December 2020 - Monthly Finances
Total Pension Pot: R14,595,270 / $929,635 / £705,085
Previous Month: R14,865,162 / $874,421 / £675,689
Number of Months Retired: 8
An end of year straightening of the books was needed in December
December's results are going to take a little explaining, especially if you're a regular reader. You may have already noticed in the numbers above, the SA Rand value went down, a lot in December but the Dollar and Pound value went up, a lot. Allow me to explain.
When I started this journey, the rand was in the doldrums and a US dollar would buy you 17 of them and the Great British Pound would buy you 22. Given most of our investments are in the US or the UK, I have to convert the amounts to Rand as that's what we spend. You can't do that every day or week as it would be impossible to see how your investments are really doing so I use a process called "Constant Currency" this means using an average exchange rate for a period of time to give a realistic value in Rands. The rand has strengthened massively since the start of the pandemic, mostly because it's now become a good place to get a decent low risk return for investors who have pulled their money out of the stock market (you can buy government savings bonds in SA right now with returns of 7%, in the UK and US that is more likely to be closer to 1-2%). What that means for me is that I need to adjust my exchange rates and the end of the year seems like the perfect time to do it. So to cut a long boring story short, up until now I've been using 22 Rand to the Pound and 17 Rand to the dollar. I've now updated that to the average for the last quarter to 20.7 to the pound and 15.7 to the dollar. That change has reduced my net worth in Rand but improved it in Dollar/Pound terms. I intend to do this every quarter from now on to prevent a big loss like I'm seeing this month. For me right now, Rand is the more important number as that's what I spend mostly.
So with that aside, it was a pretty pedestrian month on the finance side, I tried to tighten the spending up a little as we've been overspending the last few months but it was Christmas so it was inevitable there'd be a few extras like gifts, booze and food to name the main culprits.
The stock market was weird this month, it just couldn't seem to make its mind up, it felt like two steps forward and three steps back all month but fortunately in the last few days of the year a small rally meant we came out positive for the month.
Mrs H and I had a quiet December mostly driven by a resurgence of the Coronavirus in South Africa, which has now ended up in a second lockdown. I could see it coming so there was a bit of "Forward Buying" at the liquor store to stock up on lockdown supplies. Drinking is a national sport in South Africa so when we go into lockdown, Alcohol gets banned immediately to reduce the impact on the healthcare system. Lockdown is bad enough without being locked down and sober so there was some extra spending there this month.
Mrs H and I decided to make each other Christmas presents this year with our newly acquired talents from our hobbies. Mrs H has made me a T-shirt (which is currently going through some adjustments to allow for my Christmas bulge!) and I made her a storage compartment for all her sewing stuff using my woodworking skills.
That might all sound a bit hippyish to you but I think it's kind of cool that this whole process is making us care less about material things. In the past we bought each other massive things, I even bought her a classic car a couple of years ago as a Christmas present (a 1971 Volkswagen Beetle) but it seems like we've both gotten to the point that we just don't need more "Stuff" in our lives. I'm really pleased about that and I really enjoyed making her present.
Overall investment growth
Investment Growth: R77,850 / $4,959/ £3,760
Monthly Investment return: 0.5%
Annualised Return on Investments 7.3% - (7.6% Last Month)
Even though I considered it a fairly bad month of investing, we made enough money to completely cover the bills and a little bit more, so I shouldn't complain.
There was no out and out winners in my portfolio for the month, everything inched forward a little bit.
I continued playing around with Cryptocurrency which went up massively, unfortunately I still don't trust it so only had a few hundred dollars inthe crypto markets, it still shot up though. I'm still undecided about if I'll invest more in Bitcoin or Ethereum but there's no question, I f you bought early on in this area and held, you are certainly rich now.
My Magnificent 7 ETFs are still doing well which I've now held for a full 3 months. The best performer to date has been the Vanguard FTSE Emerging Markets with a 14.4% return which would equate a to an annual return of 57.6% and the worst performer in the pack has been the Franklin FTSE China ETf which has poste a return of 8.4% which would be an annual return of 25.2%. Bearing in mind my personal target for annual return uis 9.5% this is looking very, very good. I invested R3,200,000 / $200,000 / £154,000 into the Magnificent 7 in October and today it's worth R3,600,000 / $225,000 / £173,000, that's already a 12.5% return, if things were to carry on in at the same performance, my 12 month return would be 50% which I suspect is unlikely but would make my retirement pot look very different. Tim will tell, but I think I might have made some good choices with that change.
Living Expenses: R74,612 / $4,663 / £3,587
Budget: R62,000 / $3,647 / £2,952
Another blown budget this month but an improvement on last month and it was Christmas. Year tp date we've now averaged R68,221 versus the plan of R62,000 so I've made the decision that whatever the annual average is at the end of February 2021, that will be the new budget for the the next year. I've said it before that if you don't budget correctly, the only person you're trying to is yourself, and I do believe we have done our best to cut costs and we're not blowing cash left right and centre. I would love to bring it down to R67,000 average by february so that the annual increase is just R5,000 / $300 / £240 per month.
We had 2 major overspend areas this month, the first was the most annoying. Our solar energy inverter packed up so is not producing any electricity, it's under warranty but the installation company is a bit useless and I've now been well over a month with only one visit from them. They are about to get a rocket as we've spent close to R4,000 / $250 / £190 on electricity this month and that is usually around R500 / £30 / £25. The other are was food, well, food and booze. I bought all of our meat for Christmas in advance from a n online butcher and filled the freezer, I also filled the fridges (and a lot fo the garage) with booze in advance of the lockdown. All of this meant our usual grocery bill of R16,000 / $1,000 / £770 rose to an eye watering R26,000 / $1,625 / £1,250 for just the two of us and Winston the wonder dog. That's pretty shameful but my theory is that will feed and water us for half of january also so we should see some upside next month.
I also made the mistake of letting Mrs H do some food shopping on her own. This woman is a marketing man's dream. She doesn't look at the price of anything, goes shopping whilst she's hungry and then buys what she likes regardless of whether we need it or not! One day over Christmas she decided she was going to cook A roast chicken dinner. Great I thought. She nipped out to the shop to buy a chicken. I can buy a decent chicken, some potatoes and carrots for a nice meal for two (with a chicken leg for Winston) at around R100 / $6.50 / £5, we have all the other ingredients like gravy, stock, herbs garlic etc. in the house all the time. My beloved comes back thirty minutes later with said ingredients and makes a lovely meal. Quite literally; winner winner chicken dinner. A couple of days later, I'm updating the finances and see the card transaction for her grocery run.....R900 / $57 / £43. What the AF!I even went to look in the fridge to see if I'd missed something. Nope, I don't know how she did it but she managed to spend the same as the two of us at a fine dining restaurant with wine, on chicken, carrots and mash. It's a skill!
So a bit of a flat month all in all but it washes its face by the income being higher than the outgoings o that's OK. I'm hoping to make a couple of side hustle wins in January to help move things along and I'm hopeful we'll see a strong start to the year on the stock markets so fingers crossed. Also with a bit of luck, by the time I do next month's report, we'll be out of lockdown and on our way back to normality a bit.
Happy New year to all my readers and thanks again for supporting Tribal Fi in 2020. let's hope 2021 is a prosperous on for everybody.
Don't miss my next post which will be outlining my portfolio for 2021 along with my personal targets for the year.
Until then, keep living.