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November 2020 - Monthly Finances
Total Pension Pot: R14,865,162 / $874,421 / £675,689
Previous Month: R14,511,832 / $853,637 / £659,628
Change: 2.4%
Number of Months Retired: 7
Frankly; Woobloodyhoo!
November's results were much better than expected. Investment returns were strong mostly driven by the "Magnificent 7" ETFs I bought in October and I'm hoping that decision could turn out to be a real win for our savings.
I had a little income from side hustling but nothing massive, however, I have managed to do about 5 days of consulting this month and one of my contracts got extended to the end of the year so that should be Christmas paid for.
I finally put a stop to the never ending house renovation project and had to unfortunately report one set of builders for running off with deposits for work they didn't complete and had to give the other the boot for trying to make 1 day jobs last 1 week. The whole project has been a traumatic but important learning experience. I've learned I'm too trusting of strangers and that if you want a job done well, you might as well do it yourself. Unfortunately for me that means for pretty much the rest of summer, I will be fixing the shoddy workmanship I overpaid for! The university of YouTube has never been so useful and whilst it's exhausting, I"m learning skills that will last me a lifetime and save me a fortune. I also learned that even now I'm 44, people still confuse my kindness for stupidity. What those individuals fail to understand is that I return acts of kindness 10 fold but if you take advantage of me, you cease to exist. Oh well, I'm pretty much over it and what I can look forward to is plenty of free exercise and a great tan over the next few months!
The good part is that means the relentless spending in the "Household Maintenance" category will stop being the biggest line item in the budget like it has been for the last few months. I'll still need to buy materials and the odd tool but nothing like paying teams of bone-idle joiners and labourers every week like I have been since August.
Despite the fact that Don Trump is clinging onto the white house with his Twitter blistered fingertips, the US stock market hit new highs and closed out the best month since 1987. That was great for the months result but has me feeling all jittery again about how this can be happening when the US alone reported over 4,000,000 new COVID-19 cases in November? Do you know what also happened in 1987? Black Monday, yup, the day that world markets lost $1.71 Trillion in one day. I really hope not but my spidey-senses tell me the 2020 rollercoaster ride might not be over.
I didn't make many new investments this month, mostly due to the fact that all of the building work (or lack thereof) has hit our liquid cash (cash that is invested but can be turned back into cash to live on e.g. shares that are not in retirement savings or cash savings accounts) quite hard and I'm having to be careful not to end up having too much cash in non-liquid investments (pension funds, locked in savings etc.) or I'm going to have to start paying myself a wage from my business, which is not part of the plan because that would be, dare i say it, like working for a living.
Oh the horror!
The master plan is not to take any money out of my side-hustle business and redeploy it all into investments so that over time the investments become the business and it can pay me a salary without me actually having to do much work. It makes sense on paper but time will tell if that's actually possible in reality.
So the little bit of spare cash we did have that I could still lock away went straight back into the Nhimbe Fresh project at The Sun Exchange as that's still my absolute favourite investment of the year and the 16.7% returns are going to do wonders for my average returns over the long term and hopefully go a long way to me achieving my 9.5% annual return target. The project has sold around 13.5% of the solar cells so far so I'm hoping there'll be plenty more opportunity to invest more of our income in December and January. If you haven't read about The Sun Exchange and in particular the Nhimbe Fresh project, you can check that out here. I strongly recommend a read if you're not up to speed on the opportunities of impact investing.
Overall investment growth
Investment Growth: R416,496 / $26,031/ £20,000
Monthly Investment return: 2.9%
Annualised Return on Investments 7.6% - (6.7% Last Month)
With the exception of May, which was the recovery month after the stock market CoronaCrash, November was my best investment return month yet. To meet my annual target of a 9.5% return on investment, we needed to make a return of R114,885 / $7,180 / £5,523 so we achieved 363% of the plan, I'll take that!
Swapping the bulk of my South African investments into globally focussed low cost ETFs is really starting to pay off and the compounding effect of the low fees is starting to show. The Magnificent 7 ETFs are doing really well. I bought them in October and the worst performance has been my Vanguard Health ETF which has returned 5.78% in just 2 months (34.68% annualised) and the clear winner has been Vanguard Total Stock Market which has given me 9% (54% annualised), which is a big surprise for me as that is the most broad of all 7 ETFs so in theory the lowest risk which should also mean the lowest return. Overall the Magnificent 7 has grown 4.5% this month which considering the average forthe 2 years before I intervened was 0.1%, I am truly over actively managed funds and their high fees. It has however only been 2 months and I see stormy waters ahead so there'll be no cracking of champagne yet. I'll be doing a quarterly update on the Magnificent 7 in January so watch this space for that.
I have one other confession to make about being not very FIRE this month. I did a bit more Cryptocurrency trading. I know! I'm sorry.
I gave myself R5,000 / $300 / £240 to have fun with and I've been day trading on Bitcoin, Ethereum, Litecoin and Ripple in tiny amounts every time they suddenly move more than 2% and it seems to have worked (this time), I made a 21% return in November which is only R1050 / $66 / £50 but it's a lunch out for Mrs H and I. To be clear I do not recommend day trading of cryptocurrency as a means of investing. In my opinion it's the equivalent of gambling and I fully expect at some point to be left holding a bunch of Crypto that's worth half what I paid for it and I'll end up holding it forever or selling it at a loss. It's a bit of fun for me and an interesting learning experience. I plan to cash out my initial investment if I get the opportunity and then I'll continue to trade my profit until it's gone or I can buy a fancy sports car.
I think I know how this story will end!
My annual return rate jumped from 6.7% to 7.6% which is reassuring as it was starting to feel like my monthly returns weren't having an effect on the long term. As a quick reminder I need our entire pension pot to grow by 9.5% every year to achieve a sustainable income without the risk of returning to a full time job. That 9.5% simply breaks down as:
4.0% - Living Expenses
4.5% - South African Inflation
1.0% - Contingency and lifestyle increase
With less than 2% to go, I'm feeling good about it, I just need to figure out the cash-flow situation (making sure we have enough liquid cash on hand) and I have to admit I'm a bit unsure on how much tax I'm going to have to pay as this is my first year of retirement, so again, we'll keep the cork in the Moet for now.
Living Expenses: R80,424 / $5,008 / £3,866
Budget: R62,000 / $3,647 / £2,952
This is the third month in a row that we've blown the budget and December is going to be another month of spending with gifts and parties and excess so I'm looking at the January numbers to see if I need to make a call on upping the budget a little. I'd prefer not to but as they say; "failing to plan is planning to fail" and the only person I'm fooling is myself.
I do know where the overspend came from this month though.
Firstly I had to pay the municipality R10,000 / $625 / £480 to have a new electricity meter fitted so that we can feed the excess solar power the house produces back into the grid. That will pay for itself in the next year and then reduce our electricity spend for every year after that but it wasn't in the budget so it hurts. Secondly I had to pay a water bill of R6,000 / $375 / £288 for filling the new swimming pool because my cowboy builders failed to store the water from the old one like they were supposed to ( A first world problem I know, I don't feel good about typing that but it is a fact). Then there was R11,000 / $690 / £530 to builders for basically doing nothing (which is why they are no longer in my employ).
So despite us being R18,424 / $1150 / £885 over budget, we had one-off spend of R27,000 / $1,687 / £1300, so our true costs were still under budget. Shit happens though and we need to have a level of unplanned spend budgeted to allow for it, so we'll see how a normal month goes hopefully in January and make the necessary adjustments. 7 months in though, our average overspend has been R5000 / $313 / £240 per month which is around 8% so I'm not overly concerned just yet.
Monthly Summary
So all in all a really great month that has put us firmly ahead of plan for the year in terms of finances and hopefully has de-risked the year as a whole. From a non-financial perspective I'm loving having time to do my own things now and actually don't really look forward to the few days I do consulting here and there which is motivating me to think about other side hustles that won't make as much money but will be more enjoyable. I'm encouraging Mrs H to think the same way. If we can both find something we love to do that has a bi-product of a little extra cash for the finer things in life, that's got to be a good use of time right?
I've got to get the house nailed back together and our lives as streamlined as possible in terms of personal admin and "Anchors" generally, so that when Mrs H is ready to join me in retirement, we can really start having some adventures. That plan is starting to come together nicely and the gap between having to keep an eye on spending and not having to worry about it is definitely starting to close. We're both feeling like we need less and less "Stuff" that doesn't enable our enjoyment and we're preferring to spend our fun money on things that help us get more out of our free time. I like it, I like it a lot.
As of 30th November 2020: At our current budget, investment performance and inflation rate, we have enough money to last until I am 76 - That's 32 Years.
Until next month, keep living.