Monthly Finances - September 2021
A rough month on a number of levels!
Life, Health & Early Retirement - 17 Months Since Retirement
As month's go, I was glad to see the back of September. Despite it being a pretty crappy month on the investment side of things I had a health scare of note. I'll save the detail for another post so I don't stray too far off topic for the monthly update but anyone who follows this blog knows I have developed a pair of rogue kidneys in 2021 and frankly they continue to be a total pain in the.....well, kidneys!
Most of September was spent in doctor's offices, x-ray rooms, pathologists, ultrasound labs, dieticians and even an overnight stay in a hospital ward which I had entirely to myself due to covid restrictions (which was about as creepy as the first 10 minutes of a horror film). needless to say the health & medical budget was blown out of the water this month as seemingly having a chronic disease and medical aid with the country's leading health provid doesn't mean they actually pay for most of your treatment. SA Medical Aid is basically a rip off!
Anyway, I'll get off my soapbox and back to the purpose of the monthly update. For anyone who is interested, I'll post more detail on this whole debacle in the next week.
So other than that little distraction, the rest of September felt fairly tame in comparison. South Africa relaxed it's covid restrictions further and myself and Mrs H managed to get the requisite number of jabs to be fully vaccinated so I'm feeling less concerned about venturing out into the world.
The biggest highlight for September is that I'm now allowed to share is that Mrs H has finally agreed to retire and will be joining me on our early retirement journey from November wooohooo!
And whilst it's technically an October update, but I'm late with this post due to the medical shenanigans mentioned above, the UK has come off the Uk red list for travel so the gateway to our adventures have opened up. It looks like we might actually get to start enjoying a normal life of travel and adventure in 2021 after all.
Our Net Worth: R15,915,314 / $1,105,230 / £803,803
Previous Month: R16,358,767 / $1,136,025 / £826,200
Change: -2.3% (Previous Month +3.1%)
After announcing last month that we had finally broken through our FIRE magic number, the laws of Murphy kicked in and pushed me back into the cheap seats in September. Our net worth went backwards by more than R440k / $30k / £22k which is the equivalent of 6 months of living expenses. Ouch!
Most of the losses were down to what seemed like a bit of a correction on the stock market. I have been amazed how the S&P 500, where I have the lion's share of our cash invested, has kept surging forward despite the impact of a global pandemic. What I'm learning is, in a twisted way, the stock market benefits from COVID because the US is giving thousands of dollars in free money to its citizens who are either spending it or investing it which is good for the stock market on both counts. Where it all seems to get a bit dark and a bit wrong is that whenever there is any talk of returning to normal and starting to live a post-pandemic life, the US stock market throws it's toys out of the pram and drops a couple of percentage points. It's just weird.
So the pensions took a pounding but I was brave and didn't do anything stupid like sell out to wait on the sidelines despite the fact that it looks like there is still worse to come before the year is out. I'm not bright enough to time the market so I'm focussing on trying not to look at it and constantly remind myself that over time, the markets have always gone up in the end.
Living Expenses: R69,1452 / $4,902 / £3,492
Budget: R68,000 / $4,850 / £3,400
Surprisingly, considering the myriad of medical bills, we managed to come in pretty much on budget for the month.
Interestingly, I had to switch to a primarily plant based diet in September and cut out the booze whilst we established the scale of the situation and that alone translated to around a R5,000 / $330 / £250 saving on the grocery, eating out and take away line of the budget.
Also as the warm weather has finally arrived in Cape Town the electricity bill dropped significantly as we're back to living primarily on solar power and getting a small but satisfying deduction on the bill from Eskom for the excess power we feed into the grid.
The good news is that 8 months into the financial year, we're pretty much living to our expenses budget and I don't think we're feeling particularly hard done by. We try not to be wasteful but we don't go without anything we need.
I did make a couple of splurges which don't show up in the budget as they're the one-offs I only buy when we are significantly ahead of our planned financial performance for the year, and at present we're close to double the returns we need. So we blew around R10,000 / $650 / £500 on a wine cooler and matching fridge for the bar I've been building for Mrs H and I finally bit the bullet and decided to get our driveway block paved (as part of the plan for selling the house at the end of next year) so that was another R170,000 / £$11,000 / £8,500 out of our life savings. I see the driveway as an investment as I expect I'll get double back on the sale price of the house as the concrete slabs that are currently on our driveway are serious fugly and would put me off as a potential buyer.
Monthly Investment Return: -R443,552 / -$30,795 / -£22,396
Investment Return Percentage: -2.8%
Annualised Investment Return: +7.9% ( 9% Last Month )
Spookily, our investment went down in September almost exactly the amount they went up in August which is bad but also brings a level of perspective to the situation. In reality it means our investments have not provided any returns for 2 months, which means that really we've lost 2 months lof living expenses and a little bit of inflation protection, which doesn't feel like the end of the world.
I already mentioned how the S&P 500 had a little hissy fit but that was pretty much endemic across all of our stock market investments. In particular South African commodities seem to have nose dived the last few months almost at the same time that all of the mining companies that drive that index seem to be publishing record profits so I guess it's either profit taking that is driving it down or we're at the end of the cycle and it's simply a correction, either way it's painful right now.
I am almost out of the cattle farming business which gave good returns but was pretty much capped at 12% annual returns which is great but I still feel that at the moment slightly more risky investments (like passive index tracking ETFs) can provide better returns. I'm continuing to plough most of my side hustle profits into solar but am getting a little twitchy about having now over R2,000,000 / $135,000 / £100,000 of cash locked into those investments for the next 20 years. I know it's the right thing to do and the tax benefits and returns are great, it's just that feeling of not being able to get the money out if something happens. Which probably won't!
I'm currently on the hunt for a short term investment that gives better returns than my bank savings account. This is for the money I have to have access to, like to pay my tax and VAT etc, but currently sits in the business savings account earning a measly 3.5% interest.
The best thing I've seen so fas is SV Capital do a cunningly titled short term investment called, wait for it the "Short Term Investment". This runs for 5 months (it will actually be 6 as I suspect your capital get's invested at the end of the month you invest) and pays a respectable 13% annual return so in real terms that means a 5.25% payout every 5 months. Sounds ideal right? mmmmm, Yeaeeaahhh but the only thing that is stopping me fonging in a chunk of change is that the fact sheet for the investment states that the risk rating is "Aggressive" (the highest risk rating) but there is not enough information for me to assess that risk for myself. The risk overview is one of those generic "the value of investment go up and down" kind of things which is not exactly helpful. Because the money I would invest is to pay bills in the future, I can't risk losing it all even if I can afford to make no return or even a small loss. SV Capital recently did a Webinar on the investment which I missed so I think I'll go back and see if I can watch it to see if the subject was addressed. The only other thing I've found for this purpose is that Livestockwealth.com do a 6 month Free Range OX investment that pays 10% annually (5% per 6 month cycle) which I consider fairly low risk but because 6 months is actually 7, the real annual return in my opinion is only 8.5% which is below my minimum threshold (of 9.5%) but I guess so is 3.5% in the bank.
Side hustling was very quiet in September with zero income other than the interest from the bank or the savings account which was R800 / $53 / £40.
The big disaster of the month was that a client of mine went out of business and has been giving me around R220,000 / $15,000 / £11,000 of business a month for the last 6 months so that brought a tear to my eye. I should state for the record that them going out of business had nothing to do with me working for them, I swear!
So it was looking a little bleak on the side-hustling front but as I'm learning quickly, the saying of "When one door closes, another one opens" couldn't be more true as I was contacted just a few days later for a consulting contract which will run into early 2022 which means working 3-5 days per week (which is more than I like) but will super-charge the finances just as we stop receiving Mrs H's salary. So I obviously said yes to the work and have had to start wearing long pants and go to an actual office 3 days per week for the next few months.
My plan to stop consulting 3 years after I retired (Which makes it May 2023) has not changed and I still plan to plough everything I earn into investments and kind of create a micro investment and venture capital company as a sort of hobby after I really put my feet up. However, I am learning fast that owning a business has a bit of admin involved like tax, VAT, financial statements an annual returns blah blah blah and if you don't do it right, you can actually pay tax twice as you pay 28% in business tax on your profit each year and then pay personal income tax again when you eventually take the money out of the business. No fair!
So I currently have some brighter minds than me (namely my financial adviser and my tax consultant) figuring out my whole tax situation to make sure I don't do anything dumb and pay tax twice. We'll see where that goes but it's looking like the simple answer is to start paying myself a salary to cover our living expenses so not quite in line with my plan but if the professionals say it's the best way to do it, who am I to argue.
Picking A Winning Stock 2021 - Monthly Update - Month 9
It's that time of the month again where we try and answer that burning question; "Is stock picking a science or a lottery?"
With three quarters of 2021 behind us, we're on the home straight for the Tribal Fi 2021 experiments and the stock pick challenge is proving to be fairly conclusive that stock picking using research in 2021 was largely pointless and the "Pin the tail on the donkey" method was definitely the way to go.
I am now cementing my position of last on the scoreboard, as previously mentioned the SA commodities sector has tanked and I was fully invested in platinum, therefore I believe that makes me officially a blithering idiot!
The two leaders both claim that their stock picks were largely random (Lawrenceinvesting made his decision to back Mediclinic on the basis of how impressed he was with the service he received during the birth of his first child) and I believe each of us in the back 4 used a level of logic and research to make our pics thus proving that we might as well have put the JSE 40 in a hat and picked one out each.
Interestingly, the average return of the portfolio is annualising at right around 14% wch is pretty good but considering the super high risk levels of this mini-portfolio, it's not that great. This point is illustrated by the fact that we could have bought the much more low risk Sygnia S&P 500 ETF and been enjoying closer to 16% despite the past month of underperformance in the US.
However, 3 months to go and considering the volatility year to date of our portfolio, it's still too early to call a winner.
So in summary, a bit of a step backward this month on the health and financial side but the great news that Mrs H is retiring, landing a lucrative contract for the next few months and international travel being back on the cards makes the longer term view look pretty peachy.
Until next time, keep living