Monthly Finances - July 2022
[Whispering] I think it might be safe to come out now, but shhhhhhh!
Life, Health & Early Retirement - 27 Months Since Retirement
As predicted, our investments made a small bur significant recovery in July which has been a major boost to my mood if nothing else.
Is it just a breather before the next downward spiral? Who knows, and as we have zero control over it, who cares?
July sort of came and went without any major incidents and I spent quite a bit of the month side-hustling, and the rest kind of loafing around! The highlight of July was a road trip to the Northern Cape of South Africa with a great friend of mine. I've never been that far north before and without being rude, I haven't missed a great deal as there's not much going on up that side of the country. That wasn't to say we didn't have great time, we certainly did, we ate and drank a lot, saw all the local landmarks and attractions and generally put the world to rights. We stayed a couple of nights on the edge of a cliff which was very cool and if you ever needed a view to sit and contemplate the world, this would be a good contender:
We broke up the journey back and stopped in an off-grid house in the mountains about an hour from Cape Town which was great apart from the fact that the people who'd been there before us had pretty much drained the solar batteries. We ate dinner by the light of the fire, which would have been somewhat more romantic with Mrs H than my travelling companion. A great experience all the same and we've promised ourselves to do it more often.
I also finally started to kit out our little camper van ready for Mrs H and I's first camping trip. We're planning on going on our first trip in August so the pressure is on to make sure we have somewhere to sleep, sit and generally be equipped for a couple of nights in the wilderness with just us and Winton the wonder puppy.
As seems to be standard operating procedure in South Africa these days, the dreaded load shedding is back so we're enjoying the hassles that come with not having power for large parts of the day. We're so lucky to have solar power at the house but it affects everything from traffic, internet and I've even started noticing you need to be careful when shopping for food as the shops that don't have backup power can end up selling food that won't keep because of the fridges going off all the time.
To add insult to injury, we've only had a few days of rain this winter so far with not much of it left so the city have warned that we may have issues in the summer if people don't use water sparingly. We had a full on drought a couple of years ago and came within days of being the first major city in the world to run out of water.
Mrs H had a trip to the UK at the end of August which was a mix of business and pleasure as she went to see one of my clients but also got to spend a few days with her family and most importantly our grand daughter so there was much finger painting, potato stamps (is it just me who remembers them?) and dressing up as fairies. There's a new trend at the moment which involves decorating stones with paint and then leaving them in public places for someone else to find and when they do they post it on Facebook. Mrs H has deposited painted stones in various airports around the world which I did warn her was not the smartest idea and that she may ended being detained a as suspected terrorist but she's not easily put off and I'm please to say has returned safely and without a criminal record!
I'm not even going to talk about health this month as I'm starting to bore myself with my list of ailments, needless to say we're alive and not planning on that changing in the immediate future.
Our Net Worth: R17,431,397, $1,089,462 £871,570
Previous Month: R17,157,643, $1,143,843, £857,882
Change: +1.5% (Previous Month -1.1%)
At last, we actually got a break from the red numbers in the spreadsheet and posted a respectable gain on our net worth.
The eagle eyed among you will notice that the US dollar amount has gone in the opposite direction and that is simply because I have updated my USD:ZAR exchange rate to reflect the good 'ol American dollar's super-strength right now relative to the rest of the world. As most of our investments are US based, this is great news for my investments but the fact is I get less dollars for my Rands which is not great when you're trying to buy offshore stocks while they're on sale.
The $64,000 question right now is if the current market downturn is over or whether we're in the eye of the storm and there's more to come. If you read the financial news you can get whatever answer you want right now as there seems to be no consistent consensus. The truth is nobody knows and any one who says they do is ether a liar, a banker or is simply deluded. In my experience the so called "experts" that the media roll out to give their opinion are usually all three!
Unfortunately, as much as I'd love to think the worst is over, I'm not really seeing any good news when it comes to the facts; Russia is still invading Ukraine, COVID still exists, Inflation is still off the scale and the price of everything is still going up and hitting people where it hurts, in their pocket. The fact is, that people are going to have less money to spend on non-essentials. So companies make less profit which means they can't invest to grow and will try and cut their costs. That will reduce salary spend which in turn will put even less money in people's pockets and the economy doesn't grow so neither do investments in the economy.
I'm no expert and I'm often wrong (just look at my stock pick in this year's competition!) but the downside pain hasn't yet felt as bad as it should considering the state of the world right now.
So what does an early retiree do? Nothing, keep spending low, reinvest any spare cash while prices are low and go to the shed/garage/workshop and make something. That feels like a good way to play it to me.
Living Expenses: R52,737 / £3,296 / £2,637
Budget: R75,000/ $5,000 / £3,750
Talking of keeping spending low, we had our best living expenses performance possibly ever in July and were 30% under budget. Doing the happy dance!
I had a good look to see what happened and it looks like we cut back in a few areas. Firstly the grocery bill dropped significantly from an average of around R18,000 / $1,125 / £900 to an impressive R12,200 / $760 / £610 which is a reduction of 32%. My top tip here is that anything I could buy in bulk for the month that wouldn't go off like tinned food, pasta, soft drinks, alcohol, cleaning products, hygiene stuff etc. I went at the start of the month and got them in but didn't buy any perishables like meat and vegetables and went every couple of days to get them but then only bought enough for two of us for a couple of meals. As I write this, it's occurring to me that this approach might just be normal behaviour but it wasn't for me and the outcome is that I went to the supermarket less and when I did, I spent less. I may be being captain obvious here but I genuinely think we/I waste a lot of money because I have to run out to get a loaf of bread as an example and I end up spending R300 / $20/ £15 on basically nothing and I do it at the shop around the corner which is expensive because, well it's around the corner.
The next saving was petrol. We have been actively avoiding unnecessary driving (like going to the shops) because the petrol price is a joke. We usually spend on average around R2,300 / $150 / £115 per month on petrol, which isn't massive for two cars but we don't have a work commute anymore. In July we spent R300 / $20 / £15 which was a little top up by Mrs H. I did need to fill up at the start of August after a couple of airport runs but that's a win right there.
Then finally Mrs H made a big decision to take on the housework in order to save some more money so whilst it's fairly normal in South Africa to have a housekeeper to come and clean we've decided not to until things are a bit more stable. Don't think for a minute I got away without contributing though, Mrs H has given me a job or two and seems to think she can slide a couple more tasks on my plate and I won't notice. Add to that my gardener decided to quit gardening and I've also got a few extra hours in my working week on lawns, weeding and pruning. We're going to give it a go for a while and see how we get on but that has reduced living expenses by around another R6,000 / $400 / £300 per month.
So we'll see if the reduced spending continues but I'd really like to get back down to a budget of R65,000 / $4,000 / £3,250 per month because there is only the three of us (and one of us is a dog) so with no mortgage / bond and none of the costs of working, it does still feel like we spend a lot.
I was talking to a friend this week though who is a few months away from starting his own early retirement and we were discussing cost of living and how it's shooting up right now and it's more important than ever to understand your finances. I guess the biggest thing I've learned in the last 2+ years of my FIRE life is you can save on the big stuff like Insurance, electricity, petrol and big one-time expenses. But on the real lifestyle stuff like food, drink, takeaway, Netflix, fibre internet, gym and eating out, there has to be balance and control but its not worth penny pinching on. The savings that can be had are small in the grand scheme of things and depriving yourself is miserable and exhausting. I would estimate that when I avoided spending on those things, I might have been able to save 10% which might be R3,000 / $200 / £150 per month but the ability to enjoy retirement, spend time with friends and do things you enjoy is worth much much more. Now you can't go eat fine dining every night (as much as Mrs H might want to) but the Friday night Chinese takeaway, bottle of wine at a wine farm or breakfast at the local café is better for you than the amount you save by not doing it. Otherwise, why retire early?
Monthly Investment Return: +R273,754/ $17,110 / £13,687
Investment Return Percentage: +1.6% (-0.3% Last Month)
Annualised Investment Return: +4.8% ( +4.5% Last Month )
A very respectable month on the investing side which has definitely made me stop opening my stock portfolio app with just one eye open.
I did a quick calculation for shits and giggles (or tears) on how much our investments have tanked this year and with July excluded we are/were down by R2.1m / $131k / £105k which is just awful and represents around a 11% drop in out net worth in just 6 months. Turns my stomach just thinking about it. When you compare that with this month's living expenses that is well over 3 years of living expenses up in smoke.
Well it would be if I'd actually sold my investments but I didn't and I've been adding where I can by re-investing the profit form my side hustling into low cost passive index trackers while everything is pretty cheap. In particular I've been buying Berkshire Hathaway as it's times like this that you need a friend like Warren Buffett. I'll assume you know who he is but if not, in short, he's pretty much the most successful stock market investor ever, and you can leverage his skill by owning his stock which is called, you guessed it, Berkshire Hathaway.
I've also decided to go back to heavy solar investing when the stock market isn't cheap again as it's been great to have that monthly income when selling any investment means a loss.
I've stopped adding funds to my crypto investments and decided to let them grow organically. I expect around 200% growth there over the next 24 months but it could just as easily go down another 80% if the economy continues to struggle over that period. I may regret it but it feels even more dangerous than ever in the world of cryptocurrencies and my exposure is big enough for now.
Last month I mentioned I'd started a stock portfolio for my business and was taking a Dollar Cost Averaging approach using Easy Equities because their trading fees are so small. That's going pretty well and it looks like I accidentally timed the market for once so that portfolio is now R80,000 / $5,000 / £4000 and has grown by 6.3% since May which I'm really pleased with. I've now got investments in 37 stocks and funds and don't plan to go over 40 in total. They're a real mix of index tracking ETFs, US stocks, SA stocks and funds as well as a couple of investments in some individual companies I like. I've even bought some silver ETFs as metals can be a good investment in times of trouble. I plan to grow that portfolio to around R1m / $63k / £50k as a place to store short term cash for the business for paying tax and VAT bills when they cone up and then everything else can go into more long term investments like solar and farming.
Of course the lion's share of our investments are still held in our pensions which are in low cost index tracking ETFs mostly S&P 500 or similar. They're well down right now but as I can't touch them for another 9 years, I'm not really too worried.
The hustle is definitely starting to slow down and whilst I've still got 3 gigs going on simultaneously, I'm enjoying having lots of clear days to do projects and experiments of my own.
The work I'm doing is also mostly technical work around contracts and commercial stuff rather than the operational work which kept me much busier at the start of the year and is pretty intrusive to day to day retirement.
I always said I would quit the consulting hustle after three years and then when the money started to come in I started to question why I would do that. Well with just over half a year to go until I hit 3 years, I've decided that I will scale down significantly and only accept jobs that are for the more technical work I mention above as that tends to be the odd hour or two per week but still pays really well.
If I can do 5 or less hours per week consulting, that would still cover a big chunk of our living expenses and give me some time back to focus on other things. there's no question I plan to hustle for a bit longer (I'm thinking until I'm 50 in 3 in a bit years) but it's never felt more clear that I want to do something more enjoyable than consulting. In reality that means it will be less profitable but that's OK.
I would still like to keep the hustling to 2 days per week or 3-4 hours per weekday in total so I figure I have a full day to focus on non-consulting gigs, half a day for consulting and half a day for the admin of simply running a business. I'm working on a couple of ideas with a friend on things that couldn't be further away from the skills I have of consulting so that's great and I've also been spending some time running a series of experiments on some little side projects that could potentially be monetised.
Most importantly, my view has not changed and my post-consulting hustle life has to have a least an element of travel, food and fun. I don't mean everything I do in business has to be related to those topics but if I'm not doing at least something on those subjects, I'm not prioritising them so therefore I'm distracted.
I'm going to miss those crazy day rates I get for consulting though!
Picking A Winning Stock 2022
A quick look at the competition as we pass the half way point:
Somewhat predictably, StuffyUncle continues to reign supreme and is now heading for an annualised return of 100% in some of the toughest market conditions in years. I doff my cap to you Stuffy.
Lawrenceinvesting has been advancing up the pack and moves into the second spot with RMP Property Holdings and is the only other player showing a profit.
Nvidia posted some poor results this week which is hitting Jo hard but is making me feel less lonely so every cloud Jo! Not much movement mid table as Charlie, Ross and Shane all jostle for a podium position, only a couple of percentage points in it for that coveted 3rd place.
It has been all good news for me as I manage to fight back from my massive 80% loss to just the wrong side of a 50% wipeout. Its not over until the fat lady sings so I am crossing fingers for a crypto bull run even though Coinbase's results were also pretty dire as well as a load of controversy over it's ethics plaguing it's valuation.
Overall we pretty much suck as a team with a 10% loss YTD so we have to hope for some big things or Stuffy to drag us out of the collective hole we find ourselves in. Lets hope it's more good news next month and we can at least leave this competition with a shred of our dignity still in tact!
A very welcome respite on this horrendous stock market crash and a pause for breath while we wait to see if it's over. Spring is around the corner and 90% of time is being spent on being retired so other than the finances, very little to complain about.