Monthly Finances - December 2022
I know, it's a bit late in the month for a December update, but everyone is entitled to a holiday, right?
Life, Health & Early Retirement - 32 Months Since Retirement
Firstly, Happy New year to readers new and old, I know some of you only tune in for the monthly updates so you may have missed my New Year resolutions post. I hope 2023 is a cracker and if you're on your Pre-FIRE journey, may you get significantly closer to your number and if you're post-FIRE, I hope the investments are kinder than last year!
Christmas and December was a subdued affair this year and apart from a meal out on Christmas day and a couple of nice evenings with close friends, we really didn't do very much. I guess that's one of the drawbacks of emigrating, it's just not what you're used to. We do keep threatening to go "home" to the UK for Christmas but I'm not sure I could leave Winston the wonder puppy and probably couldn't find someone willing to sacrifice their Christmas to look after him anyway.
We did however use the downtime to start a full renovation of our ground floor, although it seems to have turned into much more than the ground floor as every time Mrs H starts to paint something, the boundaries seem to move so she has probably painted about 60% of the entire inside of our house across three floors!
To use one of my favourite Afrikaans words, we are both Gatvol ("up to here with it", we would say in England) now with the mess, disruption and general grind of getting up every morning in blistering heat to put another 8 hours of hard work in, but it has been pretty much everyday for about 5 weeks.
On the other hand I'm pretty proud of what we've achieved as apart from plastering a ceiling, we've done all of the work ourselves and that has included electrics, plumbing, fitting a complete new kitchen, doors, skirting boards, cornicing, removing a wall, painting and more sanding than any human should ever do. I still have to create a DIY epoxy worktop for a massive new island in the kitchen so I could easily undo all of that good work in one afternoon!
Cost wise, I reckon we would have easily spent R500k / $30k / £25k if we'd have had someone do it and including a bunch of new appliances and all the materials, we'll probably come in at about R150k / $9k / £7.5k so there's no doubt the hard work has been worth it.
The UK corporate world seemed to only stop for a few days over Christmas so I did manage a bit of side-hustling in and amongst the sawdust and paint, I kept a clean shirt, hair brush and a towel to wipe the sweat from my brow so I could jump on and off video conferences with the lest amount of effort!
On the health side, Mrs H managed to get a particularly bad bout of Bronchitis over the break so was floored by that and I think I might have had the new strain of Covid for a few days but other than that, we've soldiered on. My search for a shrink continues to be fruitless so I'm resolved to go see my GP to try and get some kind of referral as I have to go renew my prescription anyway. My entire body is covered in cuts and bruises from the the renovations as it was so hot, it was simply shorts and flip-flops. I even sacrificed my big toe-nail in the name of progress after dropping a piece of kitchen on it. It's fair to say I had a tear in my eye after that incident.
January and February are going to be our true holidays as the youngest offspring arrives this week with his partner for 2 weeks and then we have a week or two before my mum arrives for 4 weeks so that should be time to relax a bit and enjoy the last of the Cape Town Summer without all the tourists.
Between all the renovating, living on takeout whilst we don't have a functioning kitchen and me buying a new truck, the finances are expectedly somewhat dented so bear that in mind when we get into the details.
Our Net Worth: R17,908,050 / $1,023,317/ £832,933
Previous Month: R18,764,539 / $1,072,259 / £872,769
Change: -4.8% (Previous Month +2.8%)
Oof! that smarts.
A hit of just around R850k / $50k / £40k in December means I need to up my game in 2023.
Psychologically, dropping below R18m and seeing the chance of dropping below $1m has had me analysing the spreadsheets and looking at the long term view of our finances.
I'm pleased to say we still have a few years for a turnaround before we need to go back to the grindstone but the purse strings have to be tightened after our visitors leave and a bit of extra side hustling is on the cards.
Between the car and the renovations, we spent right around R600k / $35k / £30k of our savings so in real terms the extra loss was primarily from investments which we'll look at further down. Luckily January seems to have started strong in the investments front and I'm continuing with my simplification plan.
Also, we have just done our personal tax returns with no unexpected bills, in fact a decent refund for both Mrs H and I means I don't need to worry about an unexpected tax bill for another 6 months.
As it's the end of the year, I thought I'd take a quick look at the 12 month picture with regard to our net worth considering what a bad year 2022 was for investors and the picture doesn't look all that bad.
On 1st January 2022, our net worth was R17,326,474 and it's now R17,908,500 so we're just about 3.4% better off than we were a year ago. It looks like South Africa inflation was around 7% for 2022 so in real terms we're about 3.6% worse off which is tough considering how many hours of hustling I did in 2022. BUT, we're one year older, we have a new car and a shed load of house renovations and there is a bottle of wine in the rack and a steak in the fridge (well technically somewhere in the back of the freezer) so we should be thankful, and I am.
Monthly Investment Return: -R520,326 / $-29,733 / -£24,201
Investment Return Percentage: +2.8% (+1.4% Last Month)
Annualised Investment Return: +4.6% ( +5.4% Last Month )
And there it is, the real culprit.
We had been seeing a subdued but steady recovery in our losses in the middle of the year and December took all those gains back again to end the year in the doldrums.
The losses were a mix of my offshore investments retreating due to the ongoing cost of living crisis, war and rampant inflation in US and Europe and also the wipe out of my crypto when FTX collapsed in November. Whilst I can't account for the loss of that investment until FTX finally liquidates in possibly a few years, I did recognise that the profits I had amassed were now most likely gone.
Despite all of this, I still feel positive about our investments in 2023. I have been ploughing every last penny of my side hustles into the markets for most of 2022 so as the markets turnaround, we're well positioned to take full advantage. I know I've said it repeatedly but I still believe the majority of the bad news is priced into the markets and with the exception of the revival of a new covid strain, which hopefully won't re-ignite the pandemic, I think how the global economy will play out is fairly well understood, which is we'll be in recession for most of 2023 and blue skies will return in the last quarter of the year. That's just my prediction and you should do your own research but it's how I'm positioning our investments.
I have made the difficult decision to reverse my plan to invest in South Africa stocks. I had started building up a portfolio of some of the better SA businesses but with the current energy crisis in South Africa which looks like we'll be without power across the country for 4-12 hours per day for at least the next 2 years and probably way beyond, I just can't see how South African businesses will be able to compete. In my opinion, the government has now fallen apart and without an election for another year and the distinct likelihood that with no viable competition the current party will get another term, I just can't see any good news for the SA economy right now. I love South Africa and I consider it my home but I just can't see it as a viable place to invest right now, so until things change, I'll be keeping my investments in offshore funds and trackers.
I have hit one major milestone in my new and improved investing strategy and that is What I'm calling my "Side-Hustle Waterfall" and it is devilishly simple. In 2022 I worked hard on the hustle and put all of my profits into an EasyEquities share dealing account which now proudly stands at R1m / $60k / £50k and is spread across a bunch of ETFs, ETNs and index tracking funds. I actively trade that portfolio as a DCA which I've covered in previous posts. The difference now is that I'm at my maximum investment so every time the value of that portfolio goes over R1m, I take the profit and invest it in Solar Panels which provide me with a 20 year income. That's the waterfall: I hustle, I get paid, I invest in the stock market, the profit from that investment goes into Solar and I get an income from that investment for the next 20 years. So if you put inflation to one side for the time being, any income I get from that venture is effectively free.
To give you an idea how that's working out, I hit the magic million right around the ned of December when my clients cleared their November invoices so in the last 3 and a bit weeks, that portfolio has yielded R40,326 / $2,372 /£2,016, all of which was used to buy solar panels with an IRR of 12% over 20 years.
That investment will pay back right around R127,000 / $7500 / £6,300 which equates to an income of R529 / $31 / £26 per month for the next 20 years. And whilst I might not place the order for the company Rolls-Royce just yet, that is a massive personal milestone on my FIRE journey. If you go back to some of my very first posts about my little side hustle business, I had lofty ambitions to create a micro investment house with just one customer, me. While it's hardly JP Morgan Chase or Goldman Sachs quite yet, this little investment strategy is the realisation of that goal and I don't mind saying that I am seriously proud of everything that has gone into getting that R529 per month. If I've got to R529 per month in just a few weeks, what could be achieved in a few months or even a few years?
If you are now thinking "Mr H seems to have lost the plot, he's getting all excited about R529" and you may well be right, but you might also be missing the point, it's R529 generated from absolutely nothing other than a bit of effort, and now it will grow and compound with significantly less effort. It's a foundation
Budget & Spending
This months expenses: R95,176 / $5,439 / £4,428
Budget : R75,000 / $4,687 / £3,750
Yup, budget blown out of the water!
That only tells half the story too as I put R100k aside for renovations and we're more like R150,000 so that number should be another R50k higher.
In actual fact though, apart form the dreaded "household maintenance" which is where all the small materials bills went and the take-out bill from flopping on the couch with pizza after a hard days work, everything else was broadly in line.
I'm looking forward to having a functioning kitchen again as my body is crying out for minerals and vitamins and when the delivery driver is on first name terms, it's time to get a grip. That should bring the grocery bill back into check and thank goodness for solar as I'm running the air conditioning all night every night right now as it's hooooot in Cape Town this summer.
Because we're largely unaffected by electricity prices or inflation on a bond / mortgage, we're not feeling the cost of living crisis anywhere near as much as most but the price of food in SA right now is eye watering. You couldn't make the prices up, A pack of butter at some places is now R100 / $7 / £5 and a black of cheese is up to R140 / $9 / £7. I've never seen prices like this and you know those retailers are going to normalise that and they're never going back down right? I do worry about how people are making ends meet right now across the board. Its weird. I actually think SA is becoming more like England were take away food is becoming cheaper than grocery shopping due to the economies of scale for the take away owners. That is not a good route for the nations health.
Petrol is another big area where we're lucky as we don't have a daily commute but also, if you think the oil companies are not going to normalise the price and hold it close to these levels moving forward, you're kidding yourself.
Then we've got the dreaded Eskom (SA's government owned monopoly electricity company), who can't actually provide you with electricity but still thinks it's acceptable to increase the price by a whopping 18% after last year's 23% increase. Those solar panels become a better investment every day.
Anyway, it was supposed to be a budget update not a rant about the failing economy so I'll move in swiftly
As I mentioned earlier, I had envisaged radio silence on the hustle front until probably end of February but it didn't really work out like that. I definitely haven't been busy but over the Christmas break I probably worked 2 days but it was broken up into about 7 x 1 hour meetings with all the associated follow up so whilst that was mildly annoying at the time, it does mean there'll be a bit of income in January to offset the spending.
I expect January to be similar and then on the 1st February I move into my new Office / Warehouse / Lair, which still seems partly frivolous, partly unnecessary but hugely exciting. I'm looking forward to have more space to focus on new ideas and side-hustle experiments while keeping a bit of income going on the consulting side. I'm still slightly conflicted as to why I'm taking on premises when I'm supposed to be retired but it's a one year experiment, I only plan to be there for a day or two per week maximum and finally, how cool is it to have your own warehouse? hahaha
My 3 year commitment to consulting ends on the 1st May 2023 and whilst I don't' see me quitting quite yet given the state of the economy, I am committed to using the 12 months I have this office space to either come up with an alternative income plan or make the plans to hang up my hustle boots more permanently. I have a whole bunch of ideas and other things going on but I need to focus, make a decision and get on with it, as I do think I'm now procrastinating.
Picking A Winning Stock 2022
With the year coming to an end and only 2 months to go until the competition winner is announced (like we didn't already know who's going to win) let's check in on the stock pick challenge
Well quite a bit of change in the middle of the table and a massive improvement from a loss of 17% to a less embarrassing 6% for the portfolio. I'm going to go out on a limb and say that I think as a collective we'll break even this year and that will be a respectable result. What's not respectable is that my stock managed close to an 80% increase in the last month and is still 71% underwater, What a crock!
Most interesting is that Ross and Shane are still fighting it out for 2nd podium position and Jo and Charlie are still battling not to come 6th so there's still some life in this competition yet.
If you'd like to take part in the 2023 stock pick, entries are open and I'll be accepting picks until 1st March 2023. All you need to do is either comment on this post or next months monthly update with your pick and I'll automatically include you. If you'd prefer not to comment and remain slightly more anonymous. You can email your pick to me at mrH@TribalFi.com and tell me what nickname you'd like to use and I will manually add you to the list.
The rules for 2023 are simple, you are allowed to choose one company and one company only (its a pain to track multiple picks) from either the US, UK or SA. I will register the price of your stock on or around the 1st March 2023 and I will take the price on 28th February 2024 to calculate your performance. No dividends will be recorded or included so it's all about the growth stocks baby. Who ever has made the largest percentage return on the final day will be crowned the winner. Simple as that. so get your research done and let me know the name of the company you want to back, I'll do the rest.
From an investing perspective, I'll bid 2022 a less than fond farewell.
I'm full of hope for 2023 and if I take a moment to reflect on our FIRE life going into the new year, I feel really lucky to be retired at such a young age and thankful we put in the hard years of saving to make it happen.
Its a tough gig out in the world right now and I do worry about how people are coping with the current cost of living crisis from both a physical and emotional perspective. I don't think it's been as tough as this for my generation before but I also think we're through the worst and its the tough times that galvanise you.
What I am learning is that even when you're retired, there's no time to waste and if you want something, you still have to go make it happen. It's definitely easier but it's also much easier to watch the world go by or get caught up in planning. Make 2023 the year you did something massive.
Until next time, keep living.