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It's hard to put February into words.......
Life, Health & Early Retirement - 22 Months Since Retirement
Let me hijack one moment of this months update to say that Tribal Fi tries to stay in it's lane and stick to the business of Personal Finance and the pursuit of a FIRE lifestyle. As a rule, we try not to get drawn into Political, Religious, Race or Gender based arguments, we believe in just trying to be the best human being that you can be.
However, we believe in freedom and would die for people's human right to be who they want to be without fear or persecution and we also believe in the right to free speech (even if we don't agree) and democracy. It is because of those beliefs that this blog stands with Ukraine in it's fight for freedom. If you disagree with our view, that's OK, you're also entitled to your opinion. If our view, or the mentioning of it here offends you in some way, feel free to jog on and hit the little X in the top right corner.
Thanks.
February was uncomfortably hot in the Cape and I have decided that when it goes over 30 degrees Celsius I am unhappy and when it goes below 20 I am less happy than when it's between the two. Therefore there needs to be a winter holiday to somewhere warm between June and August and then a Summer Holiday to somewhere cooler between December and February.
The heat did however make the last few weeks of my 3-day per week contract more enticing as I was able to go into a nice air-conditioned corporate office for a big chunk of the week where I was in full control of the AC controller, other than when Mrs H told me to change the temperature of course!
It was also my birthday in February and at 46 I have no math left to convince myself I'm anyghting other than middle aged. It was a fairly subdued event but I tried out a beer or three and Mrs H bought me the best present ever..................
What do you buy a FIRE early retiree for his birthday, a toy gun that shoots salt at houseflies! I've been pretty much on the hunt daily ever since and I can confirm that the perimeter is clear!
Unfortunately I now seem to have a growing infestation of feral pigeons so as is the seemingly way with my life, you fix one thing and find something new to stress about.
On the health front I am happy to say there is officially nothing to report for February and for what feels like the first time in a couple of years, there has been no doctor visits, medication changes, blood tests or medical procedures of any kind. Apart form my quickly failing eyesight which I suspect is normal going into your late forties, I am as fit as a fiddle. Well as fit as a fiddle if the fiddle is overweight, constantly worn out and makes involuntary groaning noises when it either needs to sit down or stand up.
As of the last week of February, Mrs H and I pretty much returned to full time retirement and I immediately noticed a sight return of a spring to my step and a definite uptick in my mood and general wellbeing, it's official people, work is bad for you, try to do it for as shorter time as possible.
We're heading to the UK for our first proper trip in March and I'm getting pretty excited about it now. It's primarily a business trip to drum up a bit of work in the future but we've cunningly designed it to make sure we see family and friends whilst we're there and we're taking a little time to ourselves so really looking forward to that.
We've actually been hitting the gym and the electric shock treatment pretty hard since we ended the day job which is massively uncharacteristic for me and I've been cutting down on the pop as "Wine O'Clock" seems to get earlier and earlier once you retire so a little dry spell was definitely in order in advance of our trip which will inevitably be anything but dry!
Ok, nearly forgot this is actually a finance blog so I guess you probably want to see some numbers....
Net Worth
Our Net Worth: R18,974,251 / $1,264,950 / £948,712
Previous Month: R17,614,281 / $1,174,285 / £880,714
Change: 7.2% (Previous Month -1.7%)
Now this is probably going to take a little bit of explaining so I suggest you grab some popcorn, and maybe a pad and paper!
If you read the monthly update regularly you would know that a net worth increase of 3% is massive. So how then you may be wondering did I manage a 7.2% increase in net worth in what has been without doubt the worst month for investors since the COVID kick off of March 2020.
And you'd be right to ask, but it's actually fairly simple.
You see my side gig did pretty well in the last financial year which ended on the 28th February but because it was my first proper year in business, I have only been investing some of my profit and I've been keeping most of the cash in a simple savings account and crudely assuming that I would pay full tax on everything the business earned. Now that might not have been the smartest thing I could have done but it helped me sleep knowing that no matter what happened I wouldn't suddenly have a bill from SARS that my business couldn't afford.
So in practice, what I was doing was putting the profit in a savings account and that was adding to our net worth but then I was putting a negative amount in the accounts for the maximum amount of tax I could pay, which I see now was kind of making the profit look quite a bit less than I would actually get. With me so far? Good.
So my financial adviser and tax consultant came for our review in early February and looked all stressed and harassed to tell me that I had earned too much money and that because I hadn't spent much, I was going to pay a massive tax bill.
Now I'm not sure if I'm out on my own on this one, but I don't subscribe to the idea of earning too much money and the socialist in me has always been of the view that you have to earn it to get taxed on it and as long as we all pay our way than the world will be a better place.
My team don't agree, which I guess is why they charge me so much money. Although thinking about how stressed they get when they earn too much money, maybe I should help them with that and ask for a discount!
To cut a very long story short, the outcome was that I was looking at a profit of around R1,600,000 $106,000 / £80,000 from side hustling in FY22 after all my costs of doing business had been accounted for up to the start of February, which is a chunk of change.
Luckily, while I may be risk-averse and a fan of stress free sleep, that should not be confused with me being some kind of dumb-ass. This was all part of my master plan to make sure the tax bill was paid and then invest as much of the profit as possible to create future income (and more tax for SA) later down the line.
So I invested around R1,600,000 / $106,000 / £80,000 in Solar Panels which will create rental income for the business for the next 20 years. And because those solar panels are saving the planet by generating renewable energy from the sun they are also a depreciable asset for the business this year so whilst I will still pay all of that tax and much much more, I will pay it over the next 20 years instead of right now and benefit from around R4.8m of business income over the same period .
And that longer than I planned explanation is mostly why our net worth increased by 7% in February,
Phew, I think I need a lie down.
Living Expenses
Living Expenses: R63,244 / £4,216 / £3,162
Budget: R68,000 / $4,850 / £3,400
Living expenses caught me by surprise in February in that it was one of the lower spends we've had in a year and with the price of everything seemingly rocketing, I really didn't know why.
I did a quick analysis of the spend in February and found a couple of thing's Firstly I paid the municipal bill for water, sewage and rates a bit late so that will be double this month and adds about R5,000 / $333 / £250 to the budget in March. Secondly, the dreaded Household Maintenance bill was just R1,800 / $120 / £80 when the yearly average is R7,000 / $466 / £350 so that saved us another R5,000. It's not that less things broke (there's always something) I think it's that I either fixed them myself or simply ignored them and hoped they'd fix themselves! Also Mrs H didn't seem to buy as many "Home Furnishings" as usual which makes me very happy (I'll pay for that comment!).
So that explains the underspend so unfortunately nothing that is likely to stay lower. As it's the new financial year as of the 1st March, I need to set the budget for FY23 and the official monthly average spend for FY22 was R73,401 which is exactly what I'm going to make the budget for FY23.
FY22 felt like we lived reasonably frugally but we didn't go short for anything we NEED even if we didn't get everything that we WANTED. I was also pretty ill last year and there were some pretty horrendous medical bills given that Medical Aid doesn't actually Aid your Medical costs. Hopefully (and I hope I don't now curse it) that won't happen again this year. So my theory is that what we save in Medical will offset the rising food and energy costs, and if you think they're bad now, you ain't seen nothing to what the double whammy of a global conflict with sanctions and the end of COVID is going to do.
I'm even taking action to revive my vegetable patch after paying close to R40 for 4 tomatoes at the local SPAR the other day, 10 bucks for 1 tomato? WTAF?
This is where being retired has a big advantage, I can afford time to go to the local market instead of the big chain supermarket and take a little time in the afternoon to cook from scratch instead of buying high-priced pre-prepared stuff. Our Grocery bill still makes up 30% of our spending so if there is one area we can save, that would be it.
Outside of that I'm thinking of beefing up the solar system a little as I can see another 20% energy price hike on the cards and load shedding is definitely not going away so it's money well spent.
The only other area where spending has escalated is Health as we now have the addition of Gap Cover which we didn't have previously, 2 subscriptions to the weekly electrocution sessions and a couple of subscriptions to Virgin Active which knowing Vitality will get pumped up before long because we haven't woken up and done 10 billion star jumps or run three marathons before breakfast.
So a good month on the budget and in reality probably close to where we need to be.
Investment Performance
Monthly Investment Return: -R185,362 / -$12,357 / -£9,268
Investment Return Percentage: -1.1% (-0.9% Last Month)
Annualised Investment Return: +9.0% ( +9.6% Last Month )
I'm officially in mourning for my stock portfolio!
I haven't seen such depressing results from my portfolio since I began my FIRE journey. It just seems that day after day the stock market keeps opening upwards and closing downwards, the bad news is endless. I've even kind of stopped looking at it.
There are some real howlers now in the pack. Exhibit one would be ARKK - Ark Innovation ETF, pretty much THE leading cutting edge tech stock ETF. It delivered over 100% returns in 2020 (before I invested in it!) and I bought it at around $150 per share. As I type it's now $67, a paper loss of 55%. Across our stock portfolios we have around R750,000 / $50,000 / £37,500 invested in it. You do the math, in fact, don't bother, it's too depressing.
But I'm not looking for sympathy, if you're reading this you probably are going through the same pain, some of you with much more exposure than me and some with much less, but it's all relative and 55% of your savings hurts if it's R10 or R10m.
But remember this, it's only a loss if you sell it, it will come back, it always has, not all stocks will recover but the broad based passive indexes will. Think MSCI world, S&P 500, FTSE 100, hell, even the JSE 40! If you are lucky enough to have surplus cash on the side lines (erm, not me) then this is a great opportunity to do some bargain buying.
This is my second month of loses and I estimate there'll be a third in March before we see a recovery so buckle up people. What is most upsetting is I was bragging last month about my all time rate of return being above my 9.5% target last month and how that creates a total mind shift as it indicates we have enough funds to never work again but as we say in the UK, nobody likes a bighead! As of today, I'm already back at 8.7% which is a long way down considering that average is now over 4 years.
I'm definitely a "Half-full" kind of guy these days and I prefer to turn this downward trend depression into motivation to focus on me galvanising my portfolio further and with that in mind, I've set my targets for my investment distribution for the coming year. So by this time next year I plan to have my net worth spread across the following asset classes:
Cryptocurrency - 10%
Alternative Investments e.g. Solar, Cattle etc. - 30%
Low Cost Offshore Passive Index ETF's - 30%
Equities & Actively Managed Funds - 15%
Cash & Liquid Assets for Opportunistic Investing - 10%
Other & Experimental Investments (Fun Money) - 5%
That feels right for right now and what I'm in the process of understanding is where we are against that plan and what the actual action plan is but I'll be updating you on that in an upcoming post.
Side-Hustles
Hustling is down to jus an hour or so a week right now and I'm completely fine with that. Mrs H has been crystal clear that she is done with corporate life and unless I'm in a corner, that I should count her out of future consulting gigs. She has thrown herself into her furniture restoration business and we currently have the ugliest 1970's filing cabinet you've very seen standing int he back yard so I'm intrigued to see what it gets transformed into. She's already done some amazing pieces and has a great eye for design but that puppy is going to be a stretch even for her!
Even though I've completed most of the work, there is about R1.3m in invoices outstanding which is now a mix of wages and investment capital to generate more work and/or launch some new initiatives. I'm working on one thing in the crypto space which is quite interesting so more on that to come.
It feels a bit like the consulting side might dry up for a bit but I've said that before, I'm really enjoying some time off so March and April are definitely down time and I'll start thinking about money making ventures in earnest when we get to the back end of April.
Picking A Winning Stock 2022 - It's On Like Donkey Kong!
So after a short extension to allow for additional entrants, the 2022 stock pick challenge officially started on the 1st March.
Thanks to everyone who entered, it is another small but perfectly formed group of investing "Experts" taking part and the virtual investments of R100,000 per entrant have been made and recorded.
The line up looks like this:
Mr H - Coinbase - Nasdaq
Charlie - Sasol - JSE
Shane Perrier - Sibanye & Prosus - JSE
StuffyUncle - Alliance Resource Partners - Nasdaq
lawrenceinvesting - RMB Property Holdings - JSE
ross.miller09 - Alibaba - New York Stock Exchange
Jo - Nvidia - Nasdaq
Best of luck to everyone, I'll provide the first update and league table in next months monthly report.
Summary
A bloody horrible month for investing but with all tax returns done, tax bills paid and a new financial year ahead, there's nothing stopping us. Add to that the return to lie-ins and lazy days in the sun and on a personal level, there's very little to complain about. On a broader basis, we're hoping the rest of the world can find peace and freedom eventually wins.