FIREceuticals Australia

My PILL for financial independence

Author: FIREceuticals (Page 1 of 2)

NET WORTH UPDATE December 2017: $402,476 (+$11,367)

It has been a positive end to the year with my net worth climbing 2.9% to $402,476. I have added $55,950 in the past 4 months alone! Here are the numbers for December, and the spread sheet of how this has changed over the last 2.5 years:

TOTAL NET WORTH = $402.476

  • Taxable (Stocks + Cash) = $283,488
  • Superannuation = $118,988

 

Monthly Income (Net)

  • Salary ($8,927)
  • Superannuation ($1,800)

We receive an annual health insurance payment at work every December of $2k, which explains the $1,400 or so net extra for the month.

Stocks = $259,942 (+$3,029)         

No purchases in December.

Cash = $23,546 (+$5,862)

Cash holdings were higher due to no stock purchases.

Superannuation = $118,988 (+$2,476)

Expenses = $3,005

Average expenses for the year were $3,326 per month, and I managed to keep my total annual expenses to slightly under $40k at $39,915.

Savings Rate = 66.3%

My aim was a savings rate of 60% for the year and I managed 60.5%, which I am happy with.

Cannot believe how quickly this year has passed. In six months by mid-2018 I will be about half way through my journey. I definitely cannot take my foot off the pedal over these next three years; there is a long way to go yet. Honestly, I do not believe I will be 100% FI by mid-2021. However I will be in a comfortable position whereby I can think about going part-time for a couple of years or do something that pays a little less more for the enjoyment and lower stress; cruise through the last couple of years to get used to the notion of working less whilst letting those dividends compound to take me over the line.

NET WORTH UPDATE November 2017: $391,109 (+$12,612)

Another top-notch month with the net worth climbing 3.3% to $391,109. I have actually added over $50k to the net worth in four months. Miraculous numbers, but do not want to get overexcited. Yes, it is motivating, but the emotions will be in stark contrast if (when) I have to test my nerves during a bear market. Below are the numbers for November.

As you can see from the spreadsheet, adding $5k/month to savings definitely results in more positive months (green) than negative (red)!

TOTAL NET WORTH = $391,109

  • Taxable (Stocks + Cash) = $274,597
  • Superannuation = $116,512

 

Since I first found out about FIRE in early to mid-2015, my rather ambitious intention was to have done most of the legwork sometime between 2020 and 2022. The tentative goal is now July 2021 (40th birthday, and receive my bonus in March and vested shares in May each year…. So this seemed reasonable). This means I am really only 6 month away from the mid-point of my journey. If I can have my net worth figure close to $500k by that stage then I will be more than happy.

Monthly Income (Net)

  • Salary ($7,574)
  • Superannuation ($1,610)

Stocks = $256,913 (+$13,697)        

A lot of messing about this month. I have taken a change of direction and altered my strategy, quite extensively in fact. There are a number of significant benefits (and drawbacks) to investing in Australia, and they can significantly shorten ones time to reach FIRE. One of these benefits is dividends and the associated franking credits attached. If a company pays a dividend of 4% and has already payed the corporate tax of 30%, the investor is not double-taxed and receives a “tax credit” of 30%. This effectively (in the 4% dividend example) results in a gross up dividend of 5.7%. Wow, 5.7%? Of course, in your accumulation years you are still being taxed at your income tax rate, which can be high for those on high incomes (such as myself). However once you reach FIRE you may be paying very little, or even no, tax.

Drawbacks? Australia has a very concentrated index, and makes up a small fraction of global equities. Is it therefore important to have a portion of one’s portfolio dedicated to international equities? Probably. How much? That would be up to you. But having researched this quite extensively in recent times, I have come to the conclusion that a larger portion of my portfolio should be dedicated to Australia, and not through ETFs. Through Listed Investment Companies (or “LICs”). These LICs have a number of benefits over ETFs (such as VAS, which I subsequently have a large portion of). Some of these include full franking (100%) and smoother dividends.

Suffice to say it would require a much longer article to cover the full benefits of LICs, as well as the rationale for LIC selection and building a portfolio of LICs. So for the time being let’s just say I’ve settled on an approximate allocation of 20% dedicated to international (through ETFs), 20% “small-cap” Australian LICs (MIR, and perhaps try to add QVE when it’s share price is closer to NAV), and 60% to “large-cap” LICs (AFI, ARG, BKI, MLT).

After selling off a portion of my international ETFs (CGT anyone?), I have started building up my Australian LICs.

Cash = $17,684 (-$5,285)

Used a bit of my cash allocation for more stocks this month.

Superannuation = $112,312 (+$5,851)

Expenses = $2,566

Managed to keep expenses on the lower side this month, with no nasty surprises. My “monthly income” based on 4% of taxable net worth is $915. Average monthly expenses for the year are sitting at $3,355. This is larger than last year but reasonable. I am set for spending of just over $40k, which I can live with. The main reason for this was an expensive three weeks on the (expensive for US) west coast (San Francisco, Portland, Seattle).

Savings Rate = 66.1%

I am now averaging 59.9% for the year. Despite Christmas, I am optimistic of reaching my goal of 60% for 2017.

There we have it. Finishing 2017 on a high. My goals for 2018 are around solidifying my new strategy of building a portfolio of stable income investments, and adding to this periodically ($5k/month plus any additional funds through company bonuses).

NET WORTH UPDATE October 2017: $378,497 (+$22,480)

Had a great month with net worth climbing a whopping 6.3% to $378,497. After a few slow months mid-year, these kinds of months really give you that extra bit of motivation to keep the foot on the accelerator. These are the numbers for October:

TOTAL NET WORTH = $378,497

  • Taxable (Stocks + Cash) = $266,185
  • Superannuation = $112,312

 

I recently adjusted my goal to $1m by July of 2021. This is ambitious to say the least, but I will be turning 40 that month so it will certainly be something to celebrate if I can pull it off. It is not completely out of the question, but depends on a range of factors including salary and bonuses increasing, as well as the markets.

Monthly Income (Net)

  • Salary ($7,574)
  • Tax Refund ($2,792)
  • Superannuation ($1,610)

I had a nice surprise this month; I have been delaying doing my taxes, presuming I would have to pay the tax office as usual now that I have dividends coming in. Much to my surprise, I received a refund of $2,792! I am not sure how this happened, though I suspect it has something to do with how much I was taxed on my bonus earlier in the year. Regardless, I will take it!

Stocks = $243,216 (+$13,874)        

Purchases: Vanguard Australia Shares (VAS): $4,996

I hit the $100k mark in VAS this month. I have been reassessing my strategy and asset allocation of late, reading a lot more about listed investment companies (LIC) in Australia and considering upping my allocation to Aussie shares with some of these LICs. Franking credits on Aussie shares really help, and there are some clear benefits to LICs over ETFs. Some research into some of the bigger ones like AFI, ARG or MLT may be warranted. It would be great living purely off income rather than having to sell off shares, with a healthy cash reserve in case of a recession.

Cash = $22,969 (+$2,755)

Superannuation = $112,312 (+$5,851)

Expenses = $2,738

A pretty lean month which is good. My “monthly income” based on 4% of taxable net worth is $887. Hopefully that purple line plateaus soon and that yellow line continue to creep toward it.

Savings Rate = 73.6%

I am now averaging 59.3% for the year. I hope that I can get that up to 60%.

Another day another dollar. Some layoffs at work this week, so the more f&^% you money I have the better. I probably have about 7 years living expenses now. Most is tied up in the markets but it still lets me sleep better at night.

NET WORTH UPDATE September 2017: $356,017 (+$9,491)

Slowly but surely creeping up, my net worth climbing 2.7% this month to $356,017. My total net worth breakdown is as follows, with the additional glimpse into how this has changed since I began tracking my numbers in May 2015:

TOTAL NET WORTH = $356,017

  • Taxable (Stocks + Cash) = $249,556
  • Superannuation = $106,461

 

Monthly Net Income

  • Salary ($7,348)
  • Superannuation ($1,610)

I paid a quarterly tax bill of $261 this month, explaining the lower salary.

Stocks = $229,342 (+$7,001)         

Purchases: Vanguard Australia Shares (VAS): $5,014

My 40% allocation to Australian shares is approaching the $100k mark.

Cash = $20,214 (-$41)

Superannuation = $106,461 (+$2,531)

Expenses = $2,589

Lowest for the year. I’d like to try and keep my yearly expenses to around $40k, so would like to restrict the next 3 months to $9k if possible. Think I should be able to, it seems to be one of those years where each month has a decently large expense. Mainly due to my holiday.

Savings Rate = 64.8%

I am now averaging 57.7% for the year. I hope that I can get that up to 60%.

Another month gone. Still have a long stretch to go. I have been feeling recently that it will be an eternity to reach FI, and I’ve been playing all sorts of scenarios through my mind. Do I make the most of my high paying (yet significantly dull and annoying) job to make it to the finish line, or cut it short and go part-time, extending my FI date? I still have time to figure this out, but of late, I’ve been more inclined to consider the latter option. I just cannot see myself still doing what I’m doing for another five years. Three maybe, four at a stretch, but five just seems so far away. In the bigger scheme of things, it’s really not that long. I wouldn’t know any different if I hadn’t have discovered FIRE anyway.

NET WORTH UPDATE August 2017: $346,526 (+$7,224)

A different sort of month in August, with high expenses due to my 3-week trip to the US. Despite this, my net worth crept up 2.1% ($7,224) to $346,526. To think that only a couple of years ago this was $100k or so. Things are so habitual now that it’s just an automated process that I go through. My total net worth breakdown is as follows:

TOTAL NET WORTH = $346,526

  • Taxable (Stocks + Cash) = $242,596
  • Superannuation = $103,930

 

With over $240k in my taxable account and expenses hovering around the $40k/year mark, it’s nice to think that if I really wanted or needed, I could live or 6 or more years off this stash.

Monthly Net Income

  • Salary ($8,303)
  • Superannuation ($1,610)

Had a nice little bump in the salary due to my 3-week holiday and leave loading that is applied by my employer. Additionally, I have decided to start contributing extra (4%) to my superannuation to receive the 2% company match and reduce my tax a little. I’ve been back and forth with my thinking around this for the past 2 years.

Stocks = $222,341 (+$2,943)         

Purchases: None

Holiday spending was up this month, so decided to top up my savings and not purchase any ETFs this month.

Cash = $20,255 (+$2,782)

See above….

Superannuation = $103,930 (+$1,499)

Slight bump in the super this month, especially with my extra contributions.

Expenses = $5,320

Sort of wrecks my graph now doesn’t it? Highest expense month in recorded history (well my recorded history). Was well worth it though. Life is all about happiness, compromise, experience. And this holiday with five friends was something I’ll never forget. Although it looks like “lifestyle creep” may be taking a grip on me, I’m not too concerned by the trend of that graph. I had a year living back with my parents in 2015, so expenses were incredibly low. I have spent a little more in 2017 compared with 2016, but I’m confident that long-term I can keep my monthly expenses at around $3,000 to $3,500 (adjusted for inflation over long-term). In addition, this excludes some large expenses that I’d be looking to boot once I “retire” from my current job. Therefore, my FIRE expenses would be lower than this. In the meantime, I’m content to spend a little more to enjoy life.

Savings Rate = 35.9%

I’m now averaging 56.9% for the year. Hopefully I can get that up to 60%.

I have decided to go on an international trip every year now. Not getting any younger and I can’t handle the winters here without having something to look forward to. Think I’ll start planning for Japan in October 2018.

NET WORTH UPDATE July 2017: $339,302 (+$5,172)

Happy with July, seeing my net worth shift upwards 1.5% ($5,172) to $339,302. Nothing much happening in the markets, just that disciplined monthly deposit of $5k into ETFs. My total net worth breakdown is as follows:

I thought I’d do something a little different this month and post a screen shot of my net worth spreadsheet. It shows in more detail the journey I’ve been on since May 2015. Firstly to look at the columns; I have a “cash”, “shares” and “super” column. For cash, I have an everyday transaction account and a savings account where ideally, I like to keep a healthy stash of 6 months or so ($20k). For shares, I only have money in ETFs right now, but I was granted company stock last year and this year, and the first of this stock vests next May, meaning I’ll have 1/3 of the stock granted to me a couple of years back (the shares vest in 1/3 increments from years 2-4, the “golden handcuffs” as such….). I also use my company’s superannuation fund. The fees are quite high, but the company pays most of this, and I also get all insurance paid (a significant benefit, especially the Income Protection insurance). The rest is self-explanatory, the overall net worth figure and the change in both $ and %. Of significant note is the fact that in 27 months of tracking this, I have only had a negative month on three occasions. Of course, there have been more than three monthly occasions where the market has had a negative return, but I’m adding around $5k to the market each month.

TOTAL NET WORTH = $339,302

  • Taxable (Stocks + Cash) = $236,871
  • Superannuation = $102,431

Along the same lines as last month, I have posted the time course of my net worth, but also a second graph that zooms out to $1m on Y-axis and 2022 on the X-axis. I really like seeing this graph for motivational purposes. You can see up the top right I have my overall goal of $1m net worth by March of 2022. Before I used to think this was quite ambitious, but I think it’s quite realistic now.

Monthly Net Income

  • Salary ($7,798)
  • Superannuation ($1,054)
  • Dividends ($2,134)

Received my Q2 dividends this month, and the first time I’ve been about the $2k/quarter mark. A quick look below at how this has changed since I began in 2015:

It’s a little misleading looking for any trend in the $/Quarter column, as one of my ETFs (a high dividend Global ETF) pays out semi-annually. So better to look at $/Semi or $/Year.

Stocks = $219,398 (+$5,201)         

Purchases: Vanguard FTSE Emerging Markets (VGE): $5,003

Edged my emerging markets allocation up toward the 20% mark

Cash = $17,473 (-$268)

Slight decrease on the cash front this month, but no cause for concern.

Superannuation = $102,431 (+$239)

Slight bump in the super this month.

Expenses = $3,065

Around where I’d like to be on a routine basis. My yearly average currently sits at $3,385 and by the years’ end I’d like to have this at around $3,000. Seems to have been one of those years where each month has one of those big items. I’m travelling to the United States in a couple of days for over 3 weeks holiday, so I’m looking forward to that, but of course it’s one of the reasons my current expenses are a little on the high side. Fortunately most of those big ticket expenses for the trip (airfares, accommodation, Eclipse festival ticket in Oregon J) have already been paid for.

Savings Rate = 60.7%

I’m now averaging 59.8% for the year. Ouch. As pointed out above though, have to live a little, and living includes travelling overseas for 3 weeks with mates. I hope to bump this back over the 60% mark once I come back from my trip in early September.

Til next month……

NET WORTH UPDATE June 2017: $334,130 (-$165)

Net worth decreased 0.1% ($165) to $334,130. First month in the red for a while. It’s been 26 months of tracking my numbers, and this is the third month I’ve hit the red. Given I add $5k to shares religiously each and every month without fail, this would generally mean the markets were down greater than $5k for the month (or I just spent a shitload!… but I don’t think so).

My net worth is divided into three main sections; stocks, cash and superannuation, along with my expenses and savings rate.

My total net worth breakdown is as follows:

A breakdown of my “taxable” (cash and shares) and “non-taxable” (superannuation) components.

TOTAL NET WORTH = $334,130

  • Taxable (Stocks + Cash) = $231,938
  • Superannuation = $102,192

 

 

Monthly Net Income

  • Salary ($7,266)
  • Superannuation ($1,054)

Income down a little this month. This financial year I’ve started having to pay my tax quarterly, based on last year’s tax, so I think I paid $544 in tax this month.

 

Stocks = $214,197 (+$170)            

Purchases: Vanguard Australian Shares (VAS): $5,003

Considering I added $5k to the market, my ETFs had a pretty bad month.

 

Cash = $17,741 (-$605)

Slight decrease on the cash front this month, but no cause for concern.

 

Superannuation = $102,192 (+$270)

Expenses = $3,892

Quite high expenses this month. I actually did very well spending wise, but got hit with my yearly health insurance bill of over $1,200. Most non-Aussies wouldn’t understand out situation here, but if you are a high income earner and don’t have health insurance, you get slugged an addition % of your income in tax. So if I didn’t pay for the insurance I’d be paying at least that amount in tax anyway, so may as well get it! Also, I pay the bit extra for “extras cover”. Although I generally don’t use most of the options, I do claim on dental. Lucky for me I just needed lots of treatment done and managed to claim my full $750 in extras over the past few months. Winning.

Savings Rate = 46.4%

My average for the year has slipped to below 60%, now sitting at 59.7%. Main reason for the bad month obviously being the combo of the tax taken out of my salary combined with the health insurance. It’s easy to become too obsessed in your monthly numbers, not wanting to “ruin” them. But shit, lighten up I say. This year I’m taking a 3 week holiday with friends to the US for their summer (and to escape our winter), and these things can’t be missed. It’s life. I’m not sitting here at home all year thinking “shit, if I go on that holiday my yearly savings rate will drop from 64.6% to 61.2%”. What’s the point of that?

Ok I’ve calmed down, rant over. Promise. Til next month.

NET WORTH UPDATE May 2017: $334,295 (+$5,980)

Making a solid march upward, with my net worth rising 1.8% ($5,980) to $334,295. It’s nice to reach the 1/3 of a million mark.

My net worth is divided into three main sections; stocks, cash and superannuation, along with my expenses and savings rate.

My total net worth breakdown is as follows:

A breakdown of my “taxable” (cash and shares) and “non-taxable” (superannuation) components.

TOTAL NET WORTH = $334,295

  • Taxable (Stocks + Cash) = $232,373
  • Superannuation = $101,922

 

Monthly Net Income

  • Salary ($7,842)
  • Superannuation ($1,054)

Stocks = $214,027 (+$6,584)

Stock market climbed a little this month.

Purchases: Vanguard Australian Shares (VAS): $4,963

Cash = $18,346 (-$1,097)

Superannuation = $101,922 (+$493)

Expenses = $3,924

Quite high on the expenses front this month. Had to fork out a little over $1k toward my trip to the US in August. My average monthly expenses for 2017 is sitting at $3,348. I’ve paid for much of 3 week US holiday now, so I’d like to try and get this monthly average down toward the $3k/month by the end of the year. My “income per month” based on 4% of taxable accounts rose from $756 to $775.

Savings Rate = 50.0%

My savings rate is ok so far, with the average for the year being 62.4%.

Not a spectacular month, but moving along consistently. Considering I’m adding $5k per month to investments, I don’t expect to see too many months where the net worth moves backwards. Even if the markets drop considerably.

NET WORTH UPDATE April 2017: $328,315 (+$14,423)

Another really great month. My net worth rose 4.6% ($14,423) to $328,315. I’ve added almost $50k the past 2 months. I know it won’t continue at this rate, but it is exciting nevertheless. It’s now been exactly 2 years since I began tracking my net worth, and it has jumped pretty much smack bang on $200k. It’s awesome to think of the possibility of reaching my $1 million goal in around 5 years’ time, but of course there are bound to be some extreme ups or extreme downs, or both! A smooth ride I don’t expect.

As always, net worth is divided into three main sections; stocks, cash and superannuation, along with my expenses and savings rate.

My total net worth breakdown is as follows:

A breakdown of my “taxable” (cash and shares) and “non-taxable” (superannuation) components.

TOTAL NET WORTH = $328,315

  • Taxable (Stocks + Cash) = $226,886
  • Superannuation = $101,429

 

My favourite graph has to be the plot of my “taxable”, “super” and “total net worth” over time. I decided to take this a step further recently, so I could properly see how long it might take me to reach my goal of $1 million by March of 2022. If that yellow line continues on its trend that I just might do it. I need to add about $670k in 5 years. I’ve reached a point in my career where I’d be happy not be promoted further (I’m in middle management now), but it is likely I’ll get the opportunity at some point. I’m fully aware that more money means more responsibilities, and I’m content with what I have now. Regardless, I do expect yearly pay rises above inflation that will continue to assist along the way.

Monthly Net Income

  • Salary ($7,798)
  • Superannuation ($1,054)
  • Dividends ($804)

Given the 5% pay rise received last month, I expect $7.8k to be the new monthly norm. Also received my quarterly dividends from Vanguard this month, which I automatically reinvested.

Stocks = $207,443 (+$7,057)

Stock market continued its climb this month, but for how much longer….

No purchases this month; decided to top up the cash a little more.

Cash = $19,443 (+$4,752)

Added to my cash position this month. It may be slightly high, but my aim was always to have about 10% in cash. As the ETF portfolio get higher though, I may was to decrease this percentage.

Superannuation = $101,429 (+$2,614)

Got the little bump I needed to hit the $100k mark.

Expenses = $2,801

An average month for expenses, and average is good. Anything less than $3,000 per month is good. My “income per month” based on 4% of taxable accounts rose from $717 to $756.

Savings Rate = 64.1%

My savings rate is right where I like it, and the average for the year so far is 65.5%

Things are going nicely right now. If reaching FI is a 50km marathon, I’ve just taken my first drink at the 15km mark.

NET WORTH UPDATE March 2017: $313,892 (+$32,484)

What a great month!!! The net worth rose 11.5% ($32,484) to $313,892. Geez, if only every month were like this. Finally crossed that $300k mark, and closing in on the 1/3 million. March is bonus season, and due to great company earnings and also an awesome performance review, I got twice the bonus I was expecting. It’s also salary review time, and I got a nice 5% bump in my base salary.

As always, net worth is divided into three main sections; stocks, cash and superannuation, along with my expenses and savings rate.

My total net worth breakdown is as follows:

A breakdown of my “taxable” (cash and shares) and “non-taxable” (superannuation) components.

TOTAL NET WORTH = $313,892

  • Taxable (Stocks + Cash) = $215,077
  • Superannuation = $98,815

 

Monthly Net Income

  • Salary ($25,220)
  • Superannuation ($4,227)

I also receive company stock this time of year. Last year I receive US$7,500 (first time I’ve received this) and this year US$14,000. Problem is these ‘vest’ in 1/3 increments and don’t start until 2 years after you receive or ‘accept’ them. So I’ll receive my first 1/3 in March next year (these are also taxed at your marginal tax rate!). It will be nice when I start reaping the full benefits of this though. Watch this space.

Stocks = $200,386 (+$15,379)

Not only did the overall net worth hit the $300k mark, my ETF portfolio ticked over the $200k mark!

Purchases:

  • Vanguard Australian Shares (VAS): $4,986 (target portfolio allocation 40%)
  • Vanguard FTSE Europe (VEQ): $4,993 (target portfolio allocation 20%)

Cash = $14,691 (+$11,154)

Replenished the cash reserves this month. Last year this gradually decreased throughout the year, but shouldn’t happen much this year. I don’t like to have too much cash on hand, however I’m wary of the fact I’m fully invested in the share market. I’ve been thinking a bit about this lately, and think I’ll try and keep 10% of my portfolio in cash (I’m no expert on bonds, but I don’t think they are the best option right now with interest rates so low). So I think I’ll try and get my cash up to $20k. It will help me sleep ok at night.

Superannuation = $98,815 (+$5,951)

Increased nicely this month due to the $4,227 added due to salary and bonus. Almost at the $100k mark!

Expenses = $3,123

This level is slightly above what I’d like, but is ok. I’ve had a few unavoidable medical expenses this year so I’m still hoping for an overall 2017 average around the $3,000/month or $36,000/year mark. My “income per month” based on 4% of taxable accounts rose from $628 to $717. If only that yellow line were to increase at that rate every month, I’d be FI in no time! Patience my boy….. Patience….

Savings Rate = 87.6%

Obviously an amazing month due to the income side of things….

Well the Summer is well and truly over here in the southern hemisphere, and we are definitely hitting those colder Autumn months. It’s starting to get difficult to rise from that comfy bed in the morning. My projections still take me to an FI date at around March 2022. Five years. Based on current spending a $1 million target for me seems reasonable. I have found myself lately thinking that 5 years really isn’t that long. Me and the boys went to the airshow the other day, and one of them mentioned the fact it was 4 years ago that we last went. Really doesn’t feel like that long. In my mind I’m trying to break the journey down into chunks; not only money-wise, but also time-wise. I feel like if I can make it another 3 years to 2020, I’ll sort of be on the “home stretch”. We’ll see how that goes….

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