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September 2020 - Monthly Finances
Total Pension Pot: 13,945,852 / $820,344 / £633,902
Previous Month: 14,050,631 / $826,508 / £638,665
Change: -0.8%
Month number 5 post Fi and my first truly "bad" month
Whilst last month was my first month since retirement showing a loss, I had a massive renovation project at my home to blame. This month was a genuine, no excuses, it is what it is, kick in the pants kind of month.
The overall reduction on the pension pot for September was R105,000 / $6,150 / £4,750 which hurts a bit.
Apart from a bit of a budget overspend due to the ongoing building works,. the lion's share of losses came from a correction on the stock market mostly in the US and mostly in big stocks like Amazon, Google and the other big tech companies we all know and love. Unfortunately for me, that is an area that I'm heavily invested in through the S&P 500 Index tracking ETFs I own.
Also there has not been much in the way of good news for the South African economy either, with ongoing investigations into government corruption, the impact of COVID-19 and the big question on if we'll see a second wave in South Africa like is going on in the UK and parts of Europe right now. All of that has made the value of the Rand go up and down like a fiddlers elbow and has hit the South African shares I own in commodities like Silver, Oil and Platinum pretty hard.
The Runaway Stock Market Just Ran Out Of Runway!
I've been banging on for a few months now that I felt we'd see a dip or even worse a crash on the stock market any day and September proved my fears right (you'll always be right eventually, right?). Luckily it was more of a bump or even a scrape than a crash but it was enough for me to seize the opportunity to move more of my sideline and safe haven cash into the market and hopefully buy the dip. We'll see in the October numbers if that strategy worked.
I actually feel like the stock market has cleansed itself a bit now and while I don't think we're out of the woods on COVID, The US election seems to have hit new heights of craziness and Brexit is firmly back on the table in the UK, certainly in South Africa it feels like everyone is licking their wounds and getting down to the hard work of rebuilding after a global pandemic. That is a really good thing and the harder we all work, the quicker we'll be out of a global depression.
In short, I don't think we're heading for an apocalyptic crash any more, but I do foresee more bumps and scrapes.
I continued with my ongoing plan to have a decent chunk of change that is not dependent on the stock market and bought more Solar panels. (Read more about that here) I also stuck to my plan to be a "Virtual Farmer" and bought more cows. In total now I own 8 cows, 4 of which are pregnant so I like to say my "herd" is now 12 cattle, which is starting to feel like a team!
I did a review of my other impact farming ventures and they are also going pretty well. I now own 71 Blueberry bushes on top of my 3 Bee Hives and I've made the decision to go big on the Blueberries and reinvest all profits that I receive from those two ventures and a portion of the Solar panel income into growing the Blueberry patch. I'd like to get that north of 200 bushes over the next three years. The reason for that is the returns are around 12% per year and their lifespan is 8 years so as I'm 44 now, if I invest heavily for a few more years, they'll provide a good income until I'm 55 which is coincidentally when my personal pensions become accessible.
Whilst last month my consulting side hustle started to generate cash, this month I learned the hard lesson that earning money and money actually getting paid to me are not the same thing, I spent a lot of the month chasing payment from the couple of clients I've managed to get on board. I have no reason to believe they won't pay me and other than missing out on the interest of the money being in my bank instead of theirs, it's not hurting me really, but I did start to get an appreciation of how hard it is for small businesses to manage their cash flow when clients think it's OK to take 90 or 120 days to pay an invoice that should be paid in 30! Moving forward, I think I'll be adding some small print to my invoices to let my clients know there will be late payment charges in lieu of my lost interest, although I suspect the answer will be "if you don't like it, don't work for us" so I'll probably just suck it up and make sure I send my invoices the same day I complete the work.
Overall investment growth
Investment Growth: -R96,289 / -$5,664 / -£4,376
Monthly Investment return: -0.7%
Annualised Return on Investments 7.0% - (7.1% Last Month)
I really don't like writing minus signs in front of those numbers but after 5 months of gains I kind of feel a little relieved I've had a bad month in a sort of twisted way. That might sound weird but I was used to having good and bad months on my investments when I wasn't living off them so I was starting to worry that I retired at a really good time and I would soon get complacent. I take this month as a little reminder that I still need to spend money to live even when it's going badly which has made me be more conscious of what I'm spending and if I really need that new phone (I did actually) or if those new sneakers might be on sale in a few weeks if I keep my eyes open (they were).
From an investment standpoint ,the big loss in September didn't come from one particular investment, it came from everything I had in the stock market from the US, UK or South Africa, it didn't matter if it was index funds, individual shares, unit trusts or ETF's, it took a hit across the board. The good news is, I didn't panic, I didn't sell everything and I didn't start stockpiling baked beans and cans of spaghetti hoops in the basement. I got on with my life, monitored my investments and then bought a few bargains that had lost more than 5-10% in value to get some cash I already did have on the sidelines when I previously panicked back into the market. I'm actually quite proud of myself because pretty much every FIRE community guru will tell you that the whole point is to do nothing and you'll be OK, the stock market will provide over the long term but it's going to be roller coaster to get there.
It had nothing to do with the dip in the stock market but I did make two massive life decisions about our investments (And another still in the thinking process) but it needs some explanation so I'll be writing a whole post on that in the next week.
Living Expenses: R82,815 / $4,871 / £3,764
Budget: R62,000 / $3,647 / £2,952
For the first month since retirement, we completely blew the budget, but it was a conscious decision.
Why? Our builders are slower than a week in the jail!
The renovation work we decided to do to get rid of as much unexpected bills as possible going forward is in full swing but the building contractor we decided to use was cheap, there's a reason for that, they really don't know what they're doing when it comes to project management.
When we first took them on in early August, they said the whole thing would take 3 weeks. It is now October and they are still here and have some way to go before they're finished. That has affected the budget mostly in the food, take out and eat out lines. On any given day the kitchen might be out of action or the drive blocked with trucks so I can't go to the grocery store or the house full of dust from plastering or tiling so there has been a big overspend on convenience food (which is also starting to show in our waistlines). The final big leakage on spend is that when you have a room re-docrated, you start to look at all of your other things and they look, well, kind of tired. So whilst we have been frugal and not gone out and bought lots of new furniture, I have been buying materials to build a few new pieces for home 2.0. Mrs H is going to keep me very busy in the run up to Christmas.
Monthly Summary
So weighing up month number 5 of retirement, it's been a reminder that it's not always going to be a winning month and that we have to be consistent no matter how good or bad things go, over time it will be OK but if we overspend when the stock market is flying, we need to tighten the belt when it's grounded. I don't want us to have a feast and famine approach to life so we need to stick to the plan and stick to the budget like we have been doing.
Finances aside though, coming up to 6 months retired, I still don't regret the decision to get out of the rat race early and the feelings of guilt and anxiety have passed. I'm starting to look to the future and try and get Mrs H to join me in the pre-retirement club as soon as possible by working on my side-hustles and getting our finances as optimised as possible. I do still feel like I'm in the starting blocks and I think when COVID finally disappears (we're still in a light level of lockdown in South Africa and I'm still high risk so I still don't go out anywhere unless it's necessary) I can start really enjoying life and start having real adventures.
But until then, let's be thankful for what we've got, get on with it and stay safe
As of 30th September 2020: At our current budget, investment performance and inflation rate, we have enough money to last until I am 70 - That's 26 Years.
Until next month, keep living.