of feast and famine months we see where we have a pattern of bad month after good month. Looking at the last 6 months though still gives a good story for our investments with a net growth of around R1.1m / $65k / £51k which is an annualised return of exactly 12% so if I don't break it with my consolidation plans, we should be right on target for the year.
Budget & Spending
This months expenses: R105,318/ $5,851 / £4,579
Budget : R75,000 / $4,150/ £3,500
And it's a good job I'm focussing on making and keeping some of our money because for the second month in a row, the household finances are a runaway trainwreck!
Some of it was expected as I new there was an overspend last month on some household maintenance but unfortunately add in Mrs H spending time with our granddaughter in the UK and the grocery shopping for the new athlete in the house means we've been breaking records all over the place.
Unbelievably, our grocery bill for two adults and a puppy who mostly lives on dog treats and left over steak (not from me, ahem) was an incredible R22,651 / $1,258 / £984. For a month! And I've been fasting so I'm only eating 1 or at most 2 meals a day. I must be getting old because that is incomprehensible to me.
Household maintenance, which was mostly finishing off jobs, decorating and a small amount of the contractors we had in for some jobs was also a whopping R31,409/ $1,750 / £1,390 which is more than we spent in the rest of the year. I need a lie down.
That means the last two months have put us on the back foot for the rest of the year as we now have an average monthly spend of R82,000 against a target of R75,000 at the midpoint of the financial year so we really need to try and survive on R68,000 for the rest of the year, and with a UK trip in November and Christmas being less than 100 days away, that doesn't feel like fun.
So this is going to need to be an area of focus or Winston the wonder puppy and Mrs H, better be coming up with some money making ideas for each other!
Side-Hustle
August and September are the busy times of year for the kind of consulting I do for a side hustle. My clients often need to use up their annual budget and get a head start on the new year so the phone is most likely to ring around this time, and based on the current financial burn rate we find ourselves in, it's a good job it did.
I've picked up about 6 days of work so far this month and have about another 25 in the pipeline that would be delivered by the end of January 2024 so assuming I get the gig, I've got work for about 1.5-2 days a week for the rest of the year which is right in my sweet spot. It's also work that's quite enjoyable and gets me out and about so definitely no complaints there.
So with 2 days work and 1 day on my new personal admin regime, that leaves 1 day for "experiments" and 1 day to put some focus in life after consulting which is proving to be much more complicated than I had expected. I have 3 ideas that are similar to each other but different enough that I couldn't do all three on a large scale. I'm struggling to decide which one to go after and my indecision is really starting to wind me up.
I'm currently debating whether to throw some effort into one of them and be ready to fail fast if I don't enjoy it or it turns out to be a non-starter, OR start all three and pick one as they start to grow. Both have their pros and cons. They simply break down into three categories:
A food business
A personalised gifting/making business
An online maker supply store
They all follow a similar pattern which is small scale manufacturing with online retail. The differences come in what the manufacturing is, who the market is and whether I'm selling only my own things or also selling other people's or importing things I didn't make. I could get excited about all three and they feel safe in that I can do them on my own, they're scalable and I've got skills and experience in each one. I do question whether SA is ready for this kind of online retail yet as we're a long way behind Europe and the US and some people still go out to shopping malls and that kind of thing here (weirdos) but I guess we'll catch up eventually. The customer base here is also very different as there is a massive distribution of wealth between people who don't even have internet access to people with billions but the market of people willing to pay a premium for a quality product online is tiny compared to more developed countries.
I know that I just need to start and learn as I go, which is why I'm a little bit mad at myself for taking on more consulting work but as you can see from the budget, I don't have a great deal of choice at our current levels of spending right now.
I'm a big one for setting personal targets so I'm targeting myself to have made a decision and created a business plan before Christmas and punch 2024 in the face with a new side-hustle and a renewed vigour after failing to achieve my goal in 2023. You heard it here first.
Tribal Fi Stock Picking Competition - 2023
Well looky here, just when we thought we were starting to see some emerging trends in our competition, the whole thing gets turned on it's head
Lawrence is now showing a massive 80% return on a South African stock, which would make for a Tribal Fi world record. . I would have put money on the fact that was unachievable this year but there it is in black and white.
And while Spike managed to maintain his EV play with Tesla, my similar play in NIO dropped by over 30% to put me back in mid table.
It seems things just go from bad to worse for Shane with Transaction Capital who saw another massive drop in share price to add insult to injury. Charlie's play with PPC is not looking too bad when compared at the overall table and I still decline to comment on StuffyUncle's Freyer Battery pick as there's still some way to go. Ross also dulled his blade on Snow but that's also another one that I think could make a significant comeback but overall if Lawrence can maintain his lead, it's going to be a tough one to beat.
This is the mid year point of our competition so it's going to start getting tougher here on in to catch the leader but a lot can happen in 6 months.
In Summary
I feel like August was a bit like one step forward and two steps back with an improvement in our future returns but a lot of dependency on our future spending and as I'm a bit late this month, September is already three quarters in the can so October is a real test to see if we can get all the ducks pointing in the same direction.
Overall though, these things are relatively small distractions if we don't let them become trends and we should never forget how lucky we are that we get to choose how to spend our time every day when we're still relatively young. It's been nearly four years since I had to set an alarm clock when I went to bed and make sure I had an ironed shirt and had to sit in traffic for minimum 1 hour per day and often up to 3 hours.
If I can just get back in those short pants and flip flops in the next couple of weeks, I'll still be a happy camper.
Until next time, keep living.